First Round Capital Co-Founder Howard Morgan

On March 14, Dr. Howard Morgan ’68 visited Cornell to share his knowledge on turning ideas into companies as a part of the Enterprise Engineering Colloquium Seminar Series.

Morgan was a co-founder of First Round Capital, a venture capital (VC) firm that specializes in providing early-stage funding to promising companies like Blue Apron, GroupMe, and Uber. After graduating from Cornell in 1968 with a Ph.D. in Operations Research, Morgan also founded Idealab: the longest running technology incubator. He currently serves as the Chairman of B Capital Group, a VC fund that aims to back brash entrepreneurs creating revolutionary technology companies.

With over 30 years of experience in working with more than 200 technology-focused entrepreneurial ventures, Morgan came to Cornell to share his expertise with aspiring founders. Outlined below are a few of the key phases and tips that Morgan believes are essential to starting a successful venture:

1) Idea Creation

In the idea creation phase, Morgan believes founders should take time to attract the brightest minds and reward creative thinking. Further, he argues the best ideas will be the ones that have the most passion behind them. Without passion, a founder may not be able to convince a VC to invest in the future, sell customers, or attract new employees.

Morgan also advises that brainstorming should become routine in the ideation phase. At Idealab, brainstorming was a monthly meeting followed up with weekly calls. Morgan also recalls keeping a spreadsheet of ideas that his team kept. To determine which idea to pursue next, the team would consult this spreadsheet and pick the idea that they believed would lead to the highest total sales and firm market capitalization.

2) Idea Prototyping

Morgan believes that the most important aspect of this phase is to do it quickly. To allow that to happen, Morgan’s team at Idealab had on-staff engineers on standby that set up analytics for every new idea the team had. By tracking small things like where a user’s mouse was on a page or the user’s response to colors, Morgan and his team gained valuable insights into which products were working and how they could be improved.

3) Idea Filtration

Morgan prioritized finding defensibility and sustained competitive advantage as part of this phase. While he encouraged founders to create a business plan to be ready to pitch to VCs, he stressed that having a 1-page (at most) executive summary that was concise and clear was most important. Similarly, he preferred to look at businesses that projected having a modest share of a big market instead of a huge share of a small market. Other key indicators of success include the ability to raise money and recruit top talent with domain expertise or entrepreneurial backgrounds.

4) Idea Potential

As the business develops potential, Morgan encourages founders to stress working with quality people and allowing them to have an impact. He argues that founders should empower these individuals and give them significant equity ownership to make them feel attached to the business.

For more on the Enterprise Engineering Colloquium Seminar Series, click here.