A Survey Course in Entrepreneurship GBA 491 Lecture 3

1. A Survey Course in EntrepreneurshipGBA 491Lecture 3

2. Guest Speaker: Suzanne Clarridge, CEO, Mybrands • What was learned from Suzanne? • Describe her entrepreneurial characteristics. • Is the concept unique? • Evaluate the business model. • What are the company’s competitive advantages. • Evaluate the company’s marketing strategy.

3. Brief Review of the Last Class

4. Entrepreneurship Basics: 1 Definition of “Entrepreneurship” Timmons Entrepreneurship is a way of thinking, reasoning and acting that is opportunity obsessed, holistic in approach and leadership balanced.

5. My Definition It is a process comprising a series of steps which if followed would likely create value and a successful venture.

6. Definition of Intrapreneurship It is a process comprising a series of steps which when followed would create value and a successful new venture that resides in an existing company.

7. Types of Entrepreneurial Ventures • Not-for-profit organizations • Private charities, museums • Philanthropic entities • Social entrepreneurship(1) • For-profit organizations • C-corporations • Special types: sole proprietor; partnerships; limited liability; sub chapter S (1)Might include health care, educational, religious, sports and recreational organizations.

8. Forms of For-ProfitEntrepreneurial Ventures • Startups • Corporate Business Development • Franchising • Buying A Business • Revitalizing Troubled Business • Joint Ventures

9. Not-For-Profit Organizations They tend to develop functional models that focus on what they want to accomplish.

10. New Venture Creation Timmons Chap. 3: The Entrepreneurial Process Chap. 4: The Opportunity, Creating, Shaping Recognizing, Seizing Selected Highlights from the Chapters

11. The Timmons Model of theEntrepreneurial Process The Entrepreneurial Process Is ― • Opportunity driven • Driven by an entrepreneur and an entrepreneurial team • Resource parsimonious and creative • Depends on the fit and balance of these elements • Integrated and holistic • Sustainable

12. EXHIBIT 3.5 The Timmons Model of the Entrepreneurial Process Communication ➨ Resources Opportunity Business plan Fits and gaps Ambiguity Exogenous Forces ➨ ➨ Creativity Leadership Team Uncertainty Capital market context Founder Sustainability: For Environment, Community and Society

13. The Process Is Opportunity Driven – • Market demand is a key ingredient • Payback – less than a year? • Market share growth potential, 20% and durable? • Customers accessible? • Market structure and size important • Emerging/ fragmented? • $50 million? A potential of $1 billion? • Proprietary barriers to entry • Margin analysis helps to differentiate • Low cost provider (40% gross margin) • Lower capital requirements • Break even in 1-2 years • Value added increases P/E ratio

14. Understands Need for Resources But Not Driven By Them • Importance of bootstrapping • Minimize and control ― versus • Maximize and own • Think of cash last • Unleash creativity

15. Entrepreneurial Team Critical to Success • An Entrepreneurial Leader • Learns and teaches others • Deals with adversity, is resilient • Exhibits integrity, dependable, honesty • Builds entrepreneurial culture • Quality of the Team • Motivated to succeed • Creative, adaptable, committed • Relevant experience • Tolerant of risk

16. The Importance of Fit and Balance • The opportunity, the resources and the team must be in balance to develop a successful business. • Over time they may become out of balance • When this occurs, the challenge is to bring the components into equilibrium • Here are examples of Netscape over the period before it merged with AOL.

17. EXHIBIT 3.9(a) Netscape―Journey Through the Entrepreneurial Process: At Startup, a Huge Imbalance Communication ➨ Opportunity Very large, growing and undefined Resources Very limited Business plan Fits and gaps • Innumerable: Money and Management Ambiguity Exogenous Forces ➨ ➨ Creativity Leadership Team Uncertainty Capital market context Founder Sustainability: For Environment, Community and Society

18. EXHIBIT 3.9(b) Netscape―Journey Through the Entrepreneurial Process: At Venture Capital Funding, Toward New Balance Communication ➨ Resources Money to launch Opportunity Larger and growing faster Business plan Fits and gaps • Resources and team • Catching up Exogenous Forces ➨ Ambiguity Leadership ➨ Creativity Team Capital market context Uncertainty Founder Sustainability: For Environment, Community and Society

19. EXHIBIT 3.9(c) Netscape―Journey Through the Entrepreneurial Process: At IPO, a New Balance Communication ➨ • Resources • Great balance sheet • Great free cash flow • Opportunity • Even bigger and faster growing • Competitors Business plan Fits and gaps • How large and profitable can we become? Ambiguity Exogenous Forces ➨ ➨ Creativity Leadership Team Can play with the best Uncertainty Capital market context Founder Sustainability: For Environment, Community and Society

20. EXHIBIT 3.9(d) Netscape―Journey Through the Entrepreneurial Process: Today, Toward a New Imbalance Communication ➨ • Business plan • Fits and gaps • Candidate fro brontosaurus capitalism? • Threat of disruptive technology • Sustaining and reinventing entrepreneurial organization Resources Unlimited access to capital markets and other resources • Opportunity • Major growth potential • Competitors and Microsoft Exogenous Forces ➨ Ambiguity Leadership ➨ Team One of the best Creativity Capital market context Uncertainty Founder Sustainability: For Environment, Community and Society

21. The Opportunity: Creating, Shaping, Recognizing, Seizing When Is An “Idea” An “Opportunity”? The Four Anchors: • When it creates or adds significant value to customers • Meets a significant need/want; solves a problem; customers willing to pay a premium • When it has a high market margin; high market potential and sustainable realizable returns for investors • Good fit for the management team and a risk-reward balance

22. Criteria for Evaluating Venture “Opportunities” While the chapter has a complete discussion and an outline, how to evaluate an “idea”; our focus will be an overview of the process: • First ― The QuickScreen exercise(1) • Second ― The 12 Venture Screening exercises(1) (1)From New Venture Management, Chapter 5, Timmons and Spinelli.

23. QuickScreen Exercise

24. QuickScreen Exercise (cont.)

25. Twelve Venture Opportunity Screening Exercises(1) • Opportunity concept and strategy statement • The venture opportunity profile • Opportunity shaping research profile • Customer contact research exercise • Mining the value chain – defining the “white space” • Economics of the business - how do you make money in the white space • Capital and harvest – how will you realize dollars from the venture • Competitive landscape – your strategic analysis • Founders commitment • Flaws, assumptions and downside consequences – risk considered • Action steps – setting a week-by-week schedule • Four anchors revisited (1)From New Venture Management, Timmons and Spinelli

26. Summary