Launching the New Venture Organizing Resources and Raising Capital
The Basic Paradox Entrepreneurship Seizing opportunity without being constrained by resources currently controlled New Venture Without resources there is no new venture Resolving the Paradox If you Do not have money You must have something that Money cannot buy So that people with money Would like to support you
Resources for a New Venture New venture requires resources that : Can help an organization implement its strategy (valuable) May not be available to all competitors (rare) Cannot be duplicated easily or inexpensively (hard to copy) Are significantly different than resources employed by other firms (non- substitutable)
The PROFIT Model for Resources Physical Reputational Organizational Financial Intellectual and human Technological
Physical Reputational Positive perceptions Tangible assets that people have of the for use in founders/company Production Can exist at the Administration individual level Plant and At the company level equipment Key criteria Sourcing of key Management inputs integrity
Organisational Financial Resources Resources A firm’s structure, processes Borrowing capacity, and systems ability to raise new Information generation equity and amount of and decision making cash generation from systems internal operations Capability to manage the Raising money at complexity and turbulence advantageous terms in the environment Credit rating Addressing issues Financial associated with the age and life cycle stage of a business performance
Intellectual Technological Resources Resources Knowledge, training and experience Process, Systems or of the entrepreneur and the team physical transformations Judgment, insight, creativity vision R&D facilities and intelligence of team members Social skills of the entrepreneur Testing and quality Relationship capital control techniques Intellectual property Networking gives the entrepreneur access to resources Patents, copy rights, without controlling them trademarks, designs, Minimizes potential risk of licences ownership and keeps the Proprietary processes overheads down
Apple Hewlett – Packard Google
Recipe for a New Venture Nearly 45 years ago, when Bill Bowerman was having breakfast he looked at the waffle iron that his wife just used to make waffles. He was so obsessed with creating shoes lighter and faster that he ran to his lab brought a couple of bottles to make the urethane and used the waffle iron to press out a new sole. It cost Bill’s wife $ 12 but it was the birth of a multi billion dollar company, Nike. Bill’s breakthrough spawned Nike’s Waffle Trainer, released in 1974, the first innovation in a company that became known for them. Before it, most athletic soles were flat with shallow patterns. The waffle had nubs that protruded like the tread on a motorcycle tire .
Development, IP and Commercializatipon Nike Oregon Waffle Trainers ca. 1973
Asset Parsimony Most start-ups are chronically short of resources Being conservative with expenditure is an overriding philosophy Creative use of accessing and using assets Never incur fixed costs if they can be avoided Never buy new what can be bought second hand Never buy what can be rented Never rent what can be borrowed Never borrow what can be begged Never beg what can be salvaged
Help Helps Entrepreneurs who seek and get help from: Industry or trade associations Mentors already in business Business development centres Incubators Business school professors Do substantially better than those who try to get by alone
Types of Help Information or advice Introductions to other people Access to financial resources (equity, loans or loan guarantees) Business services (legal and accounting assistance) Physical resources (use of land, space, building or equipment) Personal services (household help) Other kinds of assistance 10% 20% 40% 50% 0% 30%
Clusters Incubators Focus on the core task High-quality human Administrative and resources infrastructure facilities Research in local Proximity to other universities entrepreneurs Availability of investment Links with angel capital investors and venture capitalists Representative customers Association with local development agencies Suppliers and Deshpande Centre for complementors Technological Competitors Innovation Consultants, attorneys SINE, FITT & NDBI and accountants
Key Human Resource Entrepreneur & the Team
The Ultimate Resource: Entrepreneur Individuals who are unique resources Resources that money cannot buy Provide value in terms of Creativity Unique vision Intuitions Have ability to bring together other critical resources Personal Inventory Knowledge base Specific skills Motives Commitment Personal attributes
Required Capabilities of the Entrepreneurial Team Able to accommodate uncertainty and ambiguity Flexibly adapts to changing circumstances and competitors Seeks to evaluate and mitigate the risks of the venture Creates a vision of the venture to communicate the opportunity of staff and allies Attracts, trains, and retains talented, educated people capable of multidisciplinary insights Skilled at selling ideas and have a wide network of potential partners Has talent, knowledge, and experience within the industry where the opportunity occurs Seeks important opportunities with sizable challenges and valuable potential returns Able to select an opportunity in a short period: timely Creatively explores a process that results in the concept of a valuable solution for the problem or need Able to convert an opportunity in to a workable and marketable enterprise Wants to succeed: achievement-oriented
Six Resources for a Creative Enterprise Knowledge in the Motivation toward required domain and action. fields: and knowing what Opportunity- is new. oriented Intellectual abilities to personality and recognize connections, openness to redefine problems, and change. envision and analyze Contextual possible practical ideas understanding that and solutions. supports creativity Inventive thinking about and mitigates the problem in novel risks. ways.
Networks Successful entrepreneurs are consummate networkers Essential because networks are links to Potential sources of capital Strategic alliance partners Service providers New employees Allow entrepreneurs to Share information and assessment of Markets and technology
Number of Owners Involved in Start-ups Five Four Single 2 3 Three 10 45 Two founders, rather than one, significantly increases 40 your odds of success: customer growth 3 times as Two fast and raise 30% more investments.
Why Join a New Venture? Autonomy and Growth Challenging and interesting work Participation in decision making Freedom to be creative opportunity to develop new skills Increasing responsibilities Recognition of contributions Career guidance and mentoring Rewards & Opportunities Opportunities for promotion and advancement Opportunities for personal growth Pay and bonuses tied to performance Continual professional training
The Value of The Appeal of Complementarity Similarity Similarity leads to liking Avoids Almost any kind of redundancy Provides a wider similarity will do— range of similarity with respect to information, skills, attitudes and values, aptitudes, and demographic factors, abilities interests, etc. The whole is Such effects are both greater than the strong and general sum of its parts Focus primarily on complementarity with Bring similarity into the picture with respect respect to knowledge, skills and experience to personal characteristics and motives
Founding Team Relationships Three factors are crucial in developing strong working relationships among the team: Clear initial assignment of roles Careful attention to perceived fairness Effective communication Role/Responsibility/Reward
Financial Resources
Four Financial Steps in Building a Successful Firm 1. 1. Fou oundin ing S g Stage The Entrepreneurial Team Begins with a Vision, Business Model and Strategy 2. 2. Seed S Stage Initial Financial Capital 3. Gr 3. Growth S Stage Growth Capital Required 4. 4. Harve vest st S Stage ge IPO or Acquisition Provides Return to Investors and Founders
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