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Overviewy Entrepreneurship definitiony Critical factors for start-upy Components of start-upsy Evaluating Opportunitiesy Ask questions as they come up
MeetingToday
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What is en trepreneurs h ip?y A person who destroys the existing economic order by introducing new
products and services, by creating new forms of organization, or by exploitingnew raw materials - Schumpeter
y Someone who perceives an opportunity and creates an organization to pursue it- Bygrave
y Most current:
A way of thinking and acting that isopportunity obsessed,holistic in
approach andleadership balanced for the purpose of wealth creation - BabsonCollege
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What is th e En trepreneuri al P rocess?y T he process that involves the functions, activities and actions
associated with perceiving opportunities and creatingorganizations to pursue them.
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At th e He a r t of th e Process:1 . Creation/Recognition of opportunity2. Desire and ability to seize the opportunity3. Willingness to take calculated risk
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En trepreneurs h ip is a fu ll con ta c t spor t.The val ue comes in th e co llision .
Spontaneity;
opportunism
Discipline;
processes
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D ue D iligencey N ot just for investorsy T horough investigation into all aspects of potential venturey If initial due diligence is encouraging write a full business
plan
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The Oppor tuni ty
#1 Market demand is a key ingredient to measuringan opportunity
Market share & growth potential =
20%+, 20% annual growth, and durable?Is the customer reachable?Customer payback
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The Oppor tuni tyy Take a few minutes and write down a list of businesses with
the following characteristics:y Market share & growth potential =
20%+, 20% annual growth, and durable?y Is the customer reachable?y Customer payback < 1 year
O pportunity
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The Oppor tuni ty
#2 M arket size and structureEm erging and/or f rag m entedProprietary barriers to entry
O pportunity Driven
O pportunity
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The Oppor tuni ty
Take a f ew m inutes and write down a list of businesses with the f ollowing chara cteristi cs:
Emerging and/or f rag
mentedProprietary barriers to entry
O pportunity
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Life Cyc le
100 M
50 M
25M
3M1 M
Tim e (years)
Start up HighGrowth
Maturity Sta bility
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The Oppor tuni ty
#3 Margin ana lysis helps diff erentiate an opportunity f rom an ideaLow cost provider? (40% gross m argin)
Low capita l requirem
ent versus the com
p.?Break-even in 1 -2 years?Value added increase of overa ll P/E ?
O pportunity Driven
O pportunity
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The Oppor tuni ty
#3 Margin ana lysis helps diff erentiate an opportunity f rom an ideaKey question:W
hat are the f inan cialm
ani f estations of your com petitive advantage (s)?
O pportunity Driven
O pportunity
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The Oppor tuni ty
Take a f ew m inutes and write down a list of businesses with the f ollowing chara cteristi cs:
Low cost provider? (40%
gross m
argin)Low capita l require m ent versus the com p.?Break-even in 1 -2 years?
O pportunity
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The Oppor tuni tyy Evaluating an opportunity =T he 3 Ms
#1 Market demand value proposition, name potentialcustomers
# 2 Market size and structure - $1 00m+, emerging or fragmented(not perfectly competitive)
# 3 Margin Analysis 40%gm
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Unders ta nd a nd use Resources
y
Minimize and Controlversus
y Maximize and Own
Unleash creativity
Dont be driven by them
Resources
THINK CASH LAST
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Resources:Environmen taly H otbeds - Silicon Valley,1 28Tech. H ighway
y Role modelsy Resources: VCs, Banks, Lawyers, other resources
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Resources:Environmen tal ( con t.)y Family factorsy Experience, Optimism, Youthy Contactsy Awareness of resources
.
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Resourcesy Fortune 500 start-up capital
y 25% less than Rs5,000y 50% less than Rs25,000y
75% less thanRs$100,000y Fewer than 5% began with more than Rs1 million
Too m uch cash too ear ly in a new ventures lif e cycle can be detri m enta l to creating a culture of creativity and resour cef ulness.
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En trepreneuri al F rug al ityy Low overheady H igh productivityy
Minimal ownership of capital assetsy Bootstrapping
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S ta r t-up ca pi taly Debt
y Loansy Collateral - 25% of loan
y Equityy
Outside investorsy VCsy Familyy Friendsy Informaly
Angely Sweat equity
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Profi t po ten tial : Benc hm a rksy Benchmarks
y 5% = net income for most companiesy 1 0% = doing very welly 1
5% = truly exceptionaly Reality
y 50% of fortune 500 make 5% or lessy Only 1 3% of fortune 500 make more than16 %
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Profi t po ten tial : Running th e numbersy Salaryy Benefitsy Opportunity costy Return on personal investment (40% on high risk)
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Profi t po ten tial : Ca s h f lowy K EY: dont mistake cash flow for profity Outgrowing your resources
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Profi t po ten tial : Re turn on inves tmen ty T he two ingredients that determine ROI are
y Amount investedy Annual amount earned on that investment
y
40%+ on start-up or seed investment
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The En trepreneuri al Te a m
y T he lead entrepreneur is keyy Quality and diversity of team
y An A team with a B idea isbetter than a B team with
an A idea
E ntrepreneur
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En trepreneuri al Te a m Cha ra c teris ticsy Tolerance of risk and
ambiguityy Motivation to excely
Leadershipy Creativity
y Communicatorsy Commitment and
determinationy T
eam locus of controly Adaptability
RELEVANT EXPERIENCE
AND
OPPORTUNITY OBSESSION
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En trepreneur a nd Ma na gemen t Te a my Relevant industry experiencey Getting involved in something you love to do
Passion!Passion!
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En trepreneur Cha ra c teris ticsy Burning desire to achieve - getting out therey Internal locus of control - I control my destinyy 1 0 Ds
y
Dream, Decisiveness, Doers, Determination, Dedication, Devotion, Details,Destiny, Dollars, Distribute
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The Timmons Mode l: EOR
O pportunity E ntrepreneur
Resour ces
Business PlanFits & Gaps
Uncertainty
Uncertainty Un certainty
Uncertainty
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How do I use th e mode l?
O pportunityE ntrepreneur
Resour ces
Business PlanFits & Gaps
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If I a m in con tro l, Im prob a b ly moving too s low!
- Ma rio Andre tt i