Download - Eesley Stanford Venture Fund
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Technology Entrepreneurship Research at Stanford
Chuck EesleyManagement Science & EngineeringStanford Technology Ventures ProgramMarch 9th, [email protected]
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Chuck Eesley
Lobby 10 Consulting
Sun Dance Genetics
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(STV
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Drivers of entrepreneurial entry and performance (different contexts)
Developed economy Entrepreneurs from Technology-Based Universities - with David Hsu
(Wharton), Ed Roberts (MIT) Bringing Entrepreneurial Ideas to Life Boom and Bust Founders Cutting Your Teeth - Prior entrepreneurial experience
Developing economy The Right Stuff
– Role of institutional environment in selection of high human capital entrepreneurs
Entrepreneurial Performance in a Developing Country: Evidence from China
What Drives an Innovation Strategy?– Role of Institutional Env./funding of S&T in search for ideas
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(STV
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B-schools, economics and sociology faculty have produced a large literature on industry dynamics, strategy and firm performance for large firms.
Management of Innovation – largely shows difficulty large firms have with surviving waves of innovation (creative destruction)
(Much less on how and when entrepreneurial firms take advantage of this)
Studies of Tech. Entrepreneurship began in 1960s (Roberts, Cooper)
Data, Quality Research scarce (self-employment) E-ship taught via war stories
Systematic study of Tech. Commercialization and Entrepreneurship Lacking Almost nothing is known outside of the US and EU
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(STV
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Founding Performance
Parental entrepreneurship Managerial Experience, prior founding
Wealth Lower wealth
Low opportunity costs High opportunity costs
Male Either gender
VC-backed firm work experience Entrep. prominent organization
Broker network Cohesive network
Need for achievement Self-efficacy
Education Education
Low uncertainty avoidance, high individualism Product, marketing orientation
Generalists Growth market
Non-U.S. citizen Either
In 30s-40s Any age
Planning, VC5
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Data
Unique data on firm origins, early composition and multiple stages of performance measures
Alumni: 105,000 surveyed; 42,930 records in 2001
– Date of birth, country of citizenship, gender, major at MIT, highest attained degree
– 7,798 indicated founding at least one company
Survey of self-identified MIT alumni entrepreneurs in 2003
– 2,067 respondents (r.r. 27%)
– Hsu, Roberts, Eesley 2007
Alliances & Acq. - SDC Platinum Patents – USPTOVC - VentureXpert
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Table 1. Estimated Employment and Sales Data for All Active MIT Alumni Companies°
Jobs
Percent of Companie
sMedian
Employees
Median Sales
($Millions)
Estimated Total
Employees
Estimated Total Sales ($Millions)
More than 10,000 0.3% 15,000 1,523 1,339,361 1,389,0751,000-10,000 1.8% 1,927 308 1,043,932 235,532
Less than 1,000
97.9% 39 <1 900,001 226,671
Total 100.0% 155 <1 3,283,294 1,851,278
°Underlying data from 2003 MIT survey of all living alumni, updated to 2006; ~25,800 active companies.ALL DATA FROM: Entrepreneurial Impact: The Role of MIT,Edward Roberts & Charles Eesley, MIT Sloan, February 2009
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1950s 1960s 1970s 1980s 1990s0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
All alumni Women
Non-Domestic Citizens
Estimated Number of “First-Time” Firms Founded Each Decade By MIT Alumni
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0-9 10-19 20-29 30-39 40-49 50-590
500
1000
1500
2000
2500
Cumulative Firms Founded (Bachelors Degree)
1950s
1960s
1970s
1980s
1990s
Years After Graduation
Num
ber
of F
irm
s
More entrepreneurs emerge from each successive MIT class, and they start their companies sooner and at younger ages.
S T A N F O R D U N I V E R S I T Y • Management Science & Engineering
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Table 4. One-Time and Repeat MIT Founders by Decade of Graduation (percent)
Decade
1930s 1940s1950
s1960
s1970
s 1980s 1990s 2000s
Total # Firms
Founded
1 67 61 56 54 48 57 61 59
2 0 11 21 20 23 22 23 28
3 0 9 10 11 16 11 9 9
4 11 8 7 7 6 5 3 3
5+ 22 11 7 9 7 5 4 0
% Repeat 33 39 44 46 52 43 39 41
Over time, the number of multiple companies founded per MIT alumnus has been increasing, with dramatically increased economic impact per entrepreneur.
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The MIT “magnet”: <10% of MIT students grew up in Massachusetts; 31% of alumni firms are in Massachusetts
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MIT Entrepreneurial Ecosystem has grown in its components and impact over the years
Underlying culture, history, role models, and policies
Alumni initiatives: MIT Enterprise Forum
Re-oriented Technology Licensing Office
MIT Entrepreneurship Center: Classes: 1 to 30 in 15 years; 3 new ones in energy ventures in past 2 years Clubs, including MIT $100K Business Plan Competition Conferences, and many forms of internal and external networking
Recent MIT institutional broadening and growth Venture Mentoring Service MIT Deshpande Center Entrepreneurship & Innovation MBA Track
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Table 14. Entrepreneurship Center Factors Important to Venture Founding (from limited sample only)
Proportion Rating University Factors as Important in Venture Founding* (%)
Graduation Decade1950s
(N=73)1960s
(N=111)1970s
(N=147)1980s
(N=144)1990s
(N=145)MIT Business Plan Competition 0 1 0 3 30MIT Entrepreneurship Center 3 1 2 1 12MIT’s Entrepreneurial Network 26 25 32 40 50
*Respondents could check all relevant categories.
S T A N F O R D U N I V E R S I T Y • Management Science & Engineering
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Table 8. Role of MIT’s Positive Feedback Loop in Venture Founding (from limited sample only)
Proportion of Founders Choosing MIT for the Entrepreneurial Environment (%)
Graduation Decade1950s 1960s 1970s 1980s 1990s
(N=207) (N=313) (N=373
) (N=315) (N=214)Chose MIT for its Entrepreneurial Reputation
17 12 19 26 42
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For more information, see complete report:Entrepreneurial Impact: The Role of MIT
http://entrepreneurship.mit.edu/Downloads/Entrepreneurial_Impact_The_Role_of_MIT.pdf
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Context
Alumni survey Tsinghua University~26,700 mailed (correct addresses)3,000 surveys11% r.r.Growing tradition: Stanford GSB, Chicago, HBSDisadvantages: Biased towards tech., other response bias?
Advantages: Defined‘at risk’ set, first abroad, detailed work history and founding data, less biased by govt. concerns
Other surveys: business owners, self-employed and entrepreneurs merged together – Treiman and Walder, “Life Histories and Social Change in Contemporary China”
Self-employment (Chinese Health and Nutrition Survey, NBS HH Survey)
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(STV
P)Merged MIT and Tsinghua Dataset
S T A N F O R D U N I V E R S I T Y • Management Science & Engineering
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S T A N F O R D U N I V E R S I T Y • Management Science & Engineering
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79 pages of notes from interviews with 42 individuals
– 26 Tsinghua alumni entrepreneurs– 2 Tsinghua staff (TLO, Science Park)– 5 Chinese venture capitalists (VCs)– 2 Government officials– 3 Other Chinese entrepreneurs (non-Tsinghua)– 2 MIT Alumni (non-entrepreneurs)– 2 Tsinghua alumni (non-entrepreneurs).
• Interviews were in Beijing, Shanghai and Xi’an
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Context - interviews
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S T A N F O R D U N I V E R S I T Y • Management Science & Engineering
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1982
1984
1986
1987
1988
1989
1990
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
0
5
10
15
20
25
30
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First Foundings by Year
First Founding Year
Nu
mb
er o
f S
tart
-up
s
19892004 China 29% growth vs. US 1% (State Statistics Bureau)
Tsinghua Data
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Founding Rates
MIT Tsinghua
Dept. Freq. Percent
freq. founder
% becoming founders
Freq. Percent
freq. founders
% founders
Engineering
21714 51.28 3483 16.04 1771 69.72 456 25.75
Sciences 9086 21.46 1984 21.84 406 15.98 79 19.46Management 6365 15.03 1634 25.67 100 3.94 31 31.00
Social Sciences 2838 6.70 265 9.34 163 6.42 27 16.56
Architecture 2339 5.52 487 20.82 100 3.94 27 27.00
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(STV
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Idea sources MIT Data Tsinghua data percentage percentage
In school-doing outside-funded research 2.40 1.66 In school- graduate thesis 4.64 3.96 In school- in class 1.98 5.88 In school-informal discussion w/ students 3.41 11.00 In school-other research 2.28 1.92 In school-professional literature 1.73 4.48
In school- visiting scientists, engineers 1.77 4.86
In school-working w/ outside company 3.20 4.86 Other sources-discussions in social/professional conferences
21.54 17.65
Other sources-research conference 2.66 4.48
Other sources-working in the industry 41.44 24.81 Other sources- working in the military (government experience)
4.01 2.94
Doing outside-funded research 2.07 0.77 Total 100 100 Number of observations 1284 110
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Industry Breakdown
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(STV
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Purchasing Power Parity converted to constant 2005 U.S. dollars
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(STV
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28MIT firms significantly older; GDP/capita is 43x higher in U.S.
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(STV
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0% or less
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%0
5
10
15
20
25
30
Distribution of firms by profit as a ratio of revenues
20062005
Profit as a percentage of revenues
Perc
enta
ge o
f firm
s
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(STV
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30
Aero/A
stro
Archite
cture
Biomed
Chemica
ls
Consumer
Products
Consult
Electr
onics
Energ
y
Finan
ce
Law, M
isc.
Machinery
Publishing
Software
Telec
om Oth
Other Mfg.
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Percent of Revenue from Out-of-State (MIT)
Percent of Revenue from Exports (MIT)
Percent of Revenue from Out of Province (Tsinghua)
Percent of Revenue from Exports (Tsinghua)
Prop
ortio
n
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China is more state-led than a market economy still. The government controls many resources. For firms the quickest way to make a lot of money is through the government. The government has incentives for firms to put up good numbers (it’s good for the politicians’ careers).
Interview Quotes
In the 1990s … government was giving them less support. Many universities created “university –run” enterprises and were basically selling off the periphery of campus. Even high schools had school—run enterprises that were considered acceptable. There is a Tsinghua name to many of them. - GC – 2nd generation investor
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Interviews
Historically, investors in China see fewer experienced, serial entrepreneurs
“Forced to rely more on work experience outside of an entrepreneurial context to judge the quality of entrepreneurs – GY – VC investor
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Tsinghua alumni, entrepreneurship among alumni has a meta-effect where some learn the process and mentor each other so in the future there will be more and more entrepreneurs from Tsinghua as has already happened with MIT alumni. – RC – Wave Communications (his 6th start-up firm)
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Analysis:
E[yi | x] = α + ρ’zi + ’xi + ’yi + ’pre xi + ’Xi + pre, mid, post + η + φ + i
Dep. Variables: yi represents our measures of firm
performance
xi is government ties (father in government, privatized, coastal province)
yi is government programs (specifically science parks)
zi is separate measures for exposure to entrepreneurship, prior founding experience, or innovation
Xi vector of control variables - Everjob_govt, Comm. Party, Govt. customer, Privatized, Entrep. parents, Entrep. index, rural, EECS, Overseas, SEZ, software, electronics, wealthy family, Master’s, PhD, number of cofounders
η and φ represent year and industry sector dummies >0
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Results: firm performance
N=230; (R2 0.627) ***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, respectively. Everjob_govt, Comm. Party, Govt. customer, Privatized, Entrep. parents, Entrep. index, rural, EECS, Overseas, SEZ, software, electronics, wealthy family, Master’s, PhD, number of cofounders, industry and year fixed effects were included as controls but coefficients are not shown to save space.
VARIABLES Log(rev) Log(rev) Log(rev)Log(rev
) Log(rev)Coastal 1989-2000 2.637**
(1.049)Privatize 1989-2000 2.406**
(1.058)Gov. dad 1989-2002 0.868**
(0.403)Park x 2000-02 1.391*
(0.712)Park x 2004-07 -1.545**
(0.646)E-index x 2004-07 0.214**
(0.100) Serial x 2003-07 1.409**
(0.689) Innovation x 03-07 1.939**
-0.912Log(firm age) 0.360 0.448** 0.417** 0.450** 0.007 0.085
(0.243) (0.190) (0.183) (0.180) (0.458) -0.431
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(STV
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Endorsed by Pres. HennessyPlanned for this yearEnable a comparison with MIT, TsinghuaAggregate Economic Impact on Region and WorldNew questions about entrepreneurial process, success
factors, impact of university programs
IIT India dataMore broadly always looking for help:
– Mentoring, guest teaching– Access to Data (Portfolio companies)– Funding– Ideas / Advice
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Thank you!
Chuck EesleyStanford University
Management Science & Engineering (MS&E)[email protected]