ARBUS 200 - Notes

Fast Food Industry

• Cost Leadership (Entire Market + Cost)
  • Example: McDonald’s
  • Strategy: Operates on high efficiency and massive scale to keep prices low.
  • Why it fits: Offers a wide menu at low prices globally, benefiting from economies of scale and standardized operations.
• Differentiation (Entire Market + Differentiation)
  • Example: Chipotle
  • Strategy: Promotes high-quality ingredients, customizability, and ethical sourcing.
  • Why it fits: Distinguishes itself through a “Food with Integrity” mission, appealing to health-conscious and ethically minded customers.
• Cost Focus (Segment + Cost)
  • Example: Little Caesars
  • Strategy: Focuses on affordable pizza with “Hot-N-Ready” options for budget-conscious consumers.
  • Why it fits: Keeps operations simple to offer very low prices in the take-out pizza segment.
• Differentiation Focus (Segment + Differentiation)
  • Example: Sweetgreen
  • Strategy: Targets health-conscious urban professionals with organic, locally sourced salad bowls.
  • Why it fits: Offers a premium product in a niche health/organic fast casual segment, emphasizing sustainability and lifestyle branding.

Beauty Industries

• Cost Leadership (Entire Market + Cost)
  • Example: e.l.f. Cosmetics
  • Strategy: Offers trendy, high-quality makeup at very affordable prices.
  • Why it fits: Competes across the whole market by keeping prices low while still delivering value.
• Differentiation (Entire Market + Differentiation)
  • Example: Fenty Beauty by Rihanna
  • Strategy: Offers a wide shade range and promotes inclusivity as a core brand value.
  • Why it fits: Distinctive for diversity, celebrity branding, and high product quality that appeals globally.
• Cost Focus (Segment + Cost)
  • Example: The Ordinary (by DECIEM)
  • Strategy: Offers simple, science-backed skincare products at very low prices.
  • Why it fits: Targets skincare-conscious consumers who want results without the markup.
• Differentiation Focus (Segment + Differentiation)
  • Example: Glossier
  • Strategy: Direct-to-consumer brand with minimalist beauty products and a strong community-driven marketing strategy.
  • Why it fits: Targets a niche of young, socially connected consumers who value \"no-makeup\" makeup aesthetics.

Fashion Industry

• Cost Leadership: H&M
  • Offers fashionable clothing at affordable prices through large-scale production and efficient global sourcing.
  • Appeals to a broad audience looking for style and value.
• Differentiation: Zara
  • Known for fast fashion with a quick design-to-retail cycle.
  • Stands out by offering the latest trends quickly and affordably to a wide customer base.
• Cost Focus: Shein
  • Targets budget-conscious, trend-driven consumers—especially Gen Z—through ultra-low prices and online exclusivity.
  • Prioritizes volume and speed with rapid product drops.
• Differentiation Focus: Aritzia
  • Focuses on curated, premium fashion collections and personalized in-store and online experiences.
  • Appeals to a niche market of style-conscious, urban women willing to pay for quality and brand identity.

McDonald’s vs Burger King

• Brand Positioning and Market Presence
  • McDonald’s: Positions itself as a family-friendly, fast, consistent, and affordable option worldwide. It’s the largest fast food chain globally with a very strong brand recognition and presence in over 100 countries.
  • Burger King: Positions itself as a slightly more “edgy” and flame-grilled alternative to McDonald’s, focusing on flame-grilled taste and slightly bolder marketing. It has a large international presence but smaller than McDonald’s.
• Menu Offerings and Innovation
  • McDonald’s: Known for its iconic Big Mac, fries, and breakfast menus. McDonald’s continuously innovates with localized menu items, healthier options, and digital ordering technology (mobile app, kiosks).
  • Burger King: Known for the Whopper and flame-grilled burgers. Burger King tends to experiment with limited-time offers, plant-based options (like the Impossible Whopper), and bold marketing stunts to attract attention.
• Marketing and Advertising Strategy
  • McDonald’s: Focuses on broad appeal with family-centric advertising, global campaigns, and sponsorships (e.g., Olympics, FIFA). Their ads are often warm, familiar, and aimed at mass audiences.
  • Burger King: Uses more provocative and viral marketing strategies, including humorous and edgy social media campaigns that often take direct shots at competitors, especially McDonald’s.

Delta Air Lines vs American Airlines

• Market Position and Network
  • Delta Air Lines: Known for a strong domestic and international network with major hubs like Atlanta, Detroit, and Minneapolis. Delta emphasizes reliability and operational efficiency.
  • American Airlines: Has one of the largest global route networks with hubs in Dallas/Fort Worth, Charlotte, and Miami, focusing on breadth and connectivity. American often competes on having the most destinations.
• Customer Experience and Loyalty Programs
  • Delta: Offers the SkyMiles program, which is frequently praised for flexibility and ease of use. Delta also invests heavily in in-flight amenities, on-time performance, and customer service.
  • American: Runs the AAdvantage loyalty program, one of the largest in the world. American focuses on partnerships and a broad alliance network (Oneworld) to add value to frequent flyers.
• Financial Performance and Operational Efficiency
  • Delta: Often cited as one of the most profitable U.S. carriers, with a strong balance sheet and disciplined cost management. Delta invests in fuel-efficient fleets and has a reputation for operational discipline.
  • American: Has struggled more with profitability and cost control compared to Delta, though it has improved in recent years. American’s legacy costs and larger debt load sometimes put pressure on margins.

Apple vs Samsung

• Product Ecosystem and User Experience
  • Apple: Offers a tightly integrated ecosystem (iPhone, Mac, iPad, Apple Watch, AirPods) that emphasizes seamless user experience and ease of use. iOS is known for its smooth performance, security, and app quality.
  • Samsung: Runs on Android, which is more customizable and open. Samsung offers a wide range of devices across price points, from flagship Galaxy S/Note/Ultra models to budget phones. They also have their own ecosystem but it’s less tightly integrated than Apple’s.
• Innovation and Technology
  • Apple: Known for premium build quality, proprietary chips (like the M-series and A-series), and innovations like Face ID, high-quality cameras, and software optimization. Apple focuses on refining user experience rather than flooding the market with multiple models.
  • Samsung: Leads in hardware innovation — early adopter of foldable screens, high-refresh-rate displays, and advanced camera tech. Samsung pushes multiple product lines to cover all market segments and is very aggressive with new tech.
• Market Strategy and Pricing
  • Apple: Premium pricing strategy, focusing on the high-end market segment and brand loyalty. Apple rarely discounts its flagship devices, relying on its strong brand prestige.
  • Samsung: Offers a broader price range, targeting both premium and budget markets worldwide. Samsung frequently offers discounts, bundles, and financing options to attract diverse customers.

Netflix vs Disney+

• Content Library and Originals
  • Netflix: Massive and diverse library including a wide range of genres and original content across global markets. Known for investing heavily in original series, movies, and documentaries to attract and retain subscribers worldwide.
  • Disney+: Focuses on family-friendly content, leveraging iconic franchises like Marvel, Star Wars, Pixar, and Disney classics. Originals tend to build on existing popular universes, creating strong brand loyalty among families and fans.
• Pricing and Subscription Models
  • Netflix: Offers multiple tiers — basic, standard, and premium — varying by video quality and number of simultaneous streams. Pricing tends to be higher but includes no ads on most plans.
  • Disney+: Generally lower priced than Netflix, with some plans including ads at a reduced cost. Disney+ is often bundled with Hulu and ESPN+ for a broader entertainment package.
• Global Reach and Market Strategy
  • Netflix: Available in over 190 countries, aggressively localizing content with subtitles, dubbing, and region-specific originals. Targets a broad, international audience.
  • Disney+: Rapidly expanding but still fewer markets than Netflix. Disney+ leverages its well- known IPs to attract subscribers but faces challenges in non-Western markets where Disney’s brand may have less penetration.

Uber vs Lyft

• Market Coverage and Scale
  • Uber: Operates in over 70 countries and hundreds of cities worldwide, making it the largest ride- sharing platform globally with a massive user base.
  • Lyft: Primarily focused on the U.S. and Canada, with a smaller but significant market share, especially in North America.
• Service Offerings
  • Uber: Offers a wide range of services including UberX (basic rides), Uber Black (luxury), Uber Eats (food delivery), and even freight and autonomous vehicle projects. It’s more diversified.
  • Lyft: Focuses mainly on ride-sharing and recently food delivery, but with fewer service variants. Lyft markets itself as a more community-friendly and socially responsible brand.
• Pricing and Driver Relations
  • Uber: Uses dynamic pricing heavily, with surge pricing during high demand. Uber has faced criticism over driver pay and labor practices but has more resources to invest in driver incentives and tech.
  • Lyft: Also uses dynamic pricing but often seen as slightly more driver-friendly with better support and incentives. Lyft promotes a more personal, friendly driver-passenger experience.

Coca-Cola vs PepsiCo

• Product Portfolio and Diversification
  • Coca-Cola: Best known for its flagship Coca-Cola soda, but also owns a wide variety of beverages including Diet Coke, Sprite, Fanta, Minute Maid juices, and bottled water. Primarily focused on beverages.
  • PepsiCo: Competes in beverages but also has a huge snack food portfolio (Lay’s, Doritos, Quaker Oats). Their beverage brands include Pepsi, Mountain Dew, Gatorade, Tropicana, and Aquafina. More diversified across food and drink.
• Marketing and Brand Positioning
  • Coca-Cola: Emphasizes nostalgia, happiness, and universal appeal with iconic campaigns like “Share a Coke” and holiday ads featuring Santa Claus.
  • PepsiCo: Markets itself as youthful and edgy, often aligning with pop culture, music, and sports. Their ads tend to target younger audiences with celebrity endorsements.
• Global Reach and Market Share
  • Coca-Cola: Available in virtually every country, with dominant market shares in many regions worldwide. Stronger presence in developing markets.
  • PepsiCo: Also global but generally holds smaller market share compared to Coca-Cola in carbonated soft drinks, though often stronger in snack foods and sports drinks.

Amazon vs eBay

• Business Model
  • Amazon: Primarily a retailer selling products directly to customers, along with a massive marketplace for third-party sellers. Focuses on fast shipping, vast inventory, and customer convenience (Prime membership).
  • eBay: Operates mainly as an auction and peer-to-peer marketplace where individuals and businesses sell directly to buyers. More focused on used, rare, and collectible items.
• Customer Experience and Services
  • Amazon: Offers fast, reliable delivery with services like Amazon Prime, one-click purchasing, and extensive customer service. Heavy investment in logistics and technology.
  • eBay: More varied buying experience due to auction format, buyer-seller negotiations, and less control over shipping times. Focuses on community trust and seller ratings.
• Revenue Streams and Growth Strategy
  • Amazon: Diverse revenue from retail, third-party seller fees, AWS cloud services, subscription services, and advertising. Aggressive growth with investments in new sectors (grocery, streaming, devices).
  • eBay: Primarily earns through listing fees and commissions on sales. Growth strategies include expanding buyer protections and partnering with retailers but less diversified than Amazon.

Activity #2 - Empathy Map

• Says
  • “I’ve been eating out too much lately, which has been costing so much money too. If I just meal prepped for the week, I’d save time and actually stick to eating healthy.”
  • “Okay… I don’t want to spend money right now, but I need these containers. It’s not just a purchase, it's an investment in improving my health.”
  • “But also, if I buy these containers will I actually use them, or will they just sit in my cupboard untouched?”
• Thinks
  • “Where should I get them from? Amazon’s faster and cheaper than Walmart, and they’ll be here by tomorrow. Perfect timing with the new month starting.”
  • “I’ve really been trying to get my life together, and this feels like a step in the right direction. Please let these containers be good quality. I do not want to deal with returns.”
  • “This will help me stay consistent and organized instead of scrambling to figure out meals everyday.”
• Does
  • Starts to browse through amazon, comparing containers and reading reviews.
  • Once I find one that’s in my price range and looks solid, I hit “Buy Now”
  • Then I keep checking the tracking link to see when it will arrive.
• Feels
  • Motivated to build healthier habits and to stick with a routine.
  • Slightly guilty about spending money, but reassured it is for a good reason.
  • Excited for the delivery, small boost of joy and hope.

What is an Entrepreneur?

• An entrepreneur is someone who creates a new business, often with a focus on innovation and higher risk, while a business owner is someone who owns and operates a business, which can be either a new venture or an existing one.
• Entrepreneurs are often driven by a new idea or concept, whereas business owners may docs on managing day-to-day operations and growth within a more established structure.
• Examples of entrepreneurs
  • Jeff Bezos: Founder of Amazon, a massive e-commerce and cloud computing company.
  • Elon Musk: Founder of Tesla, SpaceX, and other innovative companies, known for his ambitious projects in transportation, space, and technology.
  • Bill Gates: Co-founder of Microsoft, a leading software company, and a major figure in the tech industry.
• Examples of Business owners
  • Restaurant owners
  • Clothing store owners
  • Landscaping company operators, and independent contractors

Entrepreneur vs Business owner

• Innovation and risk:
  • Entrepreneurs are often the originators of new ideas, products, or services, taking on the higher risk of starting a business from scratch.
• Future-Oriented
  • They are more focused on long-term goals and envisioning future growth, often exploring new markets and opportunities.
• May sell the business:
  • An entrepreneur’s goals may be to create a business, grow it to a certain point, and then potentially sell it to a new owner.
• Not always a business owner:
  • An entrepreneur could be a consultant, innovator, or even a salesperson who helps others start or grow their businesses, without necessarily owning a business themselves.

Business owner vs Entrepreneur

• Operation and Management:
  • Business owners are typically responsible for the daily operations, fanances, and workforce of their business.
• Can be an entrepreneur:
  • If a business owner starts their own business, they are also considered an entrepreneur.
• May focus on existing markets:
  • Business owners may focus on operating within established markets, often choosing to buy or inherit an existing business.
• Can be more conservative:
  • Business owners often prioritize stability and predictability in their operations, potentially being less focused on risk than entrepreneurs.

Characteristics of an Entrepreneur

• Motivation
• Passion
• Vision
• Confidence
• Decision-making
• Innovation
• Risk-taking
• Curiosity
• Persistence
• Leadership

A Brief History of Entrepreneurship theory

• Jean-Baptiste Say (1800)
  • Entrepreneurs must allocate resources to the most profitable opportunity.
• Joseph Schumpter (1942)
  • Entrepreneurship involves breaking through innovation.
• Peter Drucker (1985)
  • Successful entrepreneurs take advantage of change.
• Howard Stevenson (1985)
  • Entrepreneurs are action oriented and leverage limited resources
• Scott Shane (200).
  • Entrepreneurs discover, evaluate, and exploit opportunities

Definition of Creative destruction

• Is the idea that new and creative ideas sometimes involve the destruction of an existing business model.
• Creative Destruction?
  • In entrepreneurship, creative destruction refers to the process where new innovations and technological advancements lead to the obsolescence of existing industries, firms, and jobs, ultimately paving the way for new economic structures.
  • This “destruction” is not inherently negative; instead, it is viewed as a necessary and often beneficial step for long-term economic growth and progress.
• Key aspects of creative destruction:
  • Innovation and change
  • Obsolescence
  • Destruction of the Old
  • Creation of the New
  • Long Term Growth
• Joseph Schumpeter Once said “Situations emerge in the process of creative destruction in which many firms may have to perish that nevertheless would be able to live on vigorously and usefully if they could weather a particular storm.”
• Entrepreneurs are often seen as the driving force behind creative destruction, as they are the ones who innovate, introduce new ideas, and disrupt existing markets.
• Entrepreneurs are not just creating new businesses; they are also challenging the status quo and pushing for change.
• Creative destruction is essential for entrepreneurial success, as it allows entrepreneurs to identify opportunities in evolving markets and create new value.

Examples of Creative Destruction by product/service/industry transformations

• Digital Photography vs. Film Photography
• Streaming Services vs. Traditional Media
• Smartphones vs. Traditional Phones
• Mail vs. Email
• Newspaper vs. Digital Media
• Hotel vs. AirBnB
• Taxi vs. Uber
• Library vs. Kindle
• (1- Records 2-Vinyl 3- CDs 4- Streaming)

Examples - Part 1

• Digital Photography vs. Film Photography
  • The advent of digital photography disrupted the traditional film photography industry. As digital cameras with high quality cameras became widespread, film cameras and related products faced a decline. Companies that failed to adapt to the digital era faced obsolescence, while new opportunities emerged for digital imaging technologies and services.
• Streaming Services vs. Traditional Media
  • The rise of streaming services, such as Netflix, Amazon Prime Video, and Hulu, has disrupted traditional television and film distribution models. These platforms offer on-demand content, challenging the dominance of cable and satellite television. This shift has led to the decline of traditional cable subscriptions and forced traditional media to adapt to the new streaming paradigm.
• E-commerce vs. Brick-and-Mortar Retail
  • The growth of e-commerce giants like Amazon has transformed the retail landscape, challenging brick-and-mortar stores. Consumers increasingly prefer the convenience of online shopping, leading to the decline of traditional retailers that were slow to embrace digital platforms. This shift has also influenced supply chain and logistics industries.

Examples - Part 2

• Smartphones vs. Traditional Phones
  • The introduction and widespread adoption of smartphones have revolutionized the telecommunications industry. Traditional mobile phones were gradually replaced by smartphones that offer a wide range of features beyond basic calling and texting. This shift has not only affected the phone manufacturing industry but has also given rise to new markets for mobile apps and services.
• Electric Vehicles vs. Internal Combustion Engine Vehicles
  • The automotive industry is experiencing creative destruction with the rise of electric vehicles (EVs). As concerns about climate change environmental sustainability grow, EVs are disrupting the traditional internal combustion engine vehicle market. Companies investing in electric vehicle technology are gaining prominence, while traditional automakers are adapting to the changing landscape.
• Print Media vs. Digital Media
  • The shift from print to digital media has transformed the journalism and publishing industries. Online news platforms, blogs, and social media have disrupted traditional print newspapers and magazines. Advertisers increasingly allocate resources to digital channels, impacting the revenue models of traditional print media.
• Online Travel Agencies vs. Internal Combustion Engine Vehicles
  • The travel industry has witnessed creative destruction with the rise of online travel agencies (OTAs) like Expedia, Booking.com, and AirBnB. These platforms have changed the way people book flights, accommodations, and experiences, leading to a decline in traditional travel agencies and altering the dynamics of the hospitality and travel sectors.
• Print Media vs. Digital Media
  • The shift from print to digital media has transformed the journalism and publishing industries. Online news platforms, logs, and social media have disrupted traditional print newspapers and magazines. Advertisers increasingly allocate resources to digital channels, impacting the revenue models of traditional print media.

Examples - Part 3

• Led Lights:
  • The transition from traditional incandescent and fluorescent light bulbs to LED light bulbs represents a classic case of creative destruction. LED technology offers energy efficiency, longer lifespan, and environmental benefits, leading to the decline of older, less efficient lighting technologies.
• Digital Camera:
  • The advent of digital cameras disrupted the film camera industry. Digital cameras provided instant feedback, eliminated the need for film development, and enabled easy sharing of photos online. This shift rendered traditional film-based cameras and the associated film development processes less relevant.
• Email:
  • The advent of email revolutionized communication, challenging traditional postal services. Email provides instant communication, eliminates the need for physical mail, and significantly accelerates the exchange of information. While traditional mail services still exist, they have been profoundly affected by the rise of electronic communication.
• LCD Television
  • The transition from cathode-ray tube (CRT) televisions to LCD televisions exemplifies creative destruction in the electronics industry. LCD technology provides improved image quality, thinner form factors, and energy efficiency, leading to the obsolescence of older CRT television technology.
• Word Processing Software
  • The advent of word processing software revolutionized document creation and editing. Traditional typewriters were gradually replaced by software like Microsoft Word, which offered advanced formatting, editing, and collaborative features. This shift transformed office workflows and communication.
• The Demise of Blockbuster

Waves of Innovation

• Coined by economist Joseph Schumpeter in 1942, the theory of “creative destruction” suggests that business cycles operate under long waves of innovation. Specifically, as markets are disrupted, key clusters of industries have outsized effects on the economy.
• First Wave
  • During the first wave of the Industrial Revolution, water power was instrumental in manufacturing paper, textiles, and iron goods.
• Second Wave
  • With the second wave, between about 1845 and 1900, came significant rail, steam, and steel advancements. The rail industry alone affected countless industries, from iron and oil to steel and copper. In turn, great railway monopolies were formed.
• Third Wave
  • The emergence of electricity powering light and telephone communication through the third wave dominated the first half of the 1900s. Henry Ford introduced the Model T, and the assembly line transformed the auto industry.
• Fourth Wave
  • Later, in the fourth wave, aviation revolutionized travel..
• Fifth Wave
  • After the internet emerged by the early 1990s, barriers to information were upended. New media changed political discourse, news cycles, and communication in the fifth wave. The internet ushered in a new frontier of globalization, a borderless landscape of digital information flows.
• Sixth Wave
  • The sixth wave, marked by artificial intelligence and digitization across information of things (IoT), robotics, and drones, will likely paint an entirely new picture. Namely, the automation of systems, predictive analytics, and data processing could make an impact. In turn, physical goods and services will likely be digitized. The time to complete tasks could shift from hours to even seconds.

The Entrepreneurial Mindset

• Successful entrepreneurs have many different backgrounds, personalities, experiences, and approaches, but they share a common “mindset.”
• The entrepreneur’s mindset is one that is innovative and seeks to solve problems. It acts to exploit opportunities and strives to create value with limited resources.
• Most start-ups have founding teams with diverse roles. Entrepreneurship can be learned through key concepts, frameworks, and continuous learning.
• Developing an entrepreneurial mindset is valuable for various career paths.
• Founding teams can encompass more entrepreneurial traits, a broader range of skills, and provide mutual support through the start-up journey.
• An Entrepreneurial Mindset is Key to any Career
  • An entrepreneurial mindset is critical to any business career, not only to those interested in becoming start-up founders. The mindset is needed to adapt to change and exploit opportunities
  • Many large companies are establishing innovation labs in various centers around the world:
    To foster innovation in the start-up community
    To find promising start-up to partner with or acquire
    To create a more innovative culture within their own large organization

Are Entrepreneurs Risk Takers?

• Entrepreneurs are more tolerant and comfortable with risk and uncertainty then the average person, but they don’t take risks unnecessarily.
• Successful entrepreneurs are good at mitigating risk by moving rapidly, testing ideas in the market, and adapting quickly to customer feedback or moving in a different direction if the idea is not well received.
• Do Entrepreneurs Need to be Extroverted?
  • Some of the most recognizable entrepreneurs are introverts
  • Introverts are great thinkers who think internally, rather than out loud
  • Both introverts and extrovests can be innovative and great leaders they just do so in different ways
  • Example: Bill gates
• Combined Traits: The Entrepreneurial Team
  • Most start-ups are founded by a team; although there are a few successful solo founders.
  • The advantage of a founding team is that:
    • A team can encompass more of the leading entrepreneurial traits that just one founder can.
    • A team can encompass a broader range of skills and roles.
    • A team allows opportunities to bounce ideas off of and to help each other through the demanding start-up journey.

A Hacker, a Hustler, and a Hipster

• A strong founding team often has three types of members:
  • The “Hacker” is the chief technical officer (CTO), the technical genius who harnesses technology in a unique way to develop a solution.
  • The “Hustler” is the CEO and the lead salesperson. The hustler constantly sells the company, the vision, and the passion for the solution to potential customrs, investors, and partners.
  • The “Hipster” is the one who understands the customer. They help shape the customer interface to make it more compelling and drive the right messaging and connections to attract new customers to the platform.

Can Entrepreneurship Be Learned?

• While there will be some people more comfortable with an entrepreneurial career path and others with a more traditional career path, entrepreneurship can be learned.
• There are key underlying concepts and frameworks that can increase the odds of success.
• It is important to learn from others and always seek opportunities to learn.
• It is important to curate one’s own learning experiences by enhancing current learning foundations with external sources
• Notes Red Ocean
  • Existing industries/markets where competition is intense.
  • So many people in the business ocean
  • Blood in the water
• Blue Ocean
  • Uncontested market space with little or no competition.
  • Not many people in the business ocean
  • No blood in the water

Entrepreneurial Myths and Real Start-Up Processes

• The mythical start-up process includes popular misconceptions about the start-up journey like where ideas come from, the role of a business plan, and the process for raising financing.
• Mythical Step 1: Come up with a Great Idea
  • Turning ideas into successful businesses is more difficult than coming up with an idea.
  • Successful start-ups are about taking a great idea, building a team around it, and then executing it.
  • Venture capitalists are more likely to invest in start-ups with an A+ team and a B+ idea rather than the other way.
  • Example: Webvan was grocery delivery company, predating Instacart by more then 15 years, but failed in executing.
• The Truth about Great Ideas
  • Ideas don’t have to be new inventions
  • Ideas don’t have to be unique
  • Ideas aren’t always the first to market
  • Ideas evolve over time
• Mythical Step 2: Write a detailed Business Plan
  • <25% of successful start-ups write a formal business plan ○ A business plan is a detailed document that outlines the start-up’s idea, the approach to building the business, and its financing requirements.
  • Problems with a detailed business plan includes:
    They take a lot f time and effort to create
    They are usually outdated by the time they are completed
    They can cause start-ups to miss an important pivot
    Example: Lavalife pivoted to be a hotline to connect people rather than provide information for local media outlets
• Focused and Iterative Execution
  Successful start-ups require focused and iterative execution rather than detailed business plans.
  Start-ups move quickly to market with their vision and idea.
  Start-ups find a first customer to test and evolve their offering
  Start-ups adapt and pivot based on market feedback ○ A pivot is when a start-up takes an entirely new direction for its product or service offering based on early customer feedback
  Start-ups iteratively refine and build out their business model
• Mythical Step 3: Go out and Get Financing
  • Financing only comes to start-ups when they have traction
    Start-ups need to focus on engaging with potential customers and establishing real traction to validate and evolve their concept
    Banks are also not a viable source of early-stage financing, as they only provide funds if ther are assets that can be pledge as collateral. Start-ups are usually short on assets.
    Venture capitalists only provide funding if start-ups can demonstrate momentum in their chosen market.

The Realities of Early Stage Financing

• Early-stage financing can be broken into roughly two stages:
  • The Pre-seed staege
  • The Seed stage
• The Pre-seed Stage
  • The pre-seed stage is the first stage of financing. The start-up is just forming and has an idea and vision. It just started building its minimum viable product and is beginning to identify potential early customers.
  • First-time founders face a “chicken and egg” dilemma of needing to show early traction to get significant financing but needing a minimum level of financing to help them build that traction.
    • Bootstrapping helps to leverage founder sweat equity
    • Incubators, pitch competitions, and government programs are common sources of financing at this stage.
• Key Players in Pre-seed Funding
  • Founders
    • The visionary individuals who conceptualize the startup, create a business plan, and seek funding to turn their vision into reality.
  • Angel Investors
    • High-net-worth individuals who invest their personal funds in promising startups in exchange for equity. Angel investors often provide not only financial support but also mentorship and valuable industry connections
  • Friends and Family
    • Close friends and family members who believe in the founder’s vision and contribute capital to help kickstart the business
  • Incubators and Accelerators
    • Programs that provide mentorship, resources, and funding to early-stage startups in exchange for equity. These organizations often offer a structured curriculum to help startups refine their ideas and build a solid foundation

The Seed Stage

• The seed stage is the second stage of financing. The start-up has a more refined offering and has engaged with early customers. The start-up still needs to narrow down its target market, but the start-up likely has some initial revenue and direction


• The goal of this stage is to refine its value proposition and build a predictable and sustainable business model


• After the seed stage, a company would be ready for its first round of growth capital, so that it can focus on scaling the business.


• Pre-seed vs. Seed Funding
  

• The real start-up process still starts with a great idea, but it moves through with customer engagement and market validation instead of detailed business planning to get to fundraising.
• According to the latest data, up to 90% of startups fail. Across almost all industries, the average failure rate for years one is 10%. However, in years two through five, a staggering 70% of new businesses will fail
• Ideas are just the starting point for a start-up
  • The start-up journey focuses on building a business around a great idea
  • Building a great business requires engaging with early customers, listening to feedback, and adapting and pivoting the business model
  • Detailed business planning is less valuable than focusing on market traction in today’s fast- paced start-up world.
  • Start-ups need market traction to secure early-stage financing

Elevator Pitch

• Most start-ups focus on staying agile and developing a pitch
  • A pitch is a brief presentation that “pitches” investors on a start-up
  • The First “Elevator Pitch”
    • In 1853, an American named Elisha Otis discovered a solution to a critical problem: how to make lifts safe. At that time, taking an ‘elevator’ was risky business. They were prone to malfunction, which was not much fun if you had climbed a dozen stories and then the central cable suddenly snapped.
    • Otis had found a way to overcome this. He attached a large spring to the lift cage and added a series of ratchet bars within the shaft so that if the cable did break the spring-activated braking system would bring the lift and it precious cargo to a safe stop.
    • It was a brilliant idea with the potential to save a lot of money and many lives. The only problem was it was difficult to persuade the public that it actually worked.

The First Elevator Pitch cont'd

• Undeterred, in a large exhibit hall, he constructed an open lift shaft and platform for all