Week 1: Entrepreneurship & Capitalism, Who is the Entrepreneur, 5 Stages of Business Growth, Wealth Creation, Entrepreneurial Personalities and Business Models
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54 Terms
What is the only way to create wealth?
Through Principal Ownership
What do we need for a capitalistic society to be successful?
A few principals, entrepreneur’s, principal investors, and/or owners of business assets
What are the benefits of being a Principal?
Complete control of your time
You must own assets
You are a “wealth creator”
Personal wealth creation
What are the costs of being a Principal?
Work 24/7
Need to be a good steward of the assets you own
Have higher responsibilities towards society than others
If you own assets, what have you learned to leverage?
Other people’s money and other people’s time
Who leverages other people’s money?
Entrepreneur’s
Who leverages other people’s time?
Investors
What do Principals’ take full accountability for?
Their actions
How do you define an Entrepreneur?
Take risks, solution-oriented, start/run businesses
What are the characteristics of an Entrepreneur?
Driven, optimistic, innovative, confident
Why do we need to study the Entrepreneurial Spirit?
Understand who they are/how they operate
What is the “Three Legged Stool”?
People, product, market
What is the most important thing to analyze in an early stage business?
People
What is the most important thing to analyze in a Fortune 500?
Market
What is Glamour of Entrepreneurship?
90% pain and heartache
10% magic
What are the Five Stages of Business Growth?
Formative
Development
Early
Growth
Maturity
What does the graph of the 5 Stages of Business Growth look like?
What is the Dimension in the Formative Stage?
Research and Development
What is the Profitability in the Formative Stage?
No Revenue and Large Losses
What is the Series or Round in the Formative Stage?
Pre-Seed and Seed Round
What is the Probable Valuation in the Formative Stage?
$500k to $5 million
What is the Dimension in the Development Stage?
Management Team Development
What is the Profitability in the Development Stage?
Revenue Begins and Losses Bottom
What is the Series/Round in the Development Stage?
Series A
What is the Probable Valuation in the Development Stage?
$10 mm - $25 mm
What is the Dimension in the Early Stage?
Market Penetration
What is the Profitability in the Early Stage?
Growing Revenue and Break-Even Profits
What is the Series/Round in the Early Stage?
Series B
What is the Probable Valuation in the Early Stage?
$25 mm - $100 mm
What is the Dimension in the Growth Stage?
Revenue Growth
What is the Profitability in the Growth Stage?
Exploding Revenue and Expanding Profits
What is the Series/Round in the Growth Stage?
Series C
What is the Probable Valuation in the Growth Stage?
$100 mm - $500 mm
What is the Dimension in the Maturity Stage?
Product Diversification
What is the Profitability in the Maturity Stage?
Predictable Profitability
What is the Series/Round in the Maturity Stage?
Large Private or Public
What is the Probable Valuation in the Maturity Stage?
$1B plus
What are the four types of businesses?
Dead Business
Marginal Firm/Lifetime Business (SLB)
Attractive Small Business (ASB)
High Potential Venture
What are the details of a Marginal Firm/Lifetime Business (SLB)?
Never makes a real profit, just enough for the owner
No room for the investor to invest capital
Worst to invest in
What are the details of an Attractive Small Business (ASB)?
Business grows in sales and produces profits/FCF
May take a while to achieve this, but you can value this FCF stream
IRR limited, but there’s value
What are the details of a High Potential Venture?
Take a while to achieve HIGH profit/sales, but it’s worth the wait
Think they can make 100%+ IRR on investment
In which stages are all the risk?
Formative, Development, Early
Does every business go through these 5 stages of business growth?
Yes
Can you calculate Enterprise Value when FCF are negative?
No
Why do businesses fail?
Competitors
Not scalable
Failure to reach intended market
Most popular: Run out of money
During which business stage does revenue take off?
Growth
What are the different Types of Entrepreneurs?
Small Business Manager (The Owner Operator)
Pure Entrepreneur (Visionary)
Professional Entrepreneur (The Builder)
Who do you want to run a marginal firm?
Small business manager
What kind of entrepreneur do you need in an ASB at an early stage?
Pure entrepreneur
What kind of entrepreneur is needed in all the kinds of businesses?
Professional Entrepreneur
When does the Professional Entrepreneur happen?
Later
What is the Entrepreneurial Plateau?
Run by the pure entrepreneur, and then the business outgrows the pure entrepreneur. You either fire them, or hire someone to supplement them
What are all the types of risks of an entrepreneurial career?
Career Risk
Financial Risk
Business Risk
Family Risk
Social Risk
Psychic Risk
Which risk is the hardest on the entrepreneur?
Psychic Risk (harder on themselves than anyone else)