lecture 1: choosing entrepreneurship

A set of flashcards covering key concepts from the course BMGT 30340: New Venture Creation and Development.

european commission entrecomp (mindset & competences)

develop capabilities/mindsets that contribute to economic & social growth; financial, cultural, social value for others

1) ideas and opportunities
spotting opp., creativity, vision, valuing ideas, ethical & sustainable thinking
2) resources
self-awareness & self-efficacy, motivation & perserverence, mobilising resources, mobilising others, financial & economic literacy
3) action
taking initiative, planning & mgmt, coping w uncertainty/ambiguity/risk, working w others, learning through experience

types of investors (motive)

• Necessity-based: pushed into entrepreneurship due to circumstances (driver = need / constraint, higher exposure to risk as dont have time or resources to plan in advance)

e.g. substinence, self-smployemnt

• opportunity-based: are 'pulled' by the desire to exploit opportunities - own free will (driver = independence / financial returns, perceived potential & choice)

e.g. SMEs, innovation-driven enterprises IDE
smes = well-defined problem, local market, less uncertainity, gov provides incentives/loans
ides = specific innovation (tech/business), global market, more uncertainity, more motivation, more resources req, path to commercial viability longer

What are the definitions of 'value creation' and 'value capture' in entrepreneurship?

Value creation is how an entrepreneur creates value for an end customer (problem it solves, why customers care) , and value capture is how the start-up obtains personal and/or financial value (business model - subscription, fees, grants)

What traits are commonly demonstrated by entrepreneurs?

Openness to new experiences
tendence to invest in developing/acquiring many skills
conscientiousness - hard work & discpline = achivement (effort = outcome)
firm belief in ability to control own fate (believe in themselves)

overconfidence in own abilities
natural optimism & confidence about opp.
higher tolerance for risk

ethics

Virtue ethics encourages leaders to form ethical judgments and promotes consistent moral behavior in entrepreneurship.

Entrepreneurship: choice based perspective

• choice is important because it allows founders to transform ideas into realities

• founders have a wide range of options, but due to limited resources, they must choose where to focus their time and efforts in order to maximize impact and navigate uncertainties

entrepreneurship: process perspective

how, by who, and with what effects opportunities to create future goods/services are discovered, evaluated, and exploited

• sequential order on how to get to the next stage of the process (discovery of opp., evaluation of if worth pursuing, exploitation to build something from it)

• intersection between valuable opportunities and enterprising individuals (Shane 2000/2003) - person capable & willing to act and and opp. worth pursuing

definitions of the entrepreneur

agents of risk (uncertainities in initiatives), agents of change (creative destruction - identifying new combinations (new good, new method of production, opening a new market, new source of uspply, new organisations)

why become an entrepreneur

• desire to be their own boss

• desire to pursue their own ideas

• financial reward

• social impact

types of startups

necessity venture
- aim: develop & manage a venture to make enough income to survive
- motivation: economic survival
- investment: very low
- risk: limited
- timeframe: very short term (day / week)
- success: cash for survival

e.g. conbud - got out of prison, no one giving him job bc of record, starting exercising like he did in the prison cell, attracted people, set up low maintenance gym (small space, no equipment)

lifestyle venture
- aim: develop & manage a venture that allows one to lead a desired lifestyle (location, autonomy, income level)
- motivation: autonomy and lifestyle choice
- investment: low
- risk: limited
- timeframe: short term (month / year)
- success: replacement of typical salary w entrepreneurial income

growth venture
- aim: develop & manage a venture that continues to grow and scale
- motivation: growth and competitiveness
- investment: moderate
- risk: moderate
- timeframe: medium (3-5 yrs)
- success: large competitive business and continued growth

revolutionary venture
- aim: develop a venture that disrupts and revolutionises an industry/market
- motivation: radical disruption and change
- investment: high
- risk: high
- timeframe: long term (5-10 yrs)
- success: industry/ market disruption and changing the face of an indsutry/market

innovation-based startups matrix

market-based vs tech-based innovation (incremental vs radical)

a) BL: applicator innovators: incremental & incremental - existing tech, existing market (e.g. luxgen motors, netflix)
b) BR: market-based innovators: radical& incremental - existing tech, new market (e.g. zipcar, airbnb)
c) TL: tech-based innovators: incremental & radical - new tech, existing market (e.g. tesla, dyson)
d) TR: paradigm innovators: radical & radical - new tech, new market (e.g. spaceX

social entrepreneurship

business that combine sustainable business model w creation of broader social value
social mission > wealth
not for profit & for profit (sell one, give one away - e.g. zambrero)

customers, employees, investors like being associated w organisations that create social value

e.g. sanergy - kenya sanitation facility, turning waste into renewable fertiliser and biomass energy
e.g. patagonia - prioritises env, uses tech & supply chain that have high overall quality & env sustainable production

dark side of entrepreneurship (risks)

financial, career, family & social, psychic

self-destructive traits

overbearing need for control/power
sense of distrust
overriding desire for success
unrealistic external optimism

dark triad - narcissism, machiavellianism, psychopathy

limitations entrecomp

relies on self reported data (subjective bias potential), lacks granular sector-specific info, easier to define than measure/teach, biased towards european concept of entrepreneurship

paradox of entrepreneurship

entrepreneurs must make decisions under uncertainty where knowledge can only be gained through action - this usually requires commimtnet.

trade off between learning & commitment
e.g. disney - partnered w distribution to scale quickly following success of oswald, left behind certain rights, gave up key control. distributor retained copywright ownership and poached team.
after this, rebuilt his team to pursue another route (mickey mouse, sound animation) - learned from mistake and got copyright control

google example

founders had to establish page rank was a good idea by identifying potential ways to translate idea into reality
created value: search engine based on page ranking
captured value: advertising-based model (had mulitple diff options)

choice-based approach - experimentation

learn about idea first using experiments & research - should yield multiple paths to pursue - choosing among these presents paradox of entrepreneurship. goal is not to figure out precise details, but better understand broad choices and opp.

e.g. RTR
- received positive & negative feedback from classmates
- sought feedback from influential designers for insights into designer market
- set up pop up store at uni to see demand
helped them determine their specific strategy

choosing entrepreneurship strategically

choose path that best realises preferred combination of:
- economic choice: pursue opp. where there is atleast some potential for value creation
- non-economic goal: ultimate objective should go beyond maximising profit to realising their own personal value objectives

e.g. oprah winfrey - motivation: helping inspring others (women middle age or older) - built her own company, radio, cable television, magazine

entrepreneurship req

value creation & value capture, opportunity identification & building capabilities/attracting resources