French economist Jean Baptiste say described an entrepreneur as one who shifts economic resources out of an area of lower and into an area of higher productivity and yield

Phelps : entrepreneurship is lucrative

Yunus : The simple yet revolutionary idea of loaning tiny sums to poor people to start a business

Based on the research which was done by University of Louisiana said that Opportunity and Change are the two issues most important to be an entrepreneur.

Innovation◦ Thomas Edison

◦ Intel founder Gordon Moore

◦ Steve Job

Formation of new Industries :◦ as Joseph Schumpeter observed that the key to the

entrepreneurial renewal comes from the competition from the new commodity, the new technology, the new source of supply, the new type of organization

Example : ◦ Skype developed by Niklas Zennstrom and Janus

Friis from Denmark

◦ Cellular One in Eastern Massachusetts lack in size , financial but has the right strategy by opening service center outside the downtown area Vs NYNEX

◦ Rapid creation of large market : Jet Blue, Air Asia

Entrepreneurship is the new paradigm : entrepreneurial thinking and reasoning

Entrepreneurship has spawned a new education paradigm for learning and teaching

Entrepreneurship education is becoming dominant management model for running nonprofit organization and social ventures

Entrepreneurship education is transcending rapidly business school : engineering, science,

1. Entrepreneurship is the new paradigm

Ex : Marion Kaufman Three principle

a) Values and principle based management

b) Responsibility to community

c) Ethical highground

The use of Internet

The European Union‟s plan to make EU the most competitive Economy include :1. Fuelling Entrepreneur mindset

2. Encouraging more people to become entrepreneur

3. Gearing entrepreneur for growth and competitiveness

4. Improving the flow of finance

5. Creating a more entrepreneurial friendly regulatory and administrative framework

1994 – 1998 created 5 mill jobs in the US

Microsoft established in the late i970s in 1980 workforce 38 employees with sales $8 mill, by the end of 2004 sales were $21.8 mill with 31000 employees.

Common characteristic of successful entrepreneurs is their commitment to social issues

THE ENTREPRENEURIAL MIND

Internally : ◦ Motivated

◦ High energy leader

◦ Unique tolerance for ambiguity

The mind is both influenced by and influences the psychological, physical, emotional, spiritual elements of entrepreneur

Treat Others as you would want to be treated

Share the wealth that is created with all those who have contributed to it at all levels

Give back to the community

Philanthropy is good for business

Take philanthropy to the factory floor

Link it to your client base

Cast the charity net wide

Manage charity work on a professional basis

Decide charity priorities in advance

Understood the importance of well treated workforce

Shares in the company were offered to staff

A single psychological model of entrepreneurship :◦ Success of a new venture will depend upon talent

and behavior of the team or lead entrepreneur

◦ Consider recent research said that leadership is an extraordinary complex subject, depending on the interconnections among the leader, the task, the situation, and those being led than inborn or inherited characteristics

The need of achievement

The need of power

The need of affiliation

A study of 118 entrepreneur revealed that those who like to plan are much more likely to survive

Fundamentals of an entrepreneur in seizing opportunity:1. Responsiveness

2. Resilience

3. Adaptability

When assessing critical choices: ◦ Gut reaction

◦ Intuition

Similarly when faced with crippling business◦ Regain their faith to win at the same time calmly

consider options

The ability to respond positively to challenges

Personal initiative

Great perseverance and determination

Listening to gut feeling or intuition

People : a broad view of entrepreneurship as a

form of human action, pulling together the current state of the art in academic research with respect to cognitive, economic, social and institution which influence entrepreneurial behavior

Process : which followsIdea, opportunity, team building, resource

acquisition, managing growth and entering global market

Place refers to a wide and diverse range of contextual factors

Commitment and determination

Courage

Leadership

Opportunity obsession => Obsessed first with opportunity then money

Tolerance of risk, ambiguity, and uncertainty

Creativity, self reliance, and adaptability

Motivation to excel

Intuitive

Tenacious and decisive

Intensely competitive in achieving goals

Persistent in solving problems

Willing to undertake personal sacrifice

Immersed In the mission

Moral strength

Fearless experimentation

Not afraid of conflicts, failure

Intense curiosity in the face of risk

Self starter; high standard but not perfectionist

Team builder and hero maker; inspire others Treats others as you want to be treated Shares the wealth with people who helped

create it Superior learner Patient and urgent Work by Dr.Allan Grant : lead

entrepreneur, venture team, external environment influences

Leadership in shaping the opportunity

Has knowledge of customer‟s needs

Market driven

Believe in themselves

Lead entrepreneur◦ Self concept

◦ Intellectually honest = admits when he doesn‟t know

◦ Pace maker =Displays a high energy and a sense of urgency

◦ Courage = capable of making hard decision

◦ Communication skills = Maintains an effective dialogue

◦ Team player = Competent in people Management and team building skills

The venture team ◦ Organizational style

◦ Ethical behavior

◦ Faithfulness

◦ Focus

◦ Performance / reward = fairly and equally

◦ Adaptability

External environmental influences◦ Constituent needs= Organization‟s needs are

satisfied

◦ Prior experience

◦ Mentoring

◦ Problem resolution

◦ Value creation

◦ Skill emphasis

Obsessed with value creation and enhancement

Calculated risk taker Risk minimizer Risk sharer Manages paradox and contradictions Tolerates uncertainty and lack of structure Tolerate stress and conflict Able to resolve problem and integrate

solution

Open minded

Restless with status quo

Able to adapt

Quick learner

No fear of failure

Able to conceptualize and details

Goal and result oriented

Drive to achieve goals and grow

Low need for status and power

Interpersonally supporting not competing

Aware of weakness and strength

Has perspective and sense of humor

Passionately committed

Detects meaningful patterns

Thinks holistically

Senses gut type feelings

Processes non local information

The lead entrepreneur

The venture team

The external environment influences

Successful Entrepreneur :

1. They know when to use logic and when to persuade

2. Interpersonally supporting not competing

Self concept

Intellectuality honest

Pace maker

Courage

Communication skills

Team Player

Organizational Style

Ethical behavior

Faithfulness

Focus

Performance/Reward

Adaptability

Constituent needs

Prior experience

Mentoring

Problem resolution

Value creation

Skill emphasis

INVENTOR ENTREPRENEUR

Promoter Manager, Administrator

High

LowHigh

General management skills, business knowhow and networks

CreativityandInnovation

Shaping and Managing an apprenticeship◦ They have all 10 years of experience◦ Built contacts◦ Garnered the know how◦ Established a track record in the industry◦ Knowledge of customers◦ Distribution channels◦ The more successful ones have made money for

their employer before doing it themselves◦ Adaptive and resilience◦ Not afraid of failing◦ Learn from failure experience

MOTIVATION TO EXCELL◦ Successful entrepreneur are motivated to excel

◦ Have a low need for status and power

◦ Setting high but attainable goals

◦ Insist on the highest standards of integrity and reliability ( the do what they say)

◦ They believe they personally can affect the outcome( they don‟t believe in luck, fate)

◦ Self confidence and desire to take personal responsibility

INTUITION IN DECISION MAKING◦ Entrepreneur rely on intuitive abilities than rational

analytic when identifying new business opportunity

◦ Intuition is the ability of an individual to access their subconscious mind

The role of experience and know how is the central in successful venture creation

Most successful entrepreneurs follows a pattern of apprenticeship where they prepare for becoming entrepreneurs by gaining the relevant business experiences from parents who are self employed

Numerous studies show a strong connection between the presence of role models and the emergence of entrepreneurs.

Studies have indicated that 90 per cent or more founders start their companies in the same market place technology or industry they have been working in.

1. Entrepreneur are born, not made

2. Entrepreneurs are gamblers

3. Entrepreneurs want the whole show to themselves

4. Entrepreneurs work longer and harder than managers in big companies

5. Entrepreneurs experience a great deal of stress and pay a high price

6. Money is the most important startup ingredients

Leadership skills

Interpersonal skills

Team Building

Creativity and ingenuity

Motivation

Learning skills

Persistence and determination

Values, Ethics, honesty

Goal setting orientation

Self Discipline

Sense of humor

Do what gives you energy

Figure out what can go right and make it

Say” can do” rather than” cannot” or maybe

The cup is half full not half empty

Making money is more fun than spending it

Accept responsibility

Never give up

Make heroes out of others a team builds a business, individual makes a living

Profiling the present Entrepreneurial attitude & behavior

Various role demands result from pursuit of opportunities

Getting constructive feedback◦ From those who can be trusted◦ Feedback Should be actionable◦ Need to be honest◦ Answering, debating and rationalizing should be

avoided◦ Reaching final conclusion or decisions needs to be

left later time

Putting it all together◦ The process is cumulative , and what an

entrepreneur does about weakness,

THE ENTREPRENEURIAL PROCESS

Entrepreneurship is a way of thinking, reasoning, and acting that is opportunity obsessed, holistic in approach, and leadership balanced for the purpose of value creation and capture

Today entrepreneurship has evolved beyond the classic start up notion to include companies and organizations of all types, in all stages

An innovative idea that develops into a high growth company

Success in addition to the strong leadership of the main entrepreneur

Involves building team and complementary talents

Requires skill to control resources Most highly successful entrepreneurs have

held together a team and acquired financial Backing in order to chase opportunity others may not see

Venture backed companies 90 %

Private sector 8 %

Leaders : set aspirations and continually work at success

Giant firms tend to be hierarchical in structure, with many layers of review, approvals and vetoes managing and administering from Top to Bottom

Improvisational, quick, clever, resourceful, and inventive all describe good entrepreneur

An opportunity with no or very low potential can be an enormously big opportunity◦ Steve Job and Steve Wozniak Personal Computer

To make money you have to first loose money

To create and build wealth one must relinquish wealth

To success one first has to experience failure

Entrepreneurship requires considerable thought, preparation, and planning

For creativity and innovativeness to prosper discipline must accompany the process

Entrepreneurship requires a bias toward action and a sense of urgency, but also demands patience and perseverance.

Remember, entrepreneurshipIs a full contact sport. The

value comes in the collision

SpontaneityOpportunism

Discipline,processes

DOLLARS

THINK BIG ENOUGH = the biggest mistakes aspiring entrepreneurs make is strategic

As one founder of numerous business put it = unless the business can pay you at least fives times your present salary

Arthur Rock => said that opportunity simply : look for business concepts that will change the way people live or work

Failure rates are high

Failure occur in the first two to five years

70% of failure is in the areas of retail trade, construction, and small service business

Most smaller enterprises that cease operation simply do not meet our notion of entrepreneurship, they do no create, or pursue opportunities that realize value

Who are the survivors?

Higher level of success change dramatically if the venture reaches a critical mass of at least 10 to 20 people with $2 million to $3 million revenue

Driving process dominate entrepreneurial process:1. It is opportunity driven

2. It is driven by a lead entrepreneur and an entrepreneurial team

3. It is resource parsimonious and creative

4. It depends on the fit and balance among these

5. It is integrated and holistic

6. It is sustainable

Opportunity

Strategy

Network

Team or business plan

Communication

OPPORTUNITY

RESOURCES

TEAM

LEADERSHIPCREATIVITY

Business plan

We build our understanding of opportunity by first focusing on market readiness:

1.The consumer trend

2. Behavior

That seek new products or services

Thinking money first is a big mistake

Successful entrepreneurs devise ingeniously creative and stingy strategies to gain control of resources

Team is a key ingredient in the higher potential team

1. Entrepreneur leader◦ Learns and teaches – faster, better

◦ Deals with adversity, is resilient

◦ Exhibit integrity, dependability, honesty

◦ Builds entrepreneurial culture organization

2. Quality of the team

2. Quality of the team◦ Relevant experience and track record

◦ Motivation to excel

◦ Commitment, determination and persistence

◦ Tolerance of risk, ambiguity and uncertainty

◦ Team locus of control

◦ Adaptability

◦ Opportunity obsession

◦ Leadership and courage

◦ communication

Building a sustainable venture means achieving economic , environmental and social without compromising the same opportunity for future generations

THE OPPORTUNITY : CREATING, SHAPING, RECOGNISING, SEIZING

Think big enough◦ Idea : is basically a neuron interaction in the brain

◦ Opportunity :

They create or add value to end user

They do by solving a significant problem, meeting significant want

They have robust market

They are a good fit with the founder(s) and management team at the time and marketplace – along with an attractive risk – reward balance

To summarize : A superior opportunity has the qualities of being attractive , durable and timely and is anchored in a product or service that creates or adds value for its buyer or end user.

Regulatory changes

Reconstruction of value chain and channel of distribution

Existing management = new capital structure

Entrepreneurial leadership = new vision and strategy

Market leaders are customer obsessed or customer blind

Higher potential business◦ Can identify a market niche for a product to satisfy

customer‟s needs◦ Serves as problem solver for which customers are

willing to pay◦ The potential payback period is one year or less

Lower potential opportunities :◦ Unfocussed on customers‟ needs◦ Customers are unreachable/ other loyalties to

others◦ Payback period more than three years◦ Low value added

Market structure :◦ A fragmented, imperfect market or emerging

industry often contains vacuum that create unfilled market niche

Market Size Growth rate= an attractive market is large

and growing Market capacity Market share attainable Cost structure= a firm that can become the

low cost provider is attractive

Profit after tax : High and durable gross margins usually translate into strong and durable after tax profits

BEP = Break even and positive cash flow are possible within two years

ROI Potential = Very attractive opportunities have the potential to yield a return on investment of 25 % or more per year

Capital requirements : Venture that can be funded at low and moderate capital are attractive

IRR (Internal Rate of return) = of 25% in 5 to years is considered very healthy

Gross margin

Value added potential such as technology

Valuation multiples

Exit mechanism strategy

Capital market context : the context in which the sale or acquisition of the company occurs is largely driven by the capital markets at that particular time. Timing can be crucial

Variable and fixed cost= low cost attractive

Degree of control strong control over prices attractive

Entry Barrier being able to gain proprietary protection, regulatory attractive

Entrepreneurial team having a strong team

Industry and technical experience : a management track record of significant accomplishment in the industry

Integrity

Intellectual honesty

Fatal flaw issue basically , attractive ventures have no fatal flaws :an opportunity is rendered unattractive if it suffers from one or more fatal flaws

Goals and fit : Is there a good match between the requirements and what the founders want

Upside down issues : an attractive opportunity does not have excessive downside risk

Opportunity cost

Desirability

Risk/ reward tolerance

Stress tolerance

Degree of fit

Service management

Timing

Technology

Flexibility

Opportunity orientation

Pricing

Distribution channels

Room for error

EXISTING BUSINESS

FRANCHISES

PATENTS

PRODUCT LICENSING

CORPORATIONS

NOT FOR PROFIT RESEARCH INSTITUTE

UNIVERSITIES

Trade shows and association meetings

Customers

Distributors and whole sellers

Competitors

Former employers

Professional contacts

Consulting

Networking

You will need to invest in thorough research to shape your idea into an opportunity. Data available about market, competitors and so on are frequently inversely related to the real potential of an opportunity

SCREENING VENTURE OPPORTUNITIES

Quick screen1. Focus on a few superior ideas

2. Quickly and efficiently reject ideas

Venture Opportunity Screening Exercise(VOSE)1. Are designed to segment the screening ideas into

manageable pieces

2. Provide an audit trail of your opportunity - shaping activity

3. It is important to have realistic view of the vulnerabilities and realities as well as the opportunity‟s compelling strength

The iterative process of carefully examining different ideas often :◦ Trigger creative ideas and insight

◦ How strategy can be altered to enhance the value chain, risk reward relationship and free cash flow relationship

OPPORTUNIES FOR SOCIAL ENTREPRENEURSHIP

What is social entrepreneurship :

A movement with a goal to effect positive social change

Traditional Social purpose

Social consequences

Enterprising non profits

Econom

icSocia

l

PrimaryMarket Impact

Venture Mission

Economic Social

III

III IV

Are founded on the premise that a social problem will be solved

The venture is for profit

The impact on the market is economic

There are two types

1. Utilizes earned income activities

2. Focus on growth and economic sustainability

For Profit – achieving economic goals For profit – primarily achieving social goals For profit – equally emphasizing social and

economic goals Not for profit, serving a social mission

The primary difference between social entrepreneurship and traditional commercial views of entrepreneurship is THE INTENDED MISSION

Corporate with CSR practices impact communities but CSR is not the core component of their business model, align best with Social consequence ventures Starbuck

The three major components of Timmons Model certainly apply to social entrepreneurship.

Ex : Social opportunities are driven not only by markets but also mission and social needs.

External stake holders are important

Characteristics of wicked problems Characteristics of Tame problems

1. You do not understand the problem until you have developed the solution

1.Have well defined and stable problem statements

2. Wicked problems have no stopping rule

2. Have definite stopping points –when a solution is reached

3.There are no right or wrong 3.Have solution that can be objectively evaluated as right or wrong.

4.Every wicked problem is unique 4.Belong to a class of similar problems that are all solved in a similar way

5. Every solution to wicked problem is one shot operation

5.Have solutions that can be easily tried and abandoned.

6. Wicked problems have no given alternative solutions infinite set

6. Come with a limited set of alternative solutions

Resources acquisition is critical to the success of social ventures, enterprising non profits and even hybrid forms.

Social venture capital seek to invest in profit ventures both financial return as well as environmental return this is also known as the double bottom line or triple bottom line

Social venture capital has three types of funds :

1. Focused fund : a company invests in expansion – stage clean technology, business related to energy, water

2. Community fund : its purpose is typically economic development and job creation

3. VC with a conscience : This fund stipulated that certain percentage will be invested in socially responsible businesses related to their target investment area

Include : the community, investors, the government, customers, suppliers, manufacturers.

Business Plan is more of a process and work in progress than an end itself.

The Business plan is blueprint and flight plan for a journey that converts ideas into opportunities, articulate and the likely flight and timing for a venture.

the numbers in a business plan do not matter, but the economics of the business model value proposition matter enormously

Runs from four to ten pages, essentially covers analysis of and information about the heart of the business opportunity, competitive advantages the company will enjoy and creative insights that entrepreneur often has.

Entrepreneur himself is recommended to write the business plan itself because it involves the consequences of strategy, tactics, the human and financial requirements for launching and building the venture.

Business plan – a written summary of:◦ An entrepreneur‟s proposed business venture

◦ Its operational and financial details

◦ Its marketing opportunities and strategy

◦ Its managers‟ skills and abilities

It serves two essential functions:◦ Guiding the company by charting its future course

and defining its strategy for following it

◦ Attracting lenders and investors who will provide needed capital

Purposes of a Business

Plan

Development tool for organizational founders

Vision and mission clarification

Planning and evaluation guidelines

Tool for securing financial resources

Tool for guiding growth

Although building a plan does not guarantee success, it does increase your chances of succeeding in business.

A plan is like a road map that serves as a guide on a journey through unfamiliar, harsh, and dangerous territory. Don‟t attempt the trip without a map!

Executive Summary

Mission Statement

Company History

Business and Industry Profile

Business Strategy

Description of Products/Services

Marketing Strategy Competitor Analysis Description of Management

Team Plan of Operation Forecasted Financial

Statements Loan or Investment Proposal

(continued)

Remember: No one can create your plan foryou.

Potential lenders want to see financial projections, but they are more interested in the strategies for reaching those projections.

Show how you plan to set your business apart from competitors; don't fall into the “me too” trap.

Identify your target market, and offer evidence that customers for your product or service exist.

Make sure your plan has an attractive cover. (First impressions are crucial.)

Rid your plan of all spelling and grammatical errors.

Make your plan visually appealing.

Include a table of contents to allow readers to navigate your plan easily.

Make it interesting.

(continued)

Your plan must prove that the business will make money (not necessarily immediately, but eventually).

Use spreadsheets to generate financial forecasts.

Always include cash flow projections.

Keep your plan “crisp” – between 25 and 50 pages long.

Tell the truth – always.

(continued)

Feature – a descriptive fact about a product or service (“an ergonomically designed, more comfortable handle”).

Benefit – what a customer gains from the product or service feature (“fewer problems with carpal tunnel syndrome and increased productivity”).

The Reality Test - proving that:◦ a market really does exist for your product or

service. ◦ you can actually build or provide it for the cost

estimates in the plan.

The Competitive Test - evaluates: ◦ a company‟s position relative to its customers.◦ management‟s ability to create a company that will

gain an edge over its rivals.

The Value Test – proving that:◦ a venture offers investors or lenders an attractive

rate of return or a high probability of repayment.

Demonstrate enthusiasm, but don‟t be overemotional.

Know your audience thoroughly. “Hook” investors quickly with an up-front

explanation of the venture, its opportunities, and its benefits to them.

Hit the highlights; focus on the details later.

Keep your presentation simple – 2 or 3 major points.

Avoid overloading your audience with technological jargon.

Use visual aids. Close by reinforcing the nature of the

opportunity. Be prepared (with details) for potential

investors‟ questions. Follow up with every investor to whom

you make your presentation.

(continued)

Writing a Successful

Business Plan

10 Characteristics:

1. Clear, realistic financial projections

2. Detailed market research

3. Detailed competitor research

4. Descriptions of key decision makers

5. Thorough summary

6. Proof of vision

7. Good formatting and clear writing

8. Brief and concise

9. Writing that demonstrates the importance of the bottom line

10. A plan that captures “you”

VALUATION, STRUCTURE AND NEGOTIATION

Cash

Liquidity and timing

Unavoidable conflicts between users and suppliers of capital

WHAT IS BUSINESS WORTH ?◦ A=OE +L

Cash

Time

Risk

PSYCHOLOGICAL FACTORS DETERMINING VALUE◦ P/E Ratio can be thought as the number of years

that it will take the company to accumulate sufficient profit to earn back the price of its share

In reviewing a range of investment options, most investors will choose the one that provides the greatest return, with the lower risk, in the shortest time.

Exit value

Expectation of future

Time Horizon

Tolerances for risk

Investors expectation as an annual percentage. It reflects the perceived risk of the investment

1. DISCOUNTED CASH FLOW defines as the value of the company as simply the present value of its future earning

2. THE VENTURE CAPITAL METHOD concerns of the cash flow received at the exit The expected price of the venture at time of exit

The amount of time until the exit

The discount rate to be applied

3. INVESTOR‟S REQUIRED OF OWNERSHIP Investor‟s required share = Amount invested: total

present value

4. THE FIRST CHICAGO METHOD usually focus on later stage (growth equity, consolidation and leveraged buyout)

5. OTHER RULE OF THUMB VALUATION METHODS EBIT, EBITDA

6. OWNERSHIP DILUTION

Under this approach early stage ventures are grouped by the stage of development

1. Pre – seed

2. Seed

3. First institutional round (C) round intended to fund the development of the structure and processes expected of a public company

THE DOWN (CRAM DOWN) those ventures that are able to secure funding tend to find that valuations have declined precipitously sometimes become uneconomic for shareholders

DIFFERENT PERCEPTION between entrepreneur and investor in length of time of financing

STAGED CAPITAL COMMITMENTS Increase capital dilute management‟s equity

Enable venture capital firms to control/ shut down operations

SPECIFIC ISSUES◦ Right of first refusal

◦ Ratchet anti dilution protection

◦ Washout financing

◦ Forced buyout

◦ Demand registration rights

◦ Key person insurance

Strategic Circumference

Legal circumference

Attraction to status and size

Unknown territory

Opportunity cost

Underestimation of other costs

Greed

The fundraising treadmill

Being too anxious

Impatience

Make the money and run myopia

THE FAMILY AS ENTREPRENEUR

Tran generational entrepreneurship and wealth creation : families who are enterprising generate economic activity and build long term value across generation

In Australia family firms comprise two – third of the small and medium sector

1. Family – influenced startups> who formally launches a new business with family

2. Family corporate venturing >family holding business that have formal new venture creation, strategies, plans, departments, or capabilities.

3. Family corporate renewal > focus on creating new streams of value through innovation, transformational change activities.

4. Family private cash >start up money from family member or business with a formal written agreement for market based ROI and or repayment.

5. Family investment fund >Stand alone professional private equity or venture capital controlled by family and/or using family generated capital

Develop communication skills

Make sure to have the same view of future of working together / common goals

1. Leadership

2. Relationship

3. Vision

4. Strategy

5. Governance

6. Performance

Distinctive familiness or „f+‟ refers to when these families resources and capabilities f+ lead to a competitive advantage for the family

Constrictive familiness or „f-‟ refers to when they constraint the competitive enterprising ability of the family