Best business planning books

This semester I’m teaching a business plan course for the first time since I left UCI in 2002. (I did use a business plan assignment in a 2006 strategy class — more on that later.) The course is an elective for both our undergraduate entrepreneurship and management majors, although I have a few students from other colleges on campus. At the suggestion of a local VC, we are shifting the title and emphasis of the course from strictly business plans to “Planning the New Venture.”

Although I use textbooks for core courses to cover the recommended corpus of knowledge, where possible I try to use regular (i.e. trade paperback) books for electives. They tend to be more readable, cheaper, more likely to be kept after graduation and more representative of what students will read after they graduate. So in preparing for the class, I searched on the Internet and Amazon for books related to business plans.

In 2006, I asked students to write business plans without much information on how to do it, other than walking them through our standard template, which was derived from the U. Maryland BPC. Both versions were derived originally from the standard MBA entrepreneurship textbook by the dean of entrepreneurship scholars, the late Jeff Timmons.

This year, I wanted to give them more help on the two most difficult tasks — estimating revenues and estimating costs — while also covering the broader questions of starting a new business. After buying five books and getting a 6th from the library, I eventually settled on three books.

The first book I picked was the smaller (and cheaper) Timmons paperback, entitled Business Plans that Work. It‘s not complete, but for an undergraduate course it gives a good consistent way of looking at the problem, and (not surprisingly) matches well to our (i.e. Timmons) BP format.

The second book I chose was Bankable Business Plans by Edward Rogoff. I did not expect to like the book, and with its “action steps” (rather than chapters) it’s a bit of a scattershot. However, I found it a nice complement to the Timmons text. In some areas, it’s much more concrete than Timmons, including one of the most important blind spots from 3 years ago — setting up a sales process.

These two books would have been enough for our 15 week course, if I had built a reader with 4-6 other articles to supplement the gaps in coverage. Together, they are only $28 at Amazon — a steal for anyone involved in entrepreneurship.

However, I wanted to give students a little more of the big picture of starting a business, including a sense of why they want to be entrepreneurs in the first place. In the end, I decided to use Guy Kawasaki’s The Art of the Start, which turned out to be much more substantive than any previous Kawasaki book I’d read. Still, I see Kawasaki and this book as a motivational speaker — identifying some important tricks and traps — rather than providing a business plan checklist.

One problem I’ve found in teaching entrepreneurship — with all the work of Timmons, and also many competing academics — is too much of an emphasis on venture capital-funded IPO-oriented startups. Kawasaki nicely balances this out with an entire chapter on bootstrapping, which (as he notes) can also be used by VC-bound companies to bridge between 3F money and their first professional capital. This nicely fits my course goal, which is to help students to identify the most appropriate funding approach for their idea and industry context.

The VC-centric counterpart to Kawasaki’s book is Raising Venture Capital for the Serious Entrepreneur by Dermot Berkery, a former McKinsey consultant turned VC and MBA lecturer in Dublin. It came highly recommended on Amazon, and after reading it, I saw why. It really walks entrepreneurs through the funding process — as VCs see it — and explains what they must do (and why) to put their best foot forward.

I decided not to use it this year for two reasons. First, it’s so VC centric that it would have undercut my message about being funding agnostic, and secondly, it’s more suitable for those already in business or graduate students. I would strongly consider it if I were teaching high growth-startups in the Stanford or Berkeley engineering school, and I’ll also recommended it for our new venture finance class.

Beyond the classroom, I would also recommend both the Berkery and Kawasaki books for those already in a startup. Despite 20+ years thinking about startups (as a founder, research, teacher and consultant) I picked up valuable tidbits from both — either things I didn’t know, or different ways of thinking about familiar problems. For example, Chapter 2 of Berkery’s book emphasized the importance of identifying 3-4 alternative exit strategies, so that investors (and founders) can still succeed if the initial plan is blocked.

One book that did not fit my immediate goals was The Business Plan Is Dead by Jeffrey Wofford. I’ll write more about it some other time.

Raising capital in difficult times

In the past six months, it’s become even more difficult for otherwise promising tech startups to new or follow-on funding. On October 7, the now-infamous Sequoia PowerPoint deck advised their (mainly high- tech) portfolio companies:

New Realities
$15M Raise @ $100M post[-money valuation] is gone
Series B/C will be smaller raises
Customer uptake will be slower
Cuts are a must
Need to become cash flow positive

While some suggested this was a bargaining tactic by Sequoia to lower valuations, startup companies now face a double-whammy of declining demand by business and consumers and less availability of investment funds.

Of even more concern to the VCs, exit strategies will be more rare, less lucrative and more time consuming:

Increased Challenges
M&A will decrease
Prices will decrease
Acquiring entities will favor profitable companies
IPOs will continue to decrease and will take longer

Since VCs won’t be able to cash in their investments for a long time, they must set aside more money to keep alive a smaller number of companies.

In Thursday’s Wall Street Journal, veteran tech industry reporter Pui-Wing Tam wrote about [also here] the dilemma faced by a small Oakland-based VC fund:

Claremont Creek Ventures recently had to decide which of its young to forsake.
…
Amid the financial crisis and the plunging stock market, Claremont Creek decided to focus on the fund's best investments and stop backing the less-promising start-ups. It wanted to be sure it had enough cash for the next few years for the winners. The venture firm ranked the start-ups in the fund's 16-company portfolio with an A, B or C grade.

"We're doubling down on the As and likely won't invest any more capital in the C companies," says John Steuart, a Claremont Creek managing director. "The portfolio is competing against itself and it's survival of the fittest. It's brutal."

Angel investor and fellow SJSU entrepreneurship teacher Steve Bennet is one of the few who has beat the odds. In his ProfessorVC blog, he explains how one of his portfolio companies raised $6 million in Series C funds.

For those that have already tapped 3F money and can’t raise professional money, the choices are pretty clear: sell the company, stop operations or find a way to bootstrap.

Steve will be moderating a March 9th panel on bootstrapping at the Silicon Valley Center for Entrepreneurship. More details on the program when they are available.

Tech startups are always an experiment

Last fall, I taught entrepreneurship for only the second time since I got to SJSU. (I’d previously taught it as an adjunct at UCI, building more on my experience as an entrepreneur than any formal preparation).

About 2/3 of the way through the semester, as part of making a point about the lack of sufifcient information in any startup situation, I wrote on the board

Business is an experiment

which will become the mantra for all my future entrepreneurship courses.

To explain my thinking further:

• if you’re doing something new whether new to the firm or new to the world — the answer doesn’t exist;
• in a startup, for many questions you won’t have the time (or money) to get a definitive answer; so
• you need to make and implement a decision with the recognition that the experiment may fail — and thus both look for signs of failure and find an expedient way to mitigate against (rather than prevent) such failure.

That leads me to an an interesting quote from Carol Bartz (newly appointed Yahoo CEO). It came from her 2001 talk at Stanford about encouraging entrepreneurship in established companies: at that time she was CEO of Autodesk, the CAD software company.

As an aside, I’d disagree with her use of the term “entrepreneurship”: if you use the term to refer to any form of innovation or business initiative, then the term doesn’t have any real meaning. While “corporate entrepreneurship” is a bit of an oxymoron, at least it demarks a form of initiative distinct from starting a new company.

However, I couldn’t agree more with her on the philosophy she brought to Autodesk to deal with the turbulent dot-com era, a philosophy she called “Fast Fail Forward.” As transcribed by Scott Fulton of Beta News:

I had to do this during the dot-com time, where everybody panicked and decided that you guys [Stanford students] were going to rule the world. … [P]eople got even more cemented in and scared to take risks, because what did it mean in an established company?

So we started this thing called 'fail-fast-forward,' and the whole idea is, listen, failure is very acceptable. When it happens, make sure you identify it quickly, and hopefully it's in a forward motion. And then start going again.

In other words, nothing new happens without risk, and the only way to deal with risk is to accept it rather than try to completely prevent it.

Hat tip: to Scott M. Fulton, III of BetaNews.

Hewlett & Packard, Bacon & Morgan

Earlier this week, Merc columnist Mike Cassidy wrote a touching tribute to entrepreneurial engineer Karl Bacon, who died Nov. 14 at age 98:

In 1946, Bacon and partner Ed Morgan opened the Arrow Development Co. in Mountain View. The two were a tight team who started out doing some machine work for HP and just about anything else that would bring cash through the door. Bacon was the math mind, a self-taught engineer who tended to figure out what needed to be made while Morgan concentrated on how to manufacture it.

Then Morgan got the idea that they could build a merry-go-round for the city of San Jose, which they did. Soon a man named Walt Disney was talking to them about coming up with some rides for a new park he was opening in Anaheim. They did that, too.

Mr. Toad's Wild Ride, Mad Tea Party, Dumbo the Flying Elephant, It's a Small World, Alice in Wonderland, Matterhorn Bobsleds, Pirates of the Caribbean, Haunted Mansion and more.

"They did most of the rides in Fantasyland," says Jane Bacon, 87, Karl's wife of 67 years.

The article goes on to talk about all their other major contributions to amusement park rides. While we don’t think of this as a high tech business, during its heyday 40-50 years ago, this was obviously state of the art.

Other tributes on the Internet include a discussion of their Matterhorn design, and the bio on Amusement Today, and a review of the book about them. Amazon also sells that book, which documents their 20 year relationship with Uncle Walt and his fantasy-land.

Engineering is "sexy" again?

At least Business Week pundit Vivek Wadhwa seems to think so. (Something about Wall Street jobs being in short supply nowadays).

Forbes discovers mobile phone classes

As a follow up to my earlier post on teaching mobile phone programming, this evening Forbes reported on programming classes. Reporter Elizabeth Woyke talked to professors at MIT, Stanford (iPhone), Columbia (iPhone and Android), as well as a Google evangelist.

The overlap between her story and our visit was the course taught by Prof. Hal Abelson and Andrew Yu, MIT's head of mobile services (who we did not meet). Woyke reported:

Abelson and Yu view themselves as training the next generation of mobile entrepreneurs. The course is structured around weekly critiques to teach students project management and presentation skills. Adult mentors who work in the mobile industry provide guidance in and out of class. "There's a lot of asking, 'Why will people use this?'" Abelson says. "We tell the mentors to treat them like real start-ups."
...
As more mobile development courses pop up, they will naturally become more specialized, Abelson says. He advises future classes to embrace themes, such as creating applications for the developing world, to keep things challenging. "Making something for a phone will be old news. There has to be some other spin," he says.

As with my own first-hand observations, these accounts suggest a win-win proposition. Students get credit for taking a class on programming, but by developing applications in a new and emerging industry segment — as with PCs in the 80s or the web in the 90s — they develop cutting edge skills that may be immediate relevant in a commercial (or entrepreneurial) context.

Teaching mobile programming

1st of 4 parts.

I’ve spent time the last two weeks visiting various universities to see how they do research and teaching on mobile phone programming. I’m posted on the research elsewhere, but wanted to summarize here what I learned about teaching at MIT, Georgia Tech and UCLA.

Based on what I’ve seen, the model for a mobile phone programming class would be a project-based class that combines needs analysis, use cases and prototype system development. Add in some sort of revenue model analysis, and you have a course that introduces budding software engineers to the possibility of entrepreneurship. (Absent revenue model analysis you have the typical engineering “make something cool and let’s see if we can sell it.”)

The class assumes students already have basic programming down pat, and also have at least one project course under their belt. This would be either a master’s level class or an upper division class that follows (say) software engineering.

MIT

Building Mobile Applications. The most famous course on this topic probably that by Hal Abelson, who is now the dean of teaching programmers at MIT. 24 years ago he shifted the EECS introduction to programming to Scheme (MIT’s local dialect of Lisp) with his text, Structure and Interpretation of Computer Programs.

We met with Abelson for nearly an hour to discuss his Spring and Fall 2008 classes offered to MIT CS undergraduates. The spring course (Building Mobile Applications with Android) got great writeups, perhaps because one of his teams won $300K in prize money from the Android Developer Challenge, Google’s Java programming contest.
The student application, Locale, was one of the first made available on the Android Market, and the team is evaluating commercial possibilities. Not a bad return for a 13-week class.

This semester, the class has 10 teams and about 40 students. For Abelson, a founding director of the Free Software Foundation, the iPhone was ruled out due to Apple’s NDA requirements for iPhone developers (abandoned too late for this semester). The projects are instead spread across three platforms.

Instead of being entirely about Android, the Fall course has more balance. Four projects are using Android in Java. Three are using Microsoft Visual Studio and the Windows Mobile SDK, supported by Microsoft Research New England. The remaining three are supported by the Nokia Research Center in Cambridge — two Java applications and one using Python (PyS60).

The class is extremely labor-intensive. Abelson credited Andrew Yu, (manager of mobile services for MIT) with much of the work. Each team has an industry veteran mentor — essentially a voluntary TA. Paul Oka of MSR said he spends 3 hours/week in the class and team meeting, and as much as another 5 hours early in the semester when the students are getting started.

Pervasive Computing. Abelson’s was not the first mobile phone programming course at MIT. Larry Rudolph taught a series of pervasive computing courses, first with the iPaq and then with Nokia phones using PyS60. From this effort, he wrote a boo to provide a Bluetooth programming tutorial and a 2003 pedagogy article in IEEE Pervasive Computing.

NextLab. Abelson’s course is not even the only mobile phone course at MIT this semester. If Rudolph’s course was more technology-oriented than Abelson’s, then the Nextlab course at the Media Lab is more project and need oriented, with a distinct social entrepreneurship spin. The “NextLab” course is part of MIT’s “Next Billion Network,” referring to the next 1 billion cell phone users expected to be added over the next four years — mostly in less developed countries.

We met one of the NextLab instructors (Luis Sarmenta) and visited a class session run by the other (Jhonatan Rotberg). We heard presentations by three projects, servicing Mexican farmers, rural Indian mobile commerce, and Boston low income preschool parents.

UCLA

In Spring 2008, Deborah Estrin taught “Current Topics in Computer System Modeling Analysis.” The class held 25 students — typical for a lab class — mostly master’s students, and was taught uses PyS60 with the Nokia N95.

The assignments are consistent with Estrin’s large research project on mobile sensing, with the students assigned to gather location and sound data and plot the data using Google map APIs. The 12 projects tended (not surprisingly) towards mobile social media.

Georgia Tech

At the College of Computing, there was other interest in mobile computing among researchers. I found two classes.

Mobile Computing. Thad Starner is a longtime (and prolific) researcher on pervasive and ubiquitous computing. Thus, it’s not surprising he’s taught several courses on “Mobile & Ubiquitous Computing.” I couldn’t find the website, but Starner said this semester he’s teaching about 45 students using the OpenMoko handset. Openness is a big deal to Starner, who is well known around Tech for not doing any business with Microsoft.

Augmented Reality Games. Conversely, Blair MacIntyre is teaching augmented reality (the intersection of virtual reality and reality) game programming using Gizmondo. This discontinued Windows CE-based handheld gaming console has limited communications capabilities.

Other Schools

My list is of necessity incomplete: I haven’t been able to visit all of the top C.S. programs in the country. Each school visit took a minimum of 2.5 hours, and then there’s the matter of the plane tickets. Here are a few that I found on the web.

Stanford. At least one faculty that I met this week mentioned Stanford’s course, “iPhone Application Programming,” being offered this quarter (Fall 2008).

Carnegie Mellon is offering a course this semester entitled “Mobile and Pervasive Computing.”