Lecture Notes

Part I: The global environment for entrepreneurship
1 Course overview and introduction

Introduction to course purpose, structure, and faculty.

Entrepreneurship in emerging markets.

2 Issues for entrepreneurs in developing markets

Certain institutions have been shown to be central for the healthy development of entrepreneurial ventures. Most countries, however, possess suboptimal versions of most, if not all, of those institutions. These institutional shortcomings translate directly into structural barriers for entrepreneurship. Entrepreneurs must find ways around structural barriers, and do so in often creative ways.

Live case: Live discussion with Leila Velez, Beleza Natural

3 How entrepreneurial companies respond to corruption

India is widely acknowledged to have one of the most corrupt business environments in the world. Yet a number of entrepreneurs have built up successful businesses and have pursued an explicitly ethical strategy. Infosys is one of the most interesting examples.

Study questions:

1. How did Infosys manage to grow in this corrupt environment?
2. What were the minimum conditions for an ethical firm to remain ethical in a corrupt environment?
3. Does ethical entrepreneurship pay in a corrupt environment? How do you make it pay?

4 Opportunities amid extreme unpredictability

How do emerging markets differ from developed markets for entrepreneurs? What challenges and opportunities are the same? Which are different? How and why and to what degree? How do those answers change over time as markets become more established? Using the example of post-Soviet Russia, we will examine several live cases of success and failure by entrepreneurs in Russia in the last 15 years to better understand the critical differences inherent in "doing a start-up in a start-up country."

Guest speaker: William Shor, CEO, Core Carbon Group.

Study questions:

1. Russia 1995

The "Risk Factors" in this reading are part of a prospectus given to investors buying stock in a Russian candy company in 1995. Assume you are in an entrepreneur in that bleak operating environment. Which risk factors listed would be most challenging to building your start-up company? What other risks not listed here as investment risks might an entrepreneur face as well?

2. Frontier Markets

Although its founder is now a billionaire and Renaissance Capital is not at all a start-up any longer, essentially these press releases announce a strategy of new market entry and internationalization. New Market Entry is the most common type of project that teams work on in G-Lab. How would you begin the process of assessing and analyzing how (and whether) Renaissance Capital should take its business model to Africa?

3. Russia 2008

The CCG Overview deck is a slightly redacted version of the firm's actual presentation which it uses to market to potential investors. As you review the CCG Overview deck, assume you are a potential investor listening to a pitch. Think about the critical political, economic, infrastructure and legal aspects of this kind of business. What questions and challenges do you have for our guest that relate specifically to the risks of building this company in Russia? What kind of data or evidence would be necessary to persuade you to invest in CCG?

5 Team-building mixer Each section will have an informal mixer, in which students with similar interests can meet one another and create G-Lab teams.
6 How the government shapes the entrepreneurial environment

Entrepreneurship in Shanghai: getting the story right about the competitiveness of China.

Study questions:

1. What kind of entrepreneurship is most important for countries like China?
2. Should the government have an industrial policy to foster technological development?
3. What are the pros and cons of FDI in terms of growing indigenous entrepreneurship?

7 Legal environments and IP protection Property rights, IP protection, and other legal institutions have often been cited as indispensable elements for innovation and entrepreneurship in an economy. What can entrepreneurial firms do in environments where such legal protection is lacking?
Part II: The challenges facing entrepreneurial firms
8 Working in a G-Lab project

Using a G-Lab case from 2004-05, we'll look at G-Lab projects from the inside, focusing on issues of process, client management, and team dynamics. We'll end the class by discussing the match acceptance process and how you should begin working with your host company.

Study issues and questions:

In addition to the questions posed at the end of the case, please consider the following. Imagine that you're Ailton and you're applying to host a G-Lab team. What should be the team's project scope? Now imagine you're on the G-Lab team. How will you set out to complete the project?

1. What will you do?
2. Whom will you talk to?
3. What information is missing, and how will you get it?
4. What challenges do you anticipate and how will you prepare for them?

9 Life sciences overview, biotech entrepreneurship

In this class, Professor Fiona Murray will speak about biotech companies in emerging markets. We traditionally think of the biotech industry as being dominated by firms in the US and, to a lesser extent, in Europe. However biotech firms are emerging in growing numbers in non-traditional locations including India, China, Brazil and even Cuba. In this class we will examine how these companies develop and actually take advantage of or circumvent the various institutional differences in their nations in institutions such as intellectual property, public research and healthcare.

Guest speaker: Professor Fiona Murray, MIT Sloan School

Study issues and questions:

1. Should Biocon add the Clinegene division?
2. If they were able to raise significant capital does this investment make the most sense?
3. What other investments might they consider as part of their growth?

10 Internationalization

For a variety of reasons, including size or maturity of their home market, entrepreneurial firms in emerging markets must go abroad for growth opportunities. While economically sensible, such incursions entail significant challenges, quite distinct from those faced by traditional multinational corporations. How should start-ups internationalize? What are the risks and opportunities?

Guest speaker: Professor Don Lessar, MIT Sloan School

11 Team meetings Team meetings with faculty advisors.
12 You are not alone

Mechanisms and networks firms use to circumvent environmental weaknesses.

Live case: Live discussion with Endeavor

Guest speakers: Laura Esnaola, Entrepreneur Services, Endeavor, Cindy Ko, VP, International Expansion, Endeavor


Research methods

Team meetings

Library research: techniques and resources (Alex Caracuzzo, MIT Libraries.)

Team meetings with faculty advisors. Note: Some teams will meet during class times, others outside of class. TAs will work with the teams to schedule meetings.

14 Global sales strategies for ambitious entrepreneurs

This class will cover the sales and marketing challenges faced by startup companies in emerging markets. We will use the case from a Sales and Marketing perspective; it is not necessary to read the financials in the case. The discussion will be about global sales strategies for a startup.

Study issues and questions:

1. The Company's original plan was to sell their data visualization tools to a wide range of industries. Spotfire received their first (A) round of venture capital funding from a Swedish VC firm to pursue the "horizontal" marketing plan.

2. Spotfire started as an idea in a project in a university lab. They had no business plan, no business people, and no customers. Somehow they got funded. Why? Would you have funded them?

3. Chris approached every potential customer in Sweden he could think of and asked them to "buy" his prototype. This early stage market activity is something akin to "throwing spaghetti against the wall until it sticks."

  • What kind of potential customers would "buy" from an engineer like Chris?
  • Does such early market testing work in the part of the world where your host company is located?

4. Subsequently the company changed its strategy initially to focus on only one industry ("vertical marketing").

  • What was the original decision making unit (DMU) for the horizontal sales strategy?
  • Why did they change their strategy?
  • Which industry did they select? Why?
  • Who suggested the change in strategy? Why?
  • What is the DMU today?

5. The Company moved their headquarters from Göteborg to Boston/Cambridge while retaining the software development operations in Göteborg. Whose idea was that? Why? What are the dynamics around software development operations in high cost countries?

6. In the life of a high tech startup company with global ambitions when is the right time to recruit someone like Rock? What does it take to make the relationship successful?

7. Some tips on how to think about Sales and Marketing Research on behalf of your host company.

15 Being an entrepreneur This session will consist of a panel discussion with several entrepreneurs from different emerging markets. The goal of this session is to familiarize you with the key challenges and major opportunities entrepreneurs face trying to build start-ups in several of the countries G-Lab teams will visit.
16 Team meetings with faculty advisors
17 Entrepreneurial finance

Pakistan is deemed "too unstable" a country for us to send G-Lab teams to. Pakistan suffers from extreme political instability, weak rule of law, poor oversight of capital markets, and extremely limited and generally laughably poor quality research available on publicly listed companies. Yet in 2006, this country was one of the best performing emerging markets in the world, with more than US$18 billion in foreign investment. How do professional investors and multi-nationals evaluate companies and markets when considering new investments or expansion plans, when so little market and competitive data is available and when the quality of that data is often so unreliable?

This session will present a framework of standard financing and investment alternatives available to startups and entrepreneurial firms operating in emerging markets, which can often differ significantly from the options open to tech firms in Silicon Valley or Route 128. In the second half of the session, guest speakers representing early stage EM investment firms will present perspectives on how these challenges to financial modeling and investment analysis are met on a pragmatic, real-world basis.

Guest speakers: Bill Jarosz, Managing Director, Cartesian Capital; Vikram Mansharamani, SeaCross Capital

18 Team meetings with faculty advisors
19 Investigation and analysis We will use an open-ended case to apply the frameworks and tools discussed in class thus far. We will focus on types of data, particularly how to look into and beyond the information a company may give.
20 Commercialization

Emerging technologies are often useful for several different markets and types of customers. Because of a variety of constraints, entrepreneurs must decide which of those markets to target first, knowing that the decision could be the difference between firm success or failure. How should they choose their target market?

Guest speaker: Dr Charles Sodini, MIT Dept. of Electrical Engineering and Computer Science, creator of SMaL Camera Technologies

21 Team meetings with faculty advisors
22 Organizational development and human resource management Developing and scaling the organization, hiring and retaining the right people and other challenges of success.
23 Best practices overview

We will begin by discussing consulting best practices with a McKinsey director, then turn to a panel of G-Lab alumni for a view from the trenches on the G-Lab onsite internship, with a focus on common pitfalls and traps. We will reserve significant time for Q&A.

Guest speakers: Alex Gouvea, Director, McKinsey; G-Lab alumni

24 Building trust Pulling it all together? Building trust in a challenging environment.
Part III: The internship and final reports
25 Following month: G-Lab internship

Your internship will take place during at least three weeks of IAP 2008 (January 1 - February 1, 2008). All four team members must be together, on-site, throughout the internship.

You will make a formal presentation to your company at the end of your onsite internship and provide them with supporting written analysis and data as appropriate.

26 One week following end of internship: Faculty meetings During February, teams will meet with the faculty to present their reports: The process, the findings, and the lessons learned.
27 10 days following end of internship: G-Lab poster session

We will hold a major G-Lab event 10 days following end of internship. Every team must prepare a poster and staff a presentation position during this event.

You get to showcase what you did and why, for the entire MIT community. The poster session will be widely advertised and you should expect considerable interest, scrutiny, and questions.