Book: HBR Startups and Entrepreneurship

HBR's 10 Must Reads on Entrepreneurship

I. Overview

This collection of articles from the Harvard Business Review explores various facets of entrepreneurship, covering topics ranging from crafting effective business plans to understanding the dynamics of venture capital and scaling a startup. The articles challenge conventional wisdom, emphasizing adaptability, customer-centricity, and a realistic understanding of the entrepreneurial landscape.

II. Key Themes and Ideas

A. The Business Plan: Beyond the Myth

• Emphasis on Practicality Over Formalism: The traditional, lengthy business plan with detailed financial projections is downplayed as a primary predictor of success. The article argues that execution and adaptability are more critical. "Nothing could be further from the truth. In my experience with hundreds of entrepreneurial startups, business plans rank no higher than 2—on a scale from 1 to 10—as a predictor of a new venture’s success."
• Focus on Key Questions: The document outlines specific questions a business plan should address:
• Team: "What do they know? Whom do they know? and How well are they known?" It lists 14 "Personal" questions to evaluate the founders.
• Opportunity: "Is the total market for the venture’s product or service large, rapidly growing, or both? Is the industry now, or can it become, structurally attractive?"
• Product/Service: Is the product or service a "compelling purchase"?
• Competition: Thorough analysis of existing and potential competitors, their resources, and likely responses. "Who are the new venture’s current competitors? What resources do they control? What are their strengths and weaknesses? How will they respond to the new venture’s decision to enter the business?"
• Risk and Reward Assessment: A good business plan candidly addresses potential pitfalls and how the management team will respond to unexpected challenges. It also discusses "harvesting" or how investors will eventually exit and realize their returns.

B. The Lean Startup: Adaptability and Customer Development

• Challenging the Traditional Approach: The "lean start-up" methodology rejects the traditional approach of writing a comprehensive business plan and developing a product in isolation. "According to the decades-old formula, you write a business plan, pitch it to investors, assemble a team, and introduce a fully developed product. The problem is that the formula is a recipe for high failure rates."
• Minimum Viable Product (MVP) and Iteration: Instead, the lean startup emphasizes rapid experimentation, customer feedback, and iterative development. A start-up produces a “minimum viable product”—containing only critical features—gathers feedback on it from customers, and then starts over with a revised minimum viable product."
• Customer Development: The lean startup methodology is built on "customer development."

C. Venture Capital: Myths and Realities

• Challenging Common Perceptions: This section debunks several myths about venture capitalists:
• Myth 1: "VCs Are the Smartest Money in the Room": The document suggests VCs don't always have the "Midas touch."
• Myth 2: "VCs Take a Big Risk When They Invest in Your Start-Up": VCs risk very little of their own money. "In most VC funds the partners’ own money accounts for just 1% of the total." Their revenue model (fees and percentage of profits) makes them less accountable for performance.
• Myth 3: "Most VCs Offer Great Advice and Mentoring": The quality of advice and mentoring varies greatly. Entrepreneurs should thoroughly vet potential VCs.
• Myth 5: "In VC, Bigger Is Better": Underperformance is finally causing institutional investors to think twice before investing in venture capital.
• Importance of Due Diligence: Entrepreneurs are encouraged to carefully research and evaluate potential VCs, asking about their experience, board involvement, and resources.

D. Self-Financing and the Chobani Story

• Viability of Bootstrapping: The article profiles Hamdi Ulukaya, the founder of Chobani, who successfully built a billion-dollar business without external investors. "Our ability to grow without reliance on external investors...was vital to our success. Today Chobani is a $1 billion business, and I remain the sole owner."
• Control and Mission: Ulukaya emphasizes the importance of maintaining control to stay true to the company's mission. "If I took on investors, my ability to stick to this mission would be limited."
• Strategic Decisions: Key decisions included securing a bank loan backed by the SBA, negotiating slotting fees with retailers, and carefully determining pricing.

E. Blitzscaling: Rapid Growth in a Networked World

• Definition: Blitzscaling is "the discipline of getting very big very fast."
• Three Kinds of Scale: Blitzscaling involves scaling revenue, customer base and the organization.
• Offense and Defense: Blitzscaling is used to gain market share quickly and to fend off competitors. "you know you absolutely need to, for the offensive and defensive reasons we just talked about."
• Stages of Scale: The article outlines stages of organizational scale, from "family" to "nation," and how functions change at each level.
• Prioritization: During blitzscaling, some aspects of the business (e.g., efficiency, customer service) may be temporarily sacrificed for the sake of rapid growth.

F. Acquisition Entrepreneurship: Buying a Business

• Benefits include starting with an established business, not from scratch.
• Includes building relationships with employees, customers and suppliers.
• Look for markers of enduring profitability including a steady and loyal customer base.

G. Founder Dynamics and Control

• Founder's Dilemma: Explores the trade-offs founders face as their companies grow, particularly regarding relinquishing control.
• Desire for Control: Some founders prioritize maintaining control over maximizing financial returns. "On the other side of the coin are founders who bootstrap their ventures in order to remain in control."
• VC Expectations: Venture capitalists often expect founders to eventually step aside and bring in professional management.

III. Key Quotes

• "Everybody has a plan until they get punched in the mouth." (referring to the limitations of business plans).
• "Grow big or go home." (a common motto during the dot-com bubble, highlighting the emphasis on rapid growth).
• "Forget details, just do deals." (another dot-com era motto, criticized for leading to companies with little substance).
• "The trade-offs are just too great." (John Gabbert, founder of Room & Board, on rejecting outside funding to maintain control).

IV. Conclusion

These excerpts offer a nuanced view of entrepreneurship, emphasizing the importance of adaptability, customer focus, realistic risk assessment, and the ability to make strategic decisions about funding and growth. They challenge conventional wisdom and provide valuable insights for both aspiring and experienced entrepreneurs.

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