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The Changing Face Of Entrepreneurship

Anil Saigal
11/03/2003

The TiE-Boston met on Monday, October 27th at the Burlington Marriott to discuss The Changing Face of Entrepreneurship. The speaker was Paul Severino, Founder and Former Chairman of Bay Networks. Bay Networks was acquired by Nortel Networks in 1998. Prior to that, Paul was a Co-Founder and President of Wellfleet Communications, Inc. in 1986 and Interlan, Inc. in 1981. Mr. Severino is presently engaged as an investor and advisor to emerging technology companies.

The session started with an overview of entrepreneurship and venture capital market. It focused on four topics: financing, markets, customers and competitors. According to Paul:

From 1997-2000

Financing - Money was essentially for free
Markets - Large, global, unlimited growth
Customers - All customers segments were buying
Competitors - Many, startups vs. giants

In contrast, today

Financing - Money is expensive
Markets - Slow steady growth
Customers - Very selective, prefer to buy from established vendors
Competitors - Big players are tough competitors again

However, there is optimism in the market, technology earnings are returning, venture capital industry is reaching equilibrium and M&A and IPO are coming alive. During the last quarter, there were 72 venture capital deals with $1.84B invested along with 22 IPOs. One important point to note in these numbers is that even though California led the nation with 32 deals, Massachusetts was the leader with $785M in investment.

According to Paul, today he would look for three things:
Successful entrepreneurs on team
Long-term strategic vision for the company
Next generation and/or new ideas

It is very difficult to receive funding for incremental technology / product development. The technology/product should be compelling in multiple dimensions of economics, function and performance. An entrepreneur today should be looking at emerging opportunities which are not evident to established players. Examples from the recent past include: Lotus Notes (Collaboration), Palm (Mobile Computing) and Netscape (World Wide Web). So where does Paul see the next big ideas? In the next five years Paul expect these to be in the areas of:
Bio Tech Genomic
E Commerce Applications
Health Care Dysfunctions
Information Access and Distribution
IT and Network Services/Management

In addition, one must plan for realistic goals which for a typical company might look like: Year 1 - Product development; Year 2 - $1M / Marketing/Sales; Year 3 - $4M /Sales traction; Year 4 - $12M / Sales growth and Year 5 - $30M / Jackpot.

With success comes pain. As a result of number of recent events, one must be prepared to deal with the changing face of success which includes: Government regulations and new FASB accounting rules, and Sarbanes-Oxley Act dealing with board structure, CEO/CFO accountability and disclosure requirements.

In conclusion, it was a very practical, to the point presentation for the approximately 100 people in attendance. Final words from Paul, who has been through it all: Conditions for starting a company are improving, running it is becoming more difficult and for start-ups, strategic planning will be extremely beneficial.



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