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Starting Your Own IT Company

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Title: Starting Your Own IT Company


1
Starting Your Own IT Company
  • Inshirah Bawazeer
  • Jennie Charoenpitaks
  • Owais Karamat
  • Dave Boltz

2
Project Plan and Presentation Outline
  • Provide an overview of published research on
    entrepreneurship focused on three areas
  • Trends in Entrepreneurship
  • A review of the classics especially regarding
    personal backgrounds of entrepreneurs
    personality/experiences
  • Updating the classics based on changing
    demographics and cultural factors.
  • Based on this research, interview three local IT
    entrepreneurs to assess the applicability of the
    literature especially to the field of IT
  • Analyze interview results and draw conclusions

3
Presentation Agenda
  • Entrepreneurship and Trends
  • Reviewing the Classics
  • Updating the Demographics
  • Interviews
  • Andrew Sobey Jr.
  • Sanjay Kumar
  • Wayne Haar
  • Conclusions

4
What is Entrepreneurship?
  • Entrepreneurship is a human, creative act that
    builds something of value from practically
    nothing. It is the pursuit of opportunity
    regardless of the resources, or lack of
    resources, at hand. I t requires a vision and the
    passion of commitment to lead others in the
    pursuit of that vision. It also requires a
    willingness to take calculated risks.
  • Jeffrey A. Timmons, The Entrepreneurial Mind, as
    cited by Lambing and Kuehl, 2000.

5
Entrepreneurship is flourishing
  • In 1955, the Fortune Magazines 500 list of
    largest industrial corporations captured
    Americas attention. Who had unassailable
    positions?
  • In 1955, there was one small business for every
    38 persons.
  • By 1965 one for every 29
  • By 1975 one for every 26
  • By 1985 one for every 20
  • By 1994 one for every 16
  • 1997 saw a U.S. record 884,000 new business
    incorporations.
  • What explains the growth in the number of small
    U.S. businesses from 4.5 million in 1955 to 16
    million in 1995? Lambing and Kuehl explain
  • Entrepreneurship, 2nd Ed. Lambing, Peggy and
    Charles Kuehl. 2000

6
Lambing and Kuehl
  • Two factors impacted the American economy
  • Competition from companies abroad increased
    during the 1960s and 70s.
  • The late 1970s began a period of deregulation.
  • As a result, further economic and cultural
    changes occurred. The largest corporations had
    massive layoffs downsized as corporate
    survival was at stake.
  • Any company that has more people than it needs
    is headed for trouble
  • Fewer jobs in the post-industrial economy.
  • Entrepreneurship, 2nd Ed. Lambing, Peggy and
    Charles Kuehl. 2000

7
The United States is not alone
  • The European Union has sought to simplify
    accounting procedures and improve the business
    environment for small business.
  • China and Russia, traditionally opposed to
    capitalism, have seen small enterprises emerge as
    an economic force in their new economies
  • Eastern Europe has witnessed similar growth
  • And in the Far East, as an example, the
    government of Malaysia requires commercial banks
    to make funds available for small business loans.

Entrepreneurship, 2nd Ed. Lambing, Peggy and
Charles Kuehl. 2000
8
New business success rates
  • Easton and Conant note making the transition from
    corporate employee to entrepreneur is not easy.
    Citing a study by Cooper(1982), they note 6.3MM
    firms were started in 1947-54
  • 23 gone in six months or less
  • 23 more gone in one year
  • 29 survived 4.5 year mark.
  • In 1977 study of 250 new high technology firms
    near Palo Alto, CA better results
  • 5 failed in the first three years
  • 24 stopped operations within seven years
  • 29 stopped within ten years
  • But, 42 still existed after ten years.
  • Importantly, in 1983, only 3 of new firms were
    high tech.
  • Easton, Thomas A. and Ralph W. Conant. Cutting
    Loose Making the Transition from Employee to
    Entrepreneur

9
Presentation Agenda
  • Entrepreneurship and Trends
  • Reviewing the Classics
  • Updating the Demographics
  • Interviews
  • Andrew Sobey Jr.
  • Sanjay Kumar
  • Wayne Haar
  • Conclusions

10
Literature Review
  • There is a significant history of research on
    entrepreneurship.
  • The conclusions of a major study carried out by
    Collins and Moore at MSU in 1964 (cited in Liles,
    1974) did not portray entrepreneurs in the most
    positive light
  • we have been having difficulty deciding
    whether the entrepreneur is essentially a
    reject of our organizational society who,
    instead of becoming a hobo, criminal, or college
    professor, makes his adjustment by starting his
    own business or whether he is a man who is
    positively attracted to succeed in it. We have,
    perhaps without intention, regarded him as a
    reject.
  • The men who travel the entrepreneurial way are,
    taken on balance, not remarkably likeable
    people.
  • Collins Orvis F. and David G. Moore with Darab B.
    Unwalla. The Enterprising Man

11
Literature Review
  • However, Liles also cites smaller-sample studies
    at Harvard and MIT that yielded a different view
  • Entrepreneurs were not found to be failures
  • founders had experienced a generally higher than
    average level of success in their previous
    employment
  • Several had achieved outstanding levels of
    achievement

12
Literature Review
  • Using the same data as Collins and Moore, Norman
    Smith (1967) hypothesized 2 types of
    entrepreneurs
  • Type I the Craftsman-Entrepreneur. Blue collar,
    task oriented and valued the practical.
    Successful at one job and then moved on. Didnt
    like big companies but didnt identify w/unions.
  • Type II Opportunistic-Entrepreneur. More often
    than not came from a middle class background and
    often had a father who was a small businessman.
    Typically, academically successful. Often a
    social leader. Career demonstrated not only
    technical abilities but capacity for competent
    administration. Key unlike Type I, Type IIs are
    adaptable.
  • Smith, Norman R. The Entrepreneur and His Firm
    The Relationship Between Type of Man and Type of
    Company

13
Literature Review
  • Dennis Kimbro (1996) argues that a successful
    entrepreneur must have
  • mission (being able to take charge)
  • vision ( the ability to inspire others to action)
  • passion (an intense commitment and determined
    perseverance)
  • Kimbro, Dennis P. Mission, Vision and Passion in
    the Entrepreneur from Smilor and Sexton.

14
Literature Review
  • Beyond these three most important
    characteristics, Kimbro asserts successful
    entrepreneurs must also have
  • a desire for independence
  • a sense of purpose (including the ability to set
    challenging yet clear goals and attain them)
  • tolerance for uncertainty
  • perseverance
  • self-esteem
  • salesmanship
  • self-discipline
  • Finally, Kimbro notes successful entrepreneurs
    are ready to just plain work hard.

Kimbro, Dennis P. Mission, Vision and Passion in
the Entrepreneur from Smilor and Sexton.
15
Literature Review
  • Peter Drucker states Entrepreneurship, then, is
    a behavior rather than a personality trait. I
    have seen people of the most diverse
    personalities and temperaments perform well in
    entrepreneurial challenges. To be sure, people
    who need certainty are unlikely to make good
    entrepreneurs.
  • There are, however, four requirements cited by
    Drucker to entrepreneurial success (ibid. 189) 
  • 1.     A focus on the market. You are creating
    customers
  • 2.      Financial foresight (esp. cash
    flow/planning capital needs)
  • 3.      Building a top management team before
    necessary.
  • 4.      Finding a role for the founder as the
    business matures.
  • He notes however a difference between starting a
    small business and entrepreneurship.
  • Drucker, Peter F. Innovation and
    Entrepreneurship Practice and Principles. 1985.
     

16
Literature Review
  • Liles concludes there are three types of small
    firms
  • high potential venture. It is the intention of
    these firms to grow rapidly in sales and profits
    and eventually become a large corporation.
  • attractive small company. Less intent on
    developing to the point where there would be a
    public market for its stock or appeal to venture
    capitalists. Rather, these firms are started to
    provide a good salary for the owners, often with
    a variety of perquisites including country club
    memberships, a company car and travel.
  • marginal firms. The vast majority of small
    businesses incl. dry cleaners or repair shops are
    included here.
  • Liles, Patrick R. New Business Ventures and the
    Entrepreneur

17
Literature Review
  • Backgrounds, experiences and motivations aside,
    Liles (1974, 11-12) also discusses precipitating
    events specific conditions that appear as
    major influences on decisions to start a new
    venture
  • Job dissatisfaction built up over time,
    reflecting budget cuts, no promotion or
    disappointing salary increases, denied staff.
    Key new job vs. start-up
  • the last straw one of a series of
    disappointing incidents
  • Identifying a new venture opportunity
  • Encouragement and support A wifes reaction to
    the idea of starting a company is usually a major
    influence

18
Presentation Agenda
  • Entrepreneurship and Trends
  • Reviewing the Classics
  • Updating the Classics Changing Demographics and
    Cultural Factors
  • Age
  • Gender
  • Ethnic Background
  • Interviews
  • Conclusions

19
Age
  • The popular press has widely reported on the
    successes of young, high tech entrepreneurs like
    Michael Dell, Steven Jobs and Bill Gates.
  • On the other hand, group two noted that Wal-Mart
    was founded by Sam Walton in 1962
  • 22 years after he graduated from the University
    of Missouri.
  • It would appear entrepreneurial opportunity
    exists at different stages of human life cycle

20
Self-confidence increases with age
21
But changes in financial and personal conditions
are important
22
Types of Female Entrepreneurs (Goffee and Scase,
1985)
Attachment to Entrepreneurial Ideals High Attachment to Gender Roles Low Attachment to Gender Roles
HIGH Conventional Often married. Guest house, restaurants and catering, nursing or secretarial services. Innovative Unmarried with few friends. P.R. advertising, market research, publishing
LOW Domestic Biz is secondary but provides limited autonomy. Arts/crafts, beauty care. Radical Seeking to overcome subordination. Diverse areas of enterprise.
23
Female Entrepreneurship
  • Throughout the 1980s and early 1990s the number
    of businesses owned by women grew by 50. By
    1996, the 8 million businesses owned by women
    employed 35 more people than all the Fortune 500
    do worldwide.
  • Motivating factors include desire for more
    challenge and dissatisfaction with corporate
    life, including downsizing, but also
  • Glass Ceiling issues low pay, limited
    advancement
  • Seeking balance between work and family
    responsibilities

Entrepreneurship, 2nd Ed. Lambing, Peggy and
Charles Kuehl. 2000
24
Female Entrepreneurship
  • Start-up funds for women averaged 15,000
    compared to 36,000 for men.
  • One explanation women tend to start service
    businesses that often require less capital.
  • However, many believe, women do not have equal
    access to capital when they need it, possibly
    related to networking / previous business
    connections.

Entrepreneurship, 2nd Ed. Lambing, Peggy and
Charles Kuehl. 2000
25
Asian-American Entrepreneurs
  • Asian-Americans have been very successful as
    entrepreneurs in the United States.
  • Like women this has reflected frustrations of
    trying to climb the corporate ladder.
  • David Lee, CEO, Qume Corp People believe
    Asians make good engineers, not good managers.
  • By 1990, Asian-Americans headed 300 of 800
    high-tech firms in the Silicon Valley.
  • Korean-Americans have the highest
    business-ownership rate (1/10) of any ethnic or
    racial group in America. This compares to 1/15
    for non-minorities.

Entrepreneurship, 2nd Ed. Lambing, Peggy and
Charles Kuehl. 2000
26
Presentation Agenda
  • Entrepreneurship and Trends
  • Reviewing the Classics
  • Updating the Demographics
  • Interviews
  • Andrew Sobey Jr.
  • Sanjay Kumar
  • Wayne Haar
  • Conclusions

27
The Interviews
  • Andrew Sobey Jr., Founder and President, S
    S Systems Consultants, Inc. Fenton,
    MO
  • Sanjay Kumar, Professional experience included
    participation in .com start-up effort in Fremont
    CA (1999). Currently employed as computer
    network specialist in St. Louis, MO.
  • Wayne Haar, President and CEO, Interlock
    Resources Inc. Clayton, MO

28
S S Systems Consultants
  • Founded in 1990 as a provider of computer
    programming services. Since inception, services
    have expanded to include training, EDI and
    process mapping.
  • While initially founded with four employees,
    current business activity is centered around
    Founder and President Andrew Sobey Jr.

29
Andrew Sobey background
  • Native of Sharon, PA. Son of postal worker. As a
    child, every morning from his bedroom window,
    overlooking the Westing-house plant, Sobey saw
    the 8,000 people walk into work.
  • Holds Masters degree in Computing Science
  • Employed for 17 years at Westinghouse, including
    10 as IS manager.
  • Job dissatisfaction increased after experiencing
    several years of no raises/cuts.
  • Precipitating events un-reimbursed mileage
    expense on Easter and division close down.
    (during 1990 recession he was age 40)
  • Spouse supportive of entrepreneurial start-up

30
S S Systems Consultants getting started
  • As part of close down benefits learned
    pro-forma planning, proposal writing.
  • From Westinghouse 15 years of IT experience,
    some contacts and commitment to customer
    service.
  • First four years were scary. Getting finances
    to hire four people put life savings on the
    line. Start-up included cold-calling but
    ex-Westinghouse employees were important.
  • Realized his business was established when he
    needed a car and knew he could buy it. And, when
    he started saying No to some potential
    projects.
  • Personal note Heightened spirituality because
    when I needed the phone to ring, it did.

31
S S Systems clients include
  • Bausch and Lomb Surgical, St. Louis, MO and
    Clearwater, FL
  • Sunbeam Corporation, Chicago,IL
  • Westinghouse Electric, St. Louis, MO and
    Asheville, NC
  • A variety of smaller businesses with job sites
    that included Alamo, TN, Athens, GA, Pittsburgh,
    PA, Muncie, IN, S. Boston, VA, Fayetteville, NC,
    Greenwich, CT, and St. Louis.

32
Maintaining/growing the business
  • Large personal satisfaction in job variety
    mainframe COBOL, FORTRAN, RPG, SQL, EDI, MS
    Access and Crystal Reporting, ORACLE.
  • Planning is very short term oriented.
  • Paid by the hour. Company grows by increasing
    rates. Last month sent out five invoices (i.e. 5
    different current customers incl. small
    manufacturing, CPA firm, church).
  • Vs. ideal one major customer w/30-40 hrs/week.
  • Lots of travel. Ex. six month one year project
    in Chicago. There M-Th.

33
Sobeys lessons learned
  • If you think you worked hard at a company, you
    aint seen nothing yet.
  • Be focused.
  • Its difficult to stay abreast of changes in
    technology VB4, VB5, VB6, VBNet.
  • Be a team player to get call-backs stay out of
    office politics and recognize the need to do some
    work without charging for it to build good
    relations.

34
A Silicon Valley start-up
  • This story begins in 1999. The .com boom is in
    full swing.
  • Two IT professionals who room together in Fremont
    seek to participate in the boom by linking local
    angel investors with others who have many
    ideas many of whom are consultants or IT
    professionals in their native India. All parties
    were anxious to capitalize on the market boom and
    dreamed of a high potential venture
  • Key investors agree to fund development of
  • a prototype model to demonstrate the viability
    of the concept. Today, www.keen.com developed by
    others at approx. same time is similar in
    concept.
  • a B2C website to generate revenues from day 1.
    Into Indian music? Try www.saregama.com
  • Sanjay Kumar, and his friend Ravi, are on their
    way

35
Technical Issues
  • Investors signed a one year agreement to have
    Exodus host their servers.
  • A prototype website (w/ expert advice on
    astrology and programming) would be able to
    handle 100 users at a time higher levels of
    funding would be needed to develop a site capable
    of handling hundreds of thousands of users.
  • Their plan seek capital from investment banking
    community
  • Focused on utilizing JAVA and LINUX, developers
    planned to use free software as much as possible.
    Additionally, as much development as possible
    would take place in India.
  • Programming strategy develop websites reusing as
    much code as possible.

36
Living on the edge
  • Sanjay and Ravi wore multiple hats technical
    specialists, project managers, lead programmers.
  • 14-16 hrs/day a labor of love with people they
    enjoyed.
  • The venture, then nicknamed The Pundit
    Junction, culminated in a presentation to
    investment bankers where break-even analyses,
    profit forecasts, and technical specifications
    were presented.
  • Shortly thereafter the dot.com market went bust
    and the investment bankers never called back.

37
Sanjay Kumars Background
  • Technical undergraduate degree from an Indian
    university.
  • Expertise Networking technology.
  • More than background however, the 1999 culture of
    young adult IT professionals in the Silicon
    Valley was key.
  • Sanjay was correct in his assessment he could
    always get a job in IT if the start-up failed
    minimal career risk. Didnt realize however, that
    job would be in St. Louis, Missouri.
  • Start-up effort required developing different
    skills (quickly) in order to communicate with
    investors and manage the projects overseas
    development. No MBA? Try www.fedex.com

38
Lessons Learned
  • Clearly, this start-up activity was
    late-in-the-game
  • You must enjoy what you do
  • No regrets.

39
  • Principal business is staff augmentation in MIS
    functions for clients in St. Louis region. Their
    50-80 consultants respond to a broad range of
    client needs
  • Web Development
  • Help line / network support
  • Systems development in Visual Basic, C
  • People Soft
  • Founded in 1989, Wayne Haar was originally an
    outside investor. He bought out 1 of 2 primary
    owners in late 1996.

40
Interlock Resources
  • Today, management team involves three primary
    owners
  • Wayne Haar focused on finance and administration
  • One technical partner, focused on client
    development
  • One partner focused on human resource issues.
  • Company experienced strong growth in 1997, 1998,
    1999 attributable in part to Y2K remediation.
  • Listed 2 in the St. Louis FAST 50 high growth
    technology firms in 1999. Revenues were 5.9MM.
    (St. Louis Commerce Magazine Sept. 2000, St.
    Louis Business Journal 9/25/2000)

41
Interlock Resources Clients
  • U.S. Government
  • Anheuser-Busch
  • BJC Health System
  • Enterprise Rent A Car
  • Maritz
  • Mastercard
  • Monsanto

Source www.interlockresources.com and St. Louis
Commerce Magazine (Sept. 2000)
42
Wayne Haar, background
  • Son of h.s. educated, Union Electric worker
  • Bachelors and MBA from Washington U.
  • 19 years of experience of planning and analysis
    experience in retail sector Edison Bros.,
    Venture.
  • Reported being not happy working for others. Less
    motivating environment for those with strong
    drive.
  • In mid-1980s, Haar/others investigated business
    opportunities, incl. fast food. None made
    sense.
  • Precipitating event problems of Venture led to
    downsizing in 1995. In response, he worked out of
    his home on Interlock business.

43
Interlock Resources getting started
  • Never dreamed of being a big corporation.
    Objective One of strongest staff augmentation
    firms in the region with upside potential to
    either
  • Replicate in other geographic areas or,
  • Sell firm to others. He has previously received
    offers.
  • Personal issue contributing factor to divorce ?
  • Key business start-up issue cash. Working
    capital to pay consultants for first sixty days.
    Sources
  • Family / friends
  • Personally put up stock certificates etc. as
    collateral
  • SBA-supported loan

44
Interlock Resources growing the business
  • Biggest surprise The business is more reactive
    than expected. No loyalty in this business
  • Clients are unpredictable
  • Consultants see themselves as hired guns
    identifying with IT profession, not the firm.
  • Planning focus is a few months at a time
  • By late 1998, company was really cruising, Haar
    recognized we had built something that was going
    to last.

45
Presentation Agenda
  • Entrepreneurship and Trends
  • Reviewing the Classics
  • Updating the Demographics
  • Interviews
  • Andrew Sobey Jr.
  • Sanjay Kumar
  • Wayne Haar
  • Conclusions

46
Interview Summary
Attribute Haar Sobey Kumar
Precipitating Event Downsizing Downsizing Silicon Valley Culture
Type of startup Attractive small Co. Attractive Small Co. High Potential Venture
New Business Success Sideline Close to Failing Failed
Significant Previous Employment Corporate Manager Corporate IT manager IT Professional
47
Interview Summary
Attribute Haar Sobey Kumar
Academic Success MBA MS in Computer Science Tech BS
Key Motivators Mission, Independence, Financial foresight Passion, determined perseverance, focus on the market, creating customers Vision, Purpose, Self-esteem
Personal Issues Lack of family, Support Spouse Support, Spirituality Strong Social Ties
48
Key Conclusions
  • The stories of the entrepreneurs interviewed are
    intertwined with their personal circumstances
    mid-career downsizing or early career cultural
    factors played a major role.
  • Rebackground the notion entrepreneurs are
    rejects is a clear misconception.
  • Getting started showed many consistencies hard
    work, the importance of financing working capital
    and the requirement of needing to fill many
    roles.
  • Issues in growing the business were very
    dependent on the new ventures objectives
    maintaining sole proprietor, being attractive
    small company or developing a high potential
    (greatest risk/reward potential)
  • Universally, however, none of our interviewed
    entrepreneurs regrets their decision.
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