Key Elements of a Successful Startup

Marina HatsopoulosEntrepreneur

Director at Cynosure and Levitronix TechnologiesAdvisor, MIT Enterprise Forum Greece, The EGG accelerator, OK!Thess

Agenda My Story Entrepreneurship Intellectual Property Market Competition Team Culture Board of Directors Financing

My StoryBackground Chase Manhattan Bank - Wall Street - finance Thermo Electron - technology conglomerate MIT – Masters, Mechanical Engineering Pivot: search for job>turnaround>technology MIT technology licensing office > Inventors Z Corporation (early 3D printing leader) - Founder, CEO Cynosure ($340M public company) & Levitronix Technologies – Director Director on other boards Investor in startups based in US and Greece, as well as startup funds

My StoryZ Corporation

MIT Technology Early leader in 3D printing No venture capital (hardware) Focus on Profits and Cash Flow Fastest-growing business in New England in 2001 Raised $11M from angels and strategic corporates $9M in bank when we sold $30M in revenues 125 employees

My StoryMy involvement with Greece/Cyprus Invited to MIT Enterprise Forum Greece Inspired by Israel: “Startup Nation” Why can’t we do what they’ve done? Israeli-founded businesses generate $9B in Massachusetts Israeli model: CEO & Sales in Boston, Development in Israel

EntrepreneurshipWhat’s the point?

Jobs Upward social mobility & economic opportunity Independence In today’s environment, startups require very little capital to get off the ground & go global

MITCulture of Entrepreneurship

30K Active Companies from MIT Alumni 5 million jobs, $2 Trillion Annual Revenues 10th Economy in the World 100K Competition has created >60 companies valued at $10.5B

MITTechnology Commercialization Model Sandbox grants $1K for students to explore their startup idea Grants of $25K-$250K at Deshpande Center, to get research out of

the lab & connect to professional investors $100K Startup Competition Venture Mentoring Service Technology Licensing Office patents inventions & licenses it

Patent Fees paid by startup Royalty (about 5%) on Revenues paid by startup Equity (about 5%) of startup granted to MIT

MIT Enterprise Forum Greece (mitefgreece.org) MITEF is a global organization

Focus on early-stage technology entrepreneurship

Turn ideas in to world-changing companies

Events for inspiration and networking Diaspora Group to connect Greeks to thriving tech ecosystem in Boston StartSmart Conference-Sat. Nov. 5 in Athens (Attend!) Startup Competition and Accelerator (Enter now!)

International partners, mentors, judges

Global visibility through MIT Technology Review One-week Bootcamp at MIT Sponsorships available

Idea Cocktail Napkin Spreadsheet

# Units Revenues Time and investment to get to revenues and profitability Development, Manufacturing, Sales & Marketing higher than you expect

Pricing is critical! We would have gone out of business Talk with 20 prospective customers

Does anyone care? How much would they pay for this? How big is their pain today? Who would be better positioned to do this?

A great idea is necessary but not sufficient You have much more to lose by not talking than you have to gain

Intellectual Property Patents

Difficult to invent, Easy to copy Trade Secrets

Easy to invent, Difficult to copy Know-how

Processes, Ingredients, etc. Use all for competitive advantage

Market Market is big enough Try to sell product, before it even exists

Early prospects help guide development Customers may fund research and development Don’t worry about people stealing your ideas! Get prepayments from customers-20% up front

Clear Value Proposition  My Company

Product ACompetitor #1Product X

Competitor #2Product Y

Price $45K $30K $55KSpeed Fast Slow MediumResolution 2 mm 3 mm 5 mmQuality High Medium Low

Competition Competition is good: they pay to educate the market Easier to have a benchmark to sell against than nothing 100-pound Gorilla competition (or potential competition) is bad Who is perfectly positioned in terms of customers or technology

Why haven’t they done it already? What will keep them from entering the market? Will they have an unfair advantage or will you?

The important thing is product differentiation over the competition What is the one thing that makes your product significantly better than

anything else? What do you have as a company that makes you uniquely positioned to do

this?

Team Most important factor for investors Companies with Salesperson on Founding Team have 3x chance of

success Capitalize on your stars, even if they have holes Set up founders equity-consider stock options Leverage network but don’t hire someone you can’t fire Hiring philosophy Some employees are OK, not great: opportunity cost We all make mistakes. Deal with them & move on Articulate your direction and stay focused

Culture Focus; can’t do everything All that matters is results, not face time or experience Time to market is critical and urgent; this is not time for a cafedaki 80/20 Rule: Perfection is your enemy Make concrete milestones-and deliver!

Monthly Dashboard Average Sale Price Revenues Gross Margin Net Income Cash Service Calls Repeat Sales

Board of Directors Selected passionate board members who invested in us through

several rounds Find a mentor with relevant success who is willing to tell you what

you don’t want to hear Find investors who understand your business, believe in it and have

deep pockets to invest Find missing areas of expertise and fill those roles Start with a small board-hard to remove them Use your board; don’t just report to them. LISTEN! Half the answer is

the question.

FinancingSeed Capital and Series A

Angels Venture Capital

Equity Debt

Strategic investors Equity R&D Contracts Customer Deposits

FinancingAngels Individuals or groups which meet monthly to hear pitches & share

diligence efforts Small investments: $25K to $500K Less control provisions Seed investments made as convertible debt

Converts to equity in Series A at a 20% discount Postpones valuation until there’s more information

Advantage: Better terms: control, valuation

Disadvantage: May not have capital or appetite to invest through multiple rounds

FinancingVenture Capital Lots of capital to put to work; same work to invest a little or a lot, so they

invest a lot: $1M-$25M VC’s expect dead, living dead, but they’re in it for the very few “unicorns”

with 30x-100x returns Board seat Control Have access to larger pool of capital, so can invest through multiple rounds Advantage:

Can carry credibility to be funded by a top VC Disadvantage:

Pressure to grow fast, which can be good or risky Give up control

FinancingStrategic Investors Corporate investors with interest in your success:

Customers Distributors Suppliers

Advantages: Give up very little control Access to large partner who can help grow business Validates business for outside investors Credibility

Disadvantages : May limit ability to form partnerships with their competitors May reduce chance of selling business to their competitors May give them information you’d rather keep secret (eg, gross margins)

FinancingPitching to Investors Website & Pitch should be clear and simple: WHAT DO YOU SELL? Practice elevator pitch Forget about the quick flip Forget about the billion-dollar sale in a related area Find investors who have invested (with success) in related businesses

FinancingConsiderations for the Entrepreneur Capital vs. Control

Low capital investment means higher ownership & control Lower growth can be lower risk or higher risk, depending on the business and who

the competition is Growth vs. Profitability

Some businesses need to reach critical mass before anyone else, in which case growth is paramount

Other businesses take time to educate the market, so there’s no way to accelerate it in a way that can generate a return to the investors

Some businesses require lots of capital. If you’ll need over $3M, might as well go to VC’s early. Otherwise, could retain more control and higher ownership

Most businesses are not unicorns. You can make good money as an entrepreneur without building a unicorn, as long as you don’t raise too much money

FinancingAcquisition

Don’t mess up a business to “look pretty” Don’t plan on acquisition-many issues out of your control Don’t sell into a buyer’s market Don’t put your startup in a situation where you have to sell Build a strong business and acquirors will come If they don’t, you won’t care

FinancingMoments of Crisis Competition came out with similar product before our product launch Zero sales month We tripled our burn rate just before sales plummeted Failure is information. Use it to move forward.

Doing Business with Americans Respond immediately—a few hours, or at the latest within the day Plan ahead-hard to get meetings at the last minute Follow through on anything you say you’re going to do Network using Linkedin, not Facebook & use a professional photo Mr. or Ms. (not Mrs.) for introductions, but shift to first name immediately

Entrepreneurship in Cyprus Political, economic and legislative stability, free of bureaucracy,

and business-friendly Must go global early Bootstrap to early profitability Access to strong, well-educated technical talent Think bigger: commercialize university research What are problems you see that could be solved by innovation?

Parting Words Controlling your own destiny is enriching and fulfilling Persevere. It’s hard. No “life balance.” This isn’t a Disney movie. Celebrate milestones and have fun!

Thank you

Marina HatsopoulosAngel investor and Director at Cynosure and Levitronix Technologies

Marina Hatsopoulos Marina Hatsopoulos