Introduction and ‘The Idea’

Entrepreneurship for mathematicians

Summary of today’s lecture

  • Part 1: Introduction
    • Who am I?
    • What is this course about, who is it aimed at and what’s in this course?
    • Will there be exams and can I fail?
    • What is being an “Entrepreneur?”
    • As a mathematician, what specifically do you need to know?
  • 10 minute break
  • Part 2: Evaluating a business idea
    • How do you come up with an idea or opportunity for a business
    • Good ideas and bad ideas
    • How do you tell the difference between good and bad?
    • Why mathematicians should be good at this

Who am I?

Ewan Kirk ek496@cam.ac.uk

https://en.wikipedia.org/wiki/Ewan_Kirk

Previously

  • Degrees in Mathematics, Natural Philosophy and Astronomy
  • Part III Maths Tripos (Queens’)
  • Ph.D in Classical General Relativity
  • Started two software companies
  • Partner in charge of the Strategy Group at Goldman Sachs (700 mathematicians, statisticians, computer scientists)
  • Founder and CIO of Cantab Capital Partners (a $5bn quantitative and systematic hedge fund based in Cambridge)

What is this course about?

Who is the audience?

  • Mathematicians who have a company, an idea and are commercialising it
  • Mathematicians who have an idea and are ready to commercialise it
  • Mathematicians who have an idea that they might want to commercialise
  • Mathematicians who don’t have an idea but want to know they have a good one if they have one
  • Mathematicians who want to learn some techniques and skills that might be useful in the future
  • Mathematicians who want a break from doing mathematics and want to think about something else for a bit
  • And non-mathematicians

Four two-hour lectures

  1. Introduction and Evaluation of Business Ideas: 14th Feb (today!)
  2. The Business Plan and How To Present: 28th of Feb
  3. Raising Money (Investors) and Marketing (Customers): 13th Mar
  4. Legal, IP, Money, Firms, Accounting, HR and The Cambridge Ecosystem: 24th Apr
  • Let’ go through each one in order.

Lecture One (Introduction and Business ideas)

  • Part 1

    • Introduction
    • Entrepreneurship and what, if anything, is specific to mathematicians and scientists

  • Part 2

    • How do you come up with an idea for a business
    • Good ideas and bad ideas
    • How do you tell the difference between good and bad?
    • Approximation as a tool to get a rough business plan

Lecture Two (The Business Plan and Presenting)

  • Part 1
    • Why do you write a business plan?
    • What is in it?
    • Is it useful?
  • Part 2
    • Writing good presentations
    • Presenting in front of people
    • The golden rules of presentation

Lecture Three (Raising Money and Marketing)

  • Part 1:
    • Equity vs Debt vs Grants
    • Who do you raise money from?
    • Pitching for investment
    • How to handle equity and dilution
  • Part 2:
    • A lot of this entire course is going to be about “selling”
    • Selling (or marketing) is the heart of everything as an entrepreneur
    • Customers
    • How to understand and manage the interactions with customers
    • Closing deals
    • Discounts, special deals, cornerstone customers

Lecture Four (The boring but important stuff)

  • Part 1:
    • Legal structures
    • IP protection
    • Accounting
    • Hiring, firing, leading, managing
    • Disputes
  • Part 2: The Cambrige Ecosystem
    • Main players in the Cambridge Ecosystem
    • Accessing the ecosystem
    • What the ecosystem does well
    • What it does badly less well.

Exams and can I fail?

  • tl;dr no and no

Exams

  • This course isn’t examined.
  • There are no marks, no credits for attending the course
  • But…there will be some optional home work
  • You’ll get to choose from three possible ideas loosely based on real businesses or come up with your own
  • You’ll have to do a 15 minute presentation to an imaginary customer (me) selling your product to them (me)
  • You’ll have to do a 15 minute presentation to an imaginary Venture Capital firm (me) selling your business to them (me)
  • And then half an hour of suggestions of how to do this all a bit better
  • You can book a slot on my EiR appointment calendar any time to do this although I’d wait until you’ve done at least two of the lectures

The Rules

  • Assume that you have a solid demo of the technology/idea working
  • There’s been three or four of you working on the problem for a year
  • Supported by grants and maybe an angel funder
  • You’re trying to raise a significant amount of VC money ($5m+)
  • You can imply things but you’re not allowed to lie.
  • Never lie. It’ll catch up with you in the end…

The Businesses

  • Your own idea or your own research
  • But if you don’t have an idea, I’ve got three made up businesses
  • Sküber
    • Ride sharing for e-scooters.
    • If you own an e-scooter you can rent it out to others to use
  • Squeezr
    • In your research you’ve discovered a way of losslessly compressing data much better than existing techniques (2x? )
    • Obligatory reference to HBO’s Silicon Valley (which everybody should watch)
  • Weeanos
    • Machine learning based image analysis of urine
    • Detect 10 common illnesses from a urine sample

Very different problems (Sküber)

  • Sküber is a busines model problem
  • The technology exists (mapping, GPS, payment systems, apps)
  • But how do you get paid?
  • How much value is there between what people will pay to rent a scooter and how much people want to be paid for renting their scooter?
  • How do you deal with the trust issues?
  • This is about understanding customers and marketing
  • Do the people who own scooters really want a revenue source from them?

Very different problems (Squeezr)

  • A pure technology push problem.
  • Assume that you can take a video, a picture or a hard drive and compress it at least twice as well as the state-of-the-art
  • But who needs this?
  • Who are the customers?
  • Why will they pay for this?
  • This is about turning mathematics into a business
  • Algorithms are hard to monetise

Very different problems (Weeanos)

  • You’ve got a widget that does the analysis but you’ve now got to commercialise it
  • This is a much higher capital input business (maybe)
  • There’s a definite need
  • But what business model do you want to go for?
  • Making machines? Running a lab? Licencing technology?
  • Oh and everybody is scared of these businesses because of Theranos.

Other Entrepreneurship activities through the year

  • Office hours: Every week there is a day (sometimes two) in the calendar for open office hours.
  • Book your slot here: https://www.maths.cam.ac.uk/person/ek496
  • Easter term: Fireside chats with mathematicians who have gone to the dark side
  • Entrepreneur workshops: open to all as soon as I can find a time and a place

Why attend these lectures?

  • You think that you might want to commercialise your research
  • You have an idea for a business (mathematical or non-mathematical)
  • You don’t have an idea and want to know what to think about
  • You want to learn a bit more about the world “out there”
  • A constant theme through these lectures will be about entreprenurial behaviours being valuable outside startups
  • If you are the sort of person who thinks about opportunities, resources, constraints, people, timescales, risk taking, probabilty of success, then you’ll be more successful, in a large corporate or in government or even academia

What is Entrepreneurship?

Good question

  • There’s no really good definition of entrepreneur or entrepreneurship1
  • But it’s certainly become popular

Statements about Entrepreneurship

  • “The French don’t have a word for entrepreneur”. George W Bush.
  • Sadly…false
  • Entrepreneurship: “The pursuit of opportunity beyond the resources you control”
  • Startup: “An organisation in search of a viable business model”
  • Entrepreneurs: “People who are creative in the maximisation of their utility (wealth, power, prestige)”
  • The “rules of the game” define the structure of payoffs and the rewards accruing to different types of behaviour vary dramatically
  • Entrepreneurial activity can be productive, unproductive or even destructive.

Why pursue an entreprenurial career?

  • Want control and autonomy – although maybe less than you think
  • Make the world a better place
  • Get rich
  • Challenge
  • Fun
  • Patriotic Duty
  • It’s fashionable right now?

What do the statistics say about successful entrepreneurs?

  • Well educated (mathematicians ✅)
  • First born (mathematicans ✅)
  • 30-40 years old (mathematicians ✅)
  • Product of self-employed parents (mathematicans ❓)
  • Male (mathematicians ✅❌ )
  • Have beards (mathematicians 🧔🏻‍♂️🧔🏼‍♀️)
  • Ok, that’s a useless theory

Another useless theory

  • High need for achievement
  • Goal seeking
  • Decisive
  • Objective
  • Need for autonomy
  • Tolerate ambiguity
  • Outcast or maverick
  • Judgemental
  • Action oriented
  • Positive mental attitude
  • Confident
  • Extrovert
  • Charismatic
  • Resilient
  • Well that means absolutely nothing

Entrepreneurial vs Administrative Behviour

Entrepreneurial <> Administrative
Driven by perception of opportunity Strategic Orientation Driven by controlled resources
Revolutionary with short duration Commitment to opportunity Evolutionary with long duration
Many stages, minimal esposure Commitment of resources Single stage,complete commitment
Flat with multiple informal networks Management Structure Heirarchy (often deep)
Based on value creation Compensation Based on responsibilty and seniority
Growth is priority Growth orientation Steady, safety first
Risk accepted…celebrated Entrepreneurial culture Failure punished.
Table 1: Behaviors

How to become more entrepreneurial?

  • Locate yourself in suitable environments
    • Meet people
    • Join clubs
  • Think about opportunity. A lot.
  • Take a lot of small steps
  • Learn by failing fast and failing often
  • Get a mentor
  • Do things you like.
  • Take actions: JFDI

But suppose you don’t want to start a company or don’t have an idea?

  • It’s probable that an entrepreneurial approach could make you more successful even if you’re not an entrepreneur
  • Although this course will be focused on the traditional “Entrepreneurship” tasks
    • Having an idea
    • Starting a company and raising money
    • Managing a company
    • Finding customers
    • Selling your product
  • It’s probably true that a lot of what you’ll learn will be useful in any commercial or academic rôle.

So what has this to do with mathematicians?

  • Why are mathematicians good candidates for entrepreneurship?
  • You’re smart. Really very very very smart
  • There are few stupid entrepreneurs (although they do exist)
  • You are generally good at solving complicated problems. Building a successful business is very complicated
  • Goal oriented, ability to focus and concentrate
  • The world is increasingly quantitative

Pros and cons of being a mathematician

Pros

  • Smart
  • Creative
  • Goal seeking
  • Objective
  • Rational
  • Ability to concentrate
  • The world is full of numbers
  • The world is full of computers (learn to program one now)
  • AI, statistics, machine learning, optimisation is eating the world

Cons

  • Not comfortable with ambiguity
  • Not comfortable with uncertainty
  • Unhappy with failure
  • “Proof style” approach
  • Giving up your career or passion
  • Often not wonderfully people oriented

Time for a break

Business Ideas

A reminder of what we’re going to be talking about

  • How do you come up with an idea for a business?
  • Good ideas and bad ideas
  • How do you tell the difference between good and bad?
  • Approximation as a tool to “fail fast”

How do you come up with the idea?

  • Maybe the hardest bit of entrepreneurship
  • Is it about a disruptive technology which will change the world?
  • Is it about doing something nobody else has attempted before?
  • It a leap of faith…
  • Or is it?

Often it’s not about a technology leap

  • Maybe it’s something that could just be done more efficiently
    • Think about Amazon, Walmart, Zoopla
  • Maybe it’s about an underserved market niche
    • Clothing and fashion
  • Technology as an enabler of a business model not a driver
    • Uber is just messaging, mapping and payment systems mashed together
    • Duolingo is just an app and a database
  • Or just a personal choice or dream…
    • Open a restaurant, coffee shop or a bike shop

How do you generate your idea?

  • Markets are imperfect
  • Markets change
    • Changing circumstances generate niches which can be exploited
    • Chaos generates opportunity
    • Confusion is an opportunity to simplify
    • Inconsistency gives companies opportunity to standardise
    • Knowledge gaps mean customers don’t know what’s possible

What about new technology?

  • Technology often disrupts
    • Look at existing businesses and use new technology could do it better
    • Identify a novel use for an old technology
    • An old solution in a new problem
    • A new solution to an old problem
  • Technology disruption takes longer than you think
  • You need to attach a business model to the idea
    • Is it a product, a service, an experience, a production technique, an operating practice?
    • Who is the customer. What will they pay for
    • Follow the money

The genesis of an idea or an opportunity

  • Can you identify a need?
  • Do you have a solution?
  • Remember “perception of need is constrained by awareness of solutions”
  • “If I had asked my customers what they wanted they would have said a faster horse”: Henry Ford
  • “It isn’t the customers’ job to know what they want”: Steve Jobs

Types of opportunity

  • Need identified, solution identified: Go form a business
  • Need identified, solution unidentified: Market pull so go find a solution…difficult
  • Need unidentifed, solution identified: Technology push so go find a need…easier
  • Need unidentifed, solution unidentified: err…madness?

Sources of opportunity

  • Exploit a new technology to match existing user need/solution better
  • Exploit a new infrastructure like GPS or Cloud (Fitness tracking)
  • Develop a new business model (Netflix or Spotify)
  • Improve an existing product or service (Amazon)
  • Take advantage of new legislation (OpenBanking in the UK)
  • Replicate an existing and successful idea but in a different context or location (Social Networks)
  • Look at things in your life or the life of others. Where is there pain or confusion or high cost?
  • Look for needs and look for problems.

Good ideas…bad ideas

  • During this your lifetime, you’ll come up with (hopefully) many ideas
  • You really don’t want to spend a long time on an idea that ultimately won’t work
  • Most new businesses fail
  • Most fail because they don’t evaluate the opportunity well enough
  • Avoiding non-opportunities is a core competence for entrepreneurs
  • Maybe the single most important

Simple idea evaluation

  • So ask yourself these questions…
    • Who are the customers, how many of them are there (\(C\))?
    • How many of my “thing” will they buy (\(N\))? How often per year (\(T\))?
    • How much will they pay for my thing (\(P\))
    • How much will it cost me to make my thing (\(M\))
    • How much investment will I need (\(I\))

\[C_t \times N_t \times T_t \times (P_t - M_t) > I_t(1+r_f)\]

  • This has to be true for some \(t\)
  • At the very very very least

Filling in the numbers

  • Just guess at first
  • Don’t just guess
  • Use Fermi approximation if you don’t know. Estimate an order of magnitude.
  • Say you’re selling something to coffee shops and need to know how many coffee shops in UK
    • Well…how many coffee shops in Cambridge?
    • How many people in Cambridge?
    • How many people in UK?
  • Estimate: In Cambridge, 100,000 people, 50 coffee shops, 50m people in UK => 25,000 coffee shops in the UK
  • Actual number is 25,892
  • Google is great!

Other quick things to guess

  • Who will buy this? Retail, business, specialists, government?
  • What percentage of the total number of potential customers will buy this (it’s lower than you think)
  • How do you get to sell to your customers (more about this in later lectures)
  • How many people will you need (it’s always more than you think). Work on the basis that one person costs £100k
  • Do you need “stock”, “capital”, “manufacturing”
  • How long until you’re generating revenue? How long until profit?
  • Write a simple spreadsheet Costs and revenue vertically, months/quarters horizontally. Parameterise
  • This is not a business plan but it’s the bare bones of one
  • And that’s what we will cover in two weeks

Next Lecture

  • Part 1
    • Why do you write a business plan?
    • What is in it?
    • Is it useful?
  • Part 2
    • Writing good presentations
    • Presenting in front of people
    • The golden rules of presentation

Questions

Home