24 Steps to Launch a Start-Up

HANNAH BATES: Welcome to HBR On Strategy, case studies and conversations with the world’s top business and management experts, hand-selected to help you unlock new ways of doing business.

Many people aspire to entrepreneurship. But Bill Aulet, who has advised founders for decades, warns that it is a high-risk endeavor and not for the faint of heart.

Aulet is a professor of entrepreneurship at the Sloan School of Management at MIT. In this episode, he outlines concrete steps anyone can take to get a new venture off the ground — including Intrapreneurs within large organizations. He also breaks down important trends he’s seeing in entrepreneurship—like the increasing commoditization of products…and lower barriers to entry, due to technology.

If you’re an aspiring entrepreneur or intrapreneur, this episode is for you. It originally aired on HBR IdeaCast in April 2024. Here it is.

ALISON BEARD: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Alison Beard.

So, many people in business today aspire to entrepreneurship. Whether you have an idea for a start-up or want to launch something new within a larger organization, it’s seen as a path to a more fulfilling career – and financial gains. At the same time, we know that entrepreneurship is really hard. We’ve all heard the stats on how many new ventures fail, and we’ve seen entrepreneurial efforts quashed by the corporate machine.

But our guest today says that we can de-risk the process and create companies that don’t just make a lot of money, but also have a positive impact on the world. He’s helped thousands of students and executives map out paths to successful businesses, and we wanted to speak with him about where he sees entrepreneurship today.

Bill Aulet is the Ethernet Inventors Professor of Entrepreneurship at the MIT Sloan School of Management. He’s managing director of the Martin Trust Center for MIT Entrepreneurship, and he’s the author of Disciplined Entrepreneurship: 24 Steps to A Successful Startup, newly updated and expanded. Bill, thanks for being on the show.

BILL AULET: Thank you very much. It’s an honor to be here.

ALISON BEARD: So, you’ve been focused on innovation-based entrepreneurship for decades. What feels new or different right now compared to previous eras?

BILL AULET: I think if you look at the highest level, entrepreneurship is now accepted in society at a level that it was not nearly when I first started. When I graduated from college, which was back in 1980, they had just invented electricity. But no one thought of entrepreneurship as a serious field of study or a career.

I – God rest my mother’s soul, she was fantastic, but she never understood the difference between entrepreneurship and unemployment. She thought I was unemployed. But today people understand entrepreneurship. It’s accepted by society. And not only is it accepted by society, it is one thing that unites us. No matter whether you’re on the far right, far left, everybody loves entrepreneurship. One of the big differences that’s often overlooked is just the acceptance of entrepreneurship as a serious career path and a positive thing from all perspectives.

When we look at the more micro level, the numbers start to show you the people who want to come out of college, 20% or more of at almost every university, see entrepreneurship as a career path that they want to pursue. Some of them want to do it for money, but what we see is most of them want to do it because they feel like it’s a way to have impact. It’s a way to control their own destiny.

And then even at a more micro level, when you look at what’s going on now, not just the acceptance of entrepreneurship, the barriers to become an entrepreneur have really gone down. Let me give you one example. Just when I wrote the initial version of this book 10 years ago, it took you millions of dollars and at least six months, if not a year, to put an e-commerce company up, to get an e-commerce website going today. You can literally do that in two hours or possibly even one hour or less using Shopify. And that’s just one example of what’s going on with AWS.

All the technology that’s come out has made it much easier to create new products to start companies, which has actually shifted the game from, “You need to make a product to be an entrepreneur,” to “How do we go to market with a product?” Because products are becoming more and more, I don’t want to say commoditized, but it’s easier to produce products. And so, of course you have to have a product at the end of the day, you have to get product market fit. That’s table stakes. But the actual game has shifted to be more of a, how do you come up with a go-to-market fit that is a channel market fit? How do you sell the product?

ALISON BEARD: MIT is obviously a hub for science and tech-based startups. So, is the path from high-tech research lab to business getting easier also?

BILL AULET: This is a really interesting question because I just presented to the MIT board on this, and they were very interested in how do we accelerate that pipeline of lab to market? And there’s two approaches to that. The first approach is why don’t we make our technical people, our academics… Or researchers, they don’t have to be academics, researchers, more entrepreneurial. How do we teach them the entrepreneurial process? And we do that. We have a program called the Faculty Founders Program where we teach them how to do that. That’s one way to do it.

The other way to do it is to basically flood the zone with high-quality entrepreneurs who aren’t necessarily the inventors. Because entrepreneurship has many misperceptions about it and one of them is it’s an individual sport. It is definitively not by research. Entrepreneurship is not an individual sport, it’s a team sport. And the question is, how do you build a team that can take a technology, a new invention to market? And to do that, you have to have someone who knows how to commercialize it. Those people aren’t necessarily the same as the inventor. And so, if you have great inventors and they understand the process to some degree, what we want to do is produce more high-quality entrepreneurs to kind of be around them. And then they will take that technology and that new invention and bring it to market.

I mean, people believe MIT is this faunt of entrepreneurship because of the tremendous research we have here, and we do. We have enormous research, but so does Caltech, so do other places. What really makes a difference is how much of that research can you commercialize? And that’s where the entrepreneurial process comes into play. And even if you look at MIT, less than 6% of the patents that we create are actually commercialized. Let me repeat that. Of all the patents we get, less than 6% of them actually get to the market, and that includes licensing to other companies. So, if we could just increase that number somewhat, the pipeline of the billions of dollars that are spent on research here at MIT to get that to market would create a lot more impact.

ALISON BEARD: You note that entrepreneurship is not limited to startups. It can come from within large organizations too, especially ones with deep pockets like an Amazon or Alphabet or Meta. Have you seen any shift in where students and executives think that they’re best positioned to be entrepreneurial?

BILL AULET: I wish I could tell you that there’s more of that, but entrepreneurship is such a complicated thing. You mentioned this at the front. It’s really hard. And still, the best way to teach entrepreneurship is to go to the blank canvas of a startup. And that’s what we do in our programs for the most part. We start off with a blank canvas and then we teach people how to come up with ideas and then how to take those ideas and then figure out what’s a product to get product market fit, channel market fit, and then come up with a scalable business model that’s profitable – economically sustaining.

But if we stay at that level of just seeing entrepreneurship in startups, we as a society are going to be really underperforming against some of the big challenges we have like climate, because startups can only get you so far. They don’t have the strong balance sheets that can think for long periods of time. They don’t have the infrastructure. And when you think about challenges like climate and energy, we need to have big companies involved. And so, we really do focus a lot on how do you take those skills. We teach you in startups and apply them in large companies.

We really encourage people to not just be entrepreneurs and startups, but to do it in government, in academic institutions and large organizations and medium-sized organizations and faith-based organizations or nonprofits and even in their personal lives. And I would like to see more of that. But it’s a hard sell because you got to build up the skills first before you go into that. But we’ve had huge successes.

I’ll give one example. Andrea Ippolito went through us – she’s a Cornell undergraduate, came here and was getting her graduate degree and then going for a PhD, and she went through our entrepreneurship programs. She was doing a company called Smart Scheduling to help healthcare organizations do kind of digital innovation to make them more effective, which is huge opportunity there. Well, she decided not to continue on that startup, but learned all the lessons. She then goes back to get her PhD. She’s recruited to go into the Obama White House, and she becomes the chief innovation officer overseeing the Veterans Administration. And she starts setting policies to improve innovation and entrepreneurship in the government for our veterans out there. She didn’t start a company at that point, and she’s literally making the lives of millions of our veterans better.

So I think that’s the journey. She was an entrepreneur the whole time. And the mindset, skillset and way of operating that we taught her, benefited her in all dimensions, not just in being a startup. I sometimes am frustrated, although if we get into it, I’ll talk about metrics of measuring success. And it’s too often measured and how many startups, how much revenue do they do, how much money did they raise – whereas how do you measure the impact that Andrea Ippolito had in those various jobs?

ALISON BEARD: Yeah. I mean the criticism of entrepreneurs in general and particularly tech startups for a while has been that they’re more focused on sort of easing these small pain points for pretty well-off customers. Like I’m thinking Uber, DoorDash, Tinder even, then tackling more difficult and important and challenging problems. Is that changing?

BILL AULET: Well, I can’t say for universal, but if you look in my new book, we very much believe, and this is something I work with Tom Byers of Stanford and Jon Fjeld on is entrepreneurship as an ethical activity. If you’re in it for profit-making, you’re not going to last.

And so, the first thing that we start with, excuse me, is you must have a raison d’etre. That’s French for reason for existence. And if you say that it’s to make money, we reject that because no company is just all about profits and going to last.

And then just to go to the data here, we did a 10-year longitudinal study of our students coming out of our Delta V program, our capstone program. There’s this perception that people are doing dating apps and silly things. Well, our data showed, and this was an independent study by Daniela Ruiz Massieu of ITAM University, a tenured year professor, head of their entrepreneurship down there. And she came in and looked at it. And in the 10-year study looking at almost 200 entrepreneurs, she found that 89% of the businesses they were starting 89, 8-9, were directly aligned with the UN Sustainable Development Goals.

That makes me very, very proud. And that goes directly to what you’re talking about. We believe entrepreneurship is an incredible force for good in society. And if you understand that and you build your companies based on mission, mission-driven as opposed to money-driven, they will be more successful. And going to the data on how successful they are, her study shows 69% of them are still in business five years later.

ALISON BEARD: Those statistics definitely give me hope. But I would say that still the primary successful examples of entrepreneurs and companies might cloak their businesses in laudable goals like connecting the world for Facebook or giving us information like Google, when in practice what they seem to be doing is collecting and selling our data, addicting us to their platforms, and they’re still making piles of money. So, how do you reconcile that with your vision of successful entrepreneurship always being ethical?

BILL AULET: That’s a really good point. I think I’m a system dynamics person which says the incentives of the system will dictate how people behave in it, and I find those very troubling. I find by the way, the examples of using social network or the Steve Jobs movies as that’s entrepreneurship, I find those to be very unhelpful. They’re misleading. They don’t get into what the real data shows you.

So how do I reconcile those? All I can tell you is that our companies are like Biobot Analytics. Biobot Analytics is started by two of our students here. One was Mariana Matus who was a PhD here at MIT from Mexico, and she wanted to start a company to make the world a better place and make cities more livable. And she partnered with Newsha Ghaeli who was Persian, that’s Iranian by way – out of Canada. They were very into how do we create safer cities.

They looked at this and built a dashboard that looked at wastewater, epidemiology wastewater, that is what we flush out the toilet and see what diseases do we have, what other things are going on in the city. So, basically we could set it up in Boston and we could know. In Jamaica Plain, everything seems healthy, but if you look at West Cambridge, there seems to be some fentanyl use there or there seems to be a Zika virus outbreak. When they were going through our program, we actually had a discussion about what they were doing, and they were very into this. And then they met with one of the top venture capitalists in the world. And the top venture, this person said, enormously successful, sat down and said, “You’re not going to make a lot of money doing this. You should pivot to help pharmaceutical companies.”

And we walked out of the meeting. I said, well, “He’s very accomplished. What do you want to do? If that’s not what you want to do, we fully support you.” They said, “That’s not what we want to do. We want to make cities safer.” They stuck to there what they were doing. And Biobot Analytics has become extremely successful. They became the gold standard during Covid for measuring whether Covid is in a place weeks before you could with testing. And they’re doing tens of millions of dollars. They’re on a path to IPO.

ALISON BEARD: Well, that’s a fabulous example. What about the criticism that startup founders are often so laser-focused on bringing their idea, maybe one that will have good social impact to fruition, that they don’t think about the potential risks or negative externalities or broader consequences I’m thinking about the concerns that people have about OpenAI, for example. I think Sam Altman is sort of heralded as a new kind of entrepreneur, a new generation of entrepreneurs, but people are now also worried that he’s sort of stepping away from his initial altruistic vision for the company.

BILL AULET: Yeah, I mean, I think that’s a real leadership question that you’re going to have. At the end of the day, all these companies come down to the talent that they can draw. I think if you have unethical activities, people today are cognizant of that. They’re not just going to work for companies they feel are unethical. And that’s my hope. I don’t have data to back that up to the level that I would like, but that’s my sincere belief, Alison.

ALISON BEARD: Yeah. And perhaps having gone through the era of social media in particular, Facebook, Instagram, X, et cetera, and all the sort of unexpected problems, whether it’s teenage girl eating disorders to election interference, there’s perhaps more scrutiny now on startups to make sure, “Are you thinking about all the potential things that could go wrong as you’re building your business plan?”

BILL AULET: I would hope so. But again, we have a capitalist system that rewards you for making money and getting customers and the like. I think there’s definitely a role for government and regulation in that regard. I differ from some of my entrepreneurial libertarian colleagues in that regard. I think we do need that. I’m not here to tell you everything, sunshine, rainbows and unicorns jumping around, that is a challenge going forward. And that’s why unfettered capitalism I just don’t think is the right answer.

ALISON BEARD: Okay, so let’s dig into the updated book, which as I said, sets out 24 steps to getting a startup off the ground, from market segmentation to developing a product plan. And we obviously can’t get to all of the steps, but what, if anything, did you change from the 1st edition to this one?

BILL AULET: Oh my God, the 1st edition, just to put a little quick historical perspective on this, when I started teaching, I think it was 17 years ago, I started looking for that book that captured what I had learned being an entrepreneur for decades, we’re going from three startups and failing in my first one and getting better at the second one to having success in the third one to say, “Who’s captured that knowledge?” And all I found were books that were point things. You’d find Lean Startup, you’d find a Blue Ocean Strategy, you’d find Crossing the Chasm, these are all great books, but they were all individual tools.

And so, for my class, I built a reader and I tried not to invent new stuff. I tried to take what I know already worked and just kind of stitch it together. And that was the genesis of this reader, which then it became quite popular- and people said, “Hey, this is really great. How can I get a copy of it?” And Wiley said, “Hey, we’d like to publish this.” And so, the first version was minimum viable product.

And then once it got out there, I’ll never forget a colleague of mine here at MIT, Professor Charlie Fine, said, “Now you’re really going to learn about entrepreneurship.” And I said, “What do you mean? I put everything I know into that book.” He said, “Oh no, now you’re really going to learn because everyone’s going to come and tell you everything they know and they’re going to ask you questions and you’re going to become kind of the focal point of entrepreneurship discussion.” And dang it, Charlie was right. That’s what happened. Everybody started talking to me about that.

We literally got thousands of more examples as to how to do that. And over the past 10 years, we’ve learned so much. I’ve taken that minimum viable product and updated it to a new dramatically expanded and updated version with some of the new things we were talking about. And my first rewrite of it was 700 pages, which was completely unacceptable because the key to the book is, A, that it’s open source. We try to build a and take everything that works so that Simon Sinek, Jeffrey Moore, Stefan Thomke, Michael Porter – whoever it is, we’re pulling it in and we’re saying, “This is your toolbox that you need to do.” But that toolbox has to be small enough and accessible enough to be able to be used by an entrepreneur who has finite time and resources. In the end, we got it down to 400 pages. But it’s also expanded to be able to talk about how do you use AI, the change in the past 10 years between products becoming commoditized and the emphasis now is on go-to market, how do you develop go to market.

ALISON BEARD: Yeah. And I think that efficiency and practicality point is key, particularly for people who are considering becoming intrapreneurs. So, it’s not like they’re trying to find a start-up and devoting all their time to it. It’s their full time job. But people who might want to start something new within an organization, how do you think about doing that in a way that is relatively easy, still takes thought and time, but you can work through a process before you present it to the higher ups?

BILL AULET: That’s exactly right., we’ve got to say, “Here’s the simplification of it and here’s where you get started and here are the steps you go through. While we’re giving you a sequential one, you have to understand it’s not linear. You’re going to have to do a lot of cycling, but at least you know what you’re supposed to be going.” Gives you some GPS, some templates and things to help you. But it’s a never-ending process.

The day you think that you’re done with entrepreneurship… I think Bob Dylan said it best, “He who is not being born is busy dying.” You have to continually be running the entrepreneurial process and understanding who your customer is, what you can do for your customer, how they acquire the product, how you make money, how do you scale the business. All these things are a never-ending cycle.

ALISON BEARD: How are your students and executives using new technology, like I’m thinking social media and gen AI, to make this process easier or faster?

BILL AULET: Well, we actually have a terrifically interesting tool right now. We’re internally calling it Tim the Beaver, your friendly AI entrepreneurship assistant. What it does is it’s a modified version of ChatGPT-4 Plus, which you could also use Gemini or whatever we want, but it takes the structure that we have in disciplined entrepreneurship and it trains that to ask the questions and fill in templates to say, “What’s your idea? Here’s your potential customers, which ones do you like? Which ones do you not like? What would be a beachhead market?” And then it will step you through, “Here’s your potential customers. Oh, by the way, here’s how you can reduce your cost to customer acquisition.”

And so, using things, as you mentioned, like… I mean at the end of the day, it comes down to getting customers, getting customers to profit. As we say, the first commandment of entrepreneurship is the single necessary and sufficient condition for a business is a paying customer. So, you have to focus on getting paying customers that are in a less expensive way, in a more profitable way, and keeping them and making them happy, and then scaling the business.

So, all the things you mentioned fit into this framework, like, do you use social media to acquire customers? Then that’s reducing cost of customer acquisition. Or do you use them to increase your lifetime value? That’s a different part of the equation. But do you use it to interface with them to find out their needs and wants and opportunities? this tool, we see and we’re already using it, it can dramatically shrink the entrepreneurial process of creating a new venture by as much as 90% in parts of it.

You still have to do primary market research, but a lot of the secondary market research you have to do, we can just do that in 15 minutes.

The best knowledge is not going to come from one institution, from one zip code. If we’re getting serious about pushing the field of entrepreneurship and raising the bar for it, we need to build a collaborative knowledge base that’s shared amongst all people. You’ve got to have a common body of knowledge and things that are agreed on, and those things should be agreed on based on evidence, not storytelling or who debates the best.

ALISON BEARD: Yeah. And how are you making sure that your style of disciplined entrepreneurship is spreading throughout the world, not just in Cambridge, not just in the United States?

BILL AULET: We’re not a for-profit. We have a terrible business model, Alison. It’s called, we create knowledge and give it away to the rest of the world to create positive impact. And so, everything we do is open-sourced. And we need to take the long view here. And we have that, if you call it business model, to think long-term. And that’s what we should do. That is our role in society, and we should not back down from that at all.

ALISON BEARD: Once would-be startup founders have gone through all of your steps, there is still the problem of financing and finding investors. So, how do you advise your students and executives you work with to go about that right now?

BILL AULET: Well, the first thing is there’s lack of confidence and knowledge about finance. I have a free book now called Finance for Entrepreneurs. We just have to break down that and demystify finance in a lot of ways first.

And then secondly, and I tell my students this all the time, and some listen and some don’t, is, “You want to get funding? Listen to what I have to say. The best way to get funding is to build a great company. The slowest way to get funding is to go try to play a game where you’re convincing the VCs you have what they want. Just go out and build a great business and they will find you. And by the way, there’s a great way to get funding. It’s called build a product that customers want and get them to pay you for it. And then guess what? You have money. And by the way, once you get that money, that’s validation that will help you raise it from other people.”

ALISON BEARD: Terrific, Bill. Well, thank you so much for joining me and definitely giving me hope that there are entrepreneurs out there who are going to make the world a better place.

BILL AULET: Thank you very much for having me on IdeaCast, and I look forward to any feedback.

HANNAH BATES: That was MIT Sloan School of Management professor Bill Aulet in conversation with Alison Beard on HBR IdeaCast. He’s the author of Disciplined Entrepreneurship: 24 Steps to A Successful Startup.

We’ll be back next Wednesday with another hand-picked conversation about business strategy from Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues, and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you’re there, be sure to leave us a review.

When you’re ready for more podcasts, articles, case studies, books, and videos with the world’s top business and management experts, you’ll find it all at HBR.org.

This episode was produced by Mary Dooe, Anne Saini, and me, Hannah Bates. Ian Fox is our editor. Special thanks to Rob Eckhardt, Maureen Hoch, Erica Truxler, Ramsey Khabbaz, Nicole Smith, Anne Bartholomew, and you – our listener. See you next week.