01 Intro

Stevenson Entrepreneurial Framework

product/strategy + team + cash (seize opportunity)

Leadership(growth)=> Havest & give back

New Venture, HP

HP embodied entrepreneurial discipline with a strong founding team, clear market focus, no external funding, and a trusted internal culture. Their success reflected the Stevenson framework: opportunity, product, team, cash, and leadership.

Why is “Look at the Fish” the mantra for Penn Engineering Entrepreneurship?

Direct first hand observation

• Leaders Look at the Fish!

  • Never be content with the facts on hand

  • See what others don't see

  • See how little you saw before

  • Don't settle for the easy answers

• Confident leaders see and listen

It means developing your own insight by directly observing and analyzing data or customer behavior rather than relying on assumptions. Inspired by Louis Agassiz, this mantra urges entrepreneurs to see beyond surface facts and understand deeper problems and opportunities

HP great company:

they connected all four of Drucker principles.

• Strategy, Vision (Market focus)

  • Products that make a difference
  • Target dominance of segments
  • Team and target market are electrical engineers

• Team/Culture (Hire top team)

  • Highly skilled and complementary
  • Mentor - Terman
  • Hired ahead of needs - post WWII engineers
  • HP Way: Team, trust, respect, communication

• Financing/Capital (Financial Foresight)

  • No debt; 100% financed from earnings
  • Strict cash management

• Leadership/Founder (Role of founder)

  • Complementary capabilities; division of labor
  • What the company needs What the founder can provide

HP exemplified the Stevenson entrepreneurial framework: clear vision, complementary team, disciplined use of capital, and founder-led leadership. Their market-driven strategy, engineering excellence, and respect-based culture (the "HP Way") enabled sustained innovation

Winning Strategy, Vermeer

Vermeer applied Davidow’s “Winning Strategy” by creating complete products, targeting a niche, and adapting to market changes. Their strategic focus led to a high-value acquisition by Microsoft.

What are four (or five) sources of cash and how do they differ?

Personal funds (bootstrapping): founder control, limited scale.

Customers (revenue): non-dilutive, market-validated.

Debt (loans): no ownership loss, requires repayment.

Equity (angels/VCs): enables scaling, dilutes ownership.

Grants: non-dilutive, often restricted use

How can a startup compete effectively in a new market with many large, well-established companies?

By segmenting the market, focusing on underserved niches, and differentiating based on unique value. Vermeer avoided attacking dominant players directly, instead targeting a specific segment and building a defensible position before being acquired

1. Create products not devices

   Vermeer: create online services

2. Establish a commanding position

   1. Segment
   2. Differentiation

3. Adapt strategy and plan for high tech

IP, Palm A

Palm protected its innovation using patents and trademarks, notably the PalmPrint. The case highlights how IP strategy must align with business goals and not just legal protection.

What are the types of intellectual property and which would you use to protect the IP of your venture? How?

Intellectual Property (IP):

• Patents: new and useful processes, machines, manufactures or compositions of matter
• Copyright: original works of authorship fixed in any tangible medium of expression
• Trademark (service mark): word, name, symbol or design that identifies the source of a product or service
• Trade secret: [something] used in business that provides opportunity to obtain an advantage

Innovation, Curves, and Sales Learning Curve

Turning innovation into ventures requires understanding technology and market adoption curves. The Sales Learning Curve shows how different business models impact cash flow and team development.

How do we turn innovation into products, and products into ventures?

We engage with stakeholders early and throughout development to gather feedback, then position the product clearly for a specific market segment. Innovation becomes a product through iterative prototyping and testing, and becomes a venture through defined sales, marketing, and operational strategies that scale over time.

Why does our venture exist and how does/should it evolve over time?

A venture exists to solve real customer problems and deliver value better than current alternatives. As markets, technology, and customer needs evolve, the venture must adapt its strategy, operations, and offerings accordingly to stay relevant and competitive

• Products evolve over time
  – product development & lifecycles
• Markets evolve over time
  – technology adoption lifecycle a.k.a. Diffusion of Innovation
  – Novel technologies  commodities
• Company operations should adapt
  – Sales Learning Curve
  – Scale
  – Manufacturing learning curves
• Customer engagement evolves
  – Prospect  customer
  – Sales/Marketing mix

06 Palm Computing, Crossing the Chasm

Palm succeeded by targeting early adopters, establishing a beachhead, and using self-referencing communities to cross the chasm into mainstream markets. Their marketing strategy focused on trust and clear positioning.

How can a startup succeed where well-established, well-funded companies have failed? (HINT: effective marketing!)

Startups can succeed by focusing on effective marketing, especially targeting a tightly defined niche with clear psychographics. By delivering a compelling solution and leveraging word-of-mouth in self-referencing communities, they can outmaneuver larger but less focused competitors

How can you transition from early market visionaries to mainstream pragmatists?

To cross the chasm, a startup must segment precisely, secure a referenceable beachhead in a niche, and deliver a complete product that meets mainstream expectations for reliability and support. Building trust, leveraging partnerships, and being seen as the obvious supplier in that niche are key steps

07 Palm Pilot, Customer Discovery

Palm Pilot validated demand early with low-cost market research, including MVP sketches and direct customer feedback. Concept testing and conjoint analysis helped avoid expensive missteps.

How can we use cost-effective market research to avoid failure? (and to revisit the Palm Pilot)

Startups can use low-cost tools like concept testing and conjoint analysis to validate customer interest and understand feature preferences before investing heavily. Engaging with real users—especially early adopters—provides insights into problems, willingness to pay, and helps avoid false assumptions

Principles of Concept Test and Conjoint Analysis

Concept testing evaluates purchase intent and reactions to a proposed product idea, while conjoint analysis identifies how customers make trade-offs among different attributes. Both methods must be user-centric, clearly communicated, and focused on benefits rather than technical specs.

08 Lean Startup, Dropbox

Dropbox used a video MVP to validate interest and gather feedback before building a full product. The lean startup approach minimized waste and enabled fast iteration.

How does Lean Startup and market research help us (and Dropbox) achieve product-market fit more effectively?

Lean Startup helps by turning assumptions into testable hypotheses and validating them with minimal viable products (MVPs). Dropbox used a video MVP and referral programs to rapidly gather data, iterate, and refine its offering until it resonated with a clear user segment

09 LinkedIn

LinkedIn segmented users (job seekers, recruiters, professionals) and aligned pricing strategies accordingly. Positioning and bundling were key to monetizing its freemium model.

How does positioning help setup our marketing strategy?

Positioning defines the target segment and value proposition, which guide the messaging, feature prioritization, and pricing strategy. For LinkedIn, segment-specific offerings like premium bundles or messaging access were shaped by understanding user needs like networking, recruiting, or relationship management

Principles of pricing and impact on decision-making

Pricing strategies affect revenue potential and user behavior—bundled subscriptions maximize value per user, while à la carte pricing can drive higher marginal revenues. Pricing also signals value and helps segment customers based on willingness to pay

10 Dell Virtual Integration, Business Model Canvas, Understanding Financial Modeling & Statements

Dell’s virtual integration model optimized operations and customer service while reducing inventory costs. The Business Model Canvas and financial statements helped link strategy to outcomes.

What is the impact of a new business model on company, competitive positioning, industry, and financial models?

A new business model like Dell’s virtual integration can redefine cost structures, improve margins, and shift competitive dynamics by lowering inventory and enhancing responsiveness. It affects every element of the Business Model Canvas and reflects directly in financial outcomes such as revenue timing, margin structure, and capital needs

Principles of income statement, balance sheet, cash flow

• Income Statement shows profitability by comparing revenues and expenses over time.
• Balance Sheet provides a snapshot of assets, liabilities, and equity.
• Cash Flow Statement tracks actual cash movements from operating, investing, and financing activities—critical for assessing liquidity and sustainability

11 Dell Product Development, Expected Value

Dell used expected value analysis to evaluate uncertain product decisions, like battery choices. Combining qualitative reasoning with quantitative tools led to more informed, data-driven decisions.

How can we combine qualitative and quantitative analysis to make better business decisions?

We combine qualitative insights (e.g., user needs, competitive positioning, strategic fit) with quantitative tools like expected value (EV) analysis to evaluate risk-return tradeoffs. Dell’s battery decision illustrates this: they used a decision tree to model outcomes (e.g., LiOn battery success/failure) and incorporated probabilities and financial outcomes to choose the most value-maximizing path

12 Bootstrapping & Raising Capital

Startups begin with bootstrapping, then seek angels or VCs using equity or convertible instruments. VCs don’t rely on traditional financials; they look for strong teams, big markets, and viable exits.

How do VC’s evaluate (and not evaluate) an investment opportunity?

VCs assess opportunities based on team quality, market size, product differentiation, and the likelihood of achieving a high-value exit. They don't rely on financial statements or DCF due to high uncertainty—they use the VC method, aiming for 5–10× return in ~5 years, and worry most about uncontrollable risks like market demand and execution

How do high-tech startups get funded?

Startups begin by bootstrapping—relying on personal funds, early revenues, or crowdfunding—then may progress to angels or VCs via equity or convertible instruments (like SAFEs or notes). Funding depends on the startup’s capital intensity, growth stage, and traction; each source has different risk, control, and dilution implications

13 VC Method

The VC Method calculates ownership needed for target returns based on exit value and time. SAFEs delay valuation until the next round and offer a simpler, flexible funding tool for early-stage startups.

When investing in a startup, how does a VC know how much to pay, how much of the company (shares, %) they get, how much of a return on their investment they will realize, and how they will realize the ROI?

VCs use the VC Method: estimate the startup’s terminal value at exit (e.g., IPO), apply a target ROI (e.g., 10× in 5 years), and back-calculate what ownership percentage they need today to achieve that return. This determines how much they invest and how many shares they require

Convertible notes, Simple Agreement for Future Equity (SAFE)

• Convertible notes are short-term debt that converts to equity at a later round, often with interest and a valuation cap.
• SAFEs (Simple Agreements for Future Equity) also defer valuation but are simpler, with no interest or maturity date, and typically include a discount or cap at the next financing

14 Evaluating Term Sheets, Negotiating Skills

Term sheets outline investment terms such as valuation, control, liquidation preferences, and dilution protection. Founders must carefully evaluate the tradeoffs between control and capital.

What are the considerations when negotiating terms with venture capitalists and early-stage investors?

Beyond valuation, founders should consider control (board seats, voting rights), economic terms (liquidation preference, anti-dilution), and rights (information, participation). Founders must balance protecting the company and their equity with aligning investor incentives for long-term success

15 IPO, Facebook

Going public offers liquidity and visibility but requires transparency, legal compliance, and cultural shifts. The benefits and risks vary depending on whether you're a founder, VC, or employee.

Do you want your company to go public?

Going public offers access to capital, liquidity for shareholders, and increased visibility, but also brings dilution, regulatory burdens, and loss of control.

How does your answer change if you are: VC investor? Founder, CEO? Founding employee? New employee?

• VCs prioritize ROI and exit;
• founders may seek long-term growth or control;
• early employees hope for liquidity;
• new employees may be more neutral

16 Open Innovation, Palm Financing

Palm used stage-appropriate funding to align with cash needs, and leveraged partnerships for innovation. Open innovation accelerates product development but requires strategic alignment.

How has innovation changed over the past few decades?

Innovation has shifted from closed, in-house R&D to open ecosystems involving partnerships, licensing, and startups. Companies now integrate internal and external ideas, using models like "orchestrator" or "licensor" to rapidly iterate and reduce cost and risk

How are investors and entrepreneurs aligned and misaligned when evaluating investment opportunities and liquidity events?

They both seek value creation, but investors may prefer faster, lower-risk exits (e.g., acquisition), while founders may prioritize independence, vision, or long-term scale. Different investors (e.g., VC vs. strategic partner) also differ in time horizon and exit preference.

How are objectives aligned/misaligned among different investors in the same company?

Later-stage VCs might prefer IPOs for higher returns, while earlier investors may favor acquisition for liquidity. Strategic investors may want operational control or IP access, conflicting with financial investors focused purely on ROI

18. GenapSys / Disruptive Technology

GenapSys evaluated three revenue models—traditional sales, razor-and-blades, and data analytics—each with different cash flow dynamics. Their decision impacted gross margin, adoption rate, and financing strategy, underscoring how business models shape venture trajectory.

What is disruptive technology?

Disruptive technologies introduce new value propositions at lower cost to underserved or non-consumers, eventually displacing incumbents.

How does disruption affect strategy and funding?

Disruption changes cash flow timing and capital needs; e.g., a razor-and-blades model delays breakeven but increases long-term margin. Strategy impacts product adoption, pricing, and overall funding requirements.

20. Nanogene & Founder’s Dilemma

Nanogene’s equal equity split among 5 founders diluted dramatically after funding rounds. Adding a key hire (Paige Miller) raised questions of fairness, compensation, and control. Lesson: equity should reflect contribution, not just early involvement.

How should founders determine equity division?

Use a thoughtful, trust-based approach considering contributions, commitment, capital, and future role. Avoid fast, equal splits unless justified20_20250401 Owners Equi….

What about equity for new hires?

Structure vesting based on time or milestones. Align compensation with long-term value and company needs

How to transition to key hires?

Document roles, expectations, and equity terms early. Prepare founders to shift from “doers” to “builders”

21. Sirtris / FDA / Life Sciences

Sirtris targeted aging-related diseases with sirtuin activators. Though risky, they raised $100M+ and IPO’d, later acquired by GSK for $715M. They focused on storytelling, scientific progress, and strategic liquidity events to manage biotech uncertainty

How are life science startups different?

They require longer timelines, more capital, and face stringent FDA regulation. Success hinges on milestone progress, not just revenue

How do successful ones manage?

They raise capital in phases, leverage regulatory pathways (e.g., orphan drug, fast track), and manage risk via strategy shifts (e.g., neutraceuticals)

24. MIPS, Spoiled Startup, Level 5 Leadership

MIPS had great technology but lacked vision and leadership until Miller implemented discipline, humility, and clear goals. Level 5 leadership—humility and fierce resolve—turned the company around.

How can a hi-tech startup compete with an established market-leading company?

A startup can compete by focusing on a clear, differentiated vision, hiring A-level people early, and creating a culture that supports risk-taking and urgency. Success depends on disciplined execution, market-driven product strategy, and strong internal alignment.

What contributes to success and failure of a hi-tech startup?

Success requires vision, market focus, right talent, and adaptive leadership. Failure often stems from vague strategy, overfunding without discipline, internal misalignment, and lack of leadership humility.

25. Sun, First Who…Then What

Sun’s success stemmed from assembling a world-class team before defining strategy. The company aligned vision, execution, and capital, contrasting with MIPS' early missteps.

What contributes to success and failure of a hi-tech startup?

Sun succeeded by starting with the right people—visionaries with complementary skills—before defining strategy. In contrast, MIPS had talent but lacked cohesion, vision, and focus until turnaround efforts were made.

[EAS5450 review – MIPS & Sun]

Sun’s clear vision and trust-based leadership (Khosla) enabled strategic execution and growth. MIPS initially lacked direction, overspent, and only succeeded after leadership change and re-focusing around a licensing model.

26. Motivation, Scaling a Startup, N12

N12’s scale-up required building systems, hiring strategically, and maintaining startup culture. Motivation shifted from founder passion to structured incentives and team autonomy.

What are considerations for scaling a successful high-tech startup?

After product-market fit, startups must evolve structure, systems, leadership, governance, and culture while preserving agility. Key challenges include hiring A-level people, managing transitions, and maintaining the entrepreneurial spirit amid growing complexity.

How can you effectively motivate employees?

Balance intrinsic motivators (purpose, autonomy, mastery) with fair extrinsic rewards. Foster a culture of trust, recognition, and alignment with company mission to drive engagement and performance.

27. Theranos, Principled Entrepreneurship

Theranos illustrates how compelling vision without transparency leads to ethical failure. Founders must be vigilant about cognitive biases and prioritize principled entrepreneurship.

How can well-intentioned entrepreneurs lead a company so far astray of ethical, moral boundaries?

Even well-meaning founders can drift into unethical behavior due to unchecked ambition, cognitive biases, poor governance, and toxic culture. Theranos exemplifies how storytelling, secrecy, and bias (e.g., confirmation, sunk cost) can override transparency and accountability.

28. Leaders & Managers, Creators & Stewards

Successful ventures balance leaders (visionaries) with managers (executors). The course emphasizes self-awareness, principled decision-making, and applying entrepreneurial tools to life and career.

How do I prepare for the final?

Review course slides, key takeaways, guest lectures, and complete your notes (2 double-sided pages). Focus on concepts like product-market fit, business models, startup scaling, venture finance, leadership, and examples from cases and guests.

What did I learn (should I have learned) this semester?

EAS5450 teaches how to build, fund, scale, and lead high-tech ventures. Success comes from vision, execution, culture, ethics, and balance—between leaders and managers, creators and stewards, risk and discipline.

17. GUEST: Ross Mechanic (Maybern)

Ross shared how he raised $26M to build Maybern, a SaaS platform for fund management, despite starting without a product or customers. He emphasized the power of relationships and storytelling in early fundraising and hiring. Key lessons: build trust, use narrative effectively, and understand cap table implications of post-money SAFEs.

19. GUEST: Julia O'Mara (Pickle)

Julia co-founded Pickle, a peer-to-peer fashion rental startup, after pivoting from PicklePoll. She bootstrapped with minimal funds, did non-scalable work (e.g., 4,000 subway deliveries), and emphasized customer intimacy. Investors care about clear, concise stories—be relentless, adaptive, and simple.

22. GUEST: Tobias Dengel (WillowTree)

Tobias emphasized 5 business truths: Know yourself, sales drives business, marketing drives sales, culture is everything, and follow trends. He highlighted AI’s role in redefining human-tech interaction and the power of voice + GenAI in customer experience

23. GUEST: Miranda Wang (Novoloop)

Miranda described building a cleantech startup in hard times—pivoting from U.S. to India for scaling, securing international partnerships, and raising $22M despite setbacks. Her advice: validate your problem, stress-test customers, manage burn, and adapt with urgency.