Week 2 - Entrepreneurship and start-ups
Week 2: Entrepreneurship and Start-ups Study Guide (Sept 2024)
Lecture Overview
Characterization of an Entrepreneur:
Ambitious
Reflective
Risk Taker
Session Details:
Replace Monday Afternoon Session: Entrepreneurial Inspirations co-hosted by Blue Factory, ESCP Incubator, and Professor.
Benefits:
Inspiration for ideas
Live examples of idea-market testing
Testimonials of entrepreneurs
Objectives
Discuss entrepreneurship and underlying concepts.
Explain effectuation and entrepreneurial mindset.
Identify common traits of successful entrepreneurs.
Highlight contributions of small businesses to the economy.
Identify causes of business failure and sources for advice.
Discuss sources of small-business financing.
Explain franchising advantages and disadvantages.
Key Names in Start-ups
Notable Entrepreneurs:
Coco Chanel
James Dyson
Elon Musk
Common Traits:
Visionary
Risk Taker
Creative
Break-through ideas
Statistics
Failures and Success Rates
2 out of 10 new businesses fail in the first year.
7.5 out of 10 venture-backed startups fail.
9 out of 10 startups fail.
Opportunities in Problems
Mindset: Interaction with the environment can turn ideas into opportunities.
Understanding Entrepreneurship
Definition
Entrepreneurship: Solving user problems/unmet needs using opportunities.
An opportunity arises as a favorable set of circumstances creating a need.
Theoretical Foundations
Shane & Venkataraman (2000): Entrepreneurial opportunities exist and some entrepreneurs exploit them.
Sarasvathy (2001): Entrepreneurs create opportunities.
Effectuation
Principles of Effectuation
Effectual Cycle:
You + Catalyst = Idea
Idea + Action = Opportunity
Opportunity + Engagements = Viable Project
Mindset in Entrepreneurship
Entrepreneurs focus on existing means and their possible effects rather than fixed goals.
Five Principles:
Bird in Hand: Start with available resources.
Affordable Loss: Limit risks to manageable levels.
Co-Creation Partnerships: Build networks for shared success.
Leverage Contingencies: Embrace surprises as opportunities.
Worldview: Control outcomes through actions rather than predictions.
Common Traits of Entrepreneurs
Attributes:
Bias to action
Welcoming change
Optimistic
Resourceful
Risk management skills
Strong curiosity
Experimentation readiness
Resilience in the face of failure
Customer focus
Permission-seeking behavior
Characteristics of Small Businesses
Overview
Limited resources and narrow focus.
Higher freedom for innovation and quick decision-making.
Economic Contributions
Job creation
Introduction of new products
Fulfillment of larger businesses' needs
Injection of capital into the economy
Risk-taking elements absent in larger firms.
Entrepreneurial Firm Types
Categories
Salary Substitute Firms: Provide income similar to conventional jobs.
Lifestyle Firms: Enable ownership and a preferred lifestyle.
Entrepreneurial Firms: Introduce innovative products/services through opportunity creation.
Business Start-up Options
Options Overview
Create a New Business
Requires significant effort and resources.
Buy an Existing Business
Easier but often at a high price.
Buy into a Franchise
Established systems but comes with strict guidelines.
Franchise Considerations
Questions Before Agreement:
Total start-up costs? Initial franchise fee coverage?
Employee training costs?
Royalty calculations?
Advertising responsibilities?
Reasons for Business Failure
Common Issues
Market fit problems
Leadership and managerial incompetence
Ineffective marketing strategies
Financial mismanagement
Poor cash management, location, and inventory control.
Support Resources
Business Incubators
Facilities providing support to start-ups.
ESCP’s Blue Factory offers resources and assistance.
Financing Options
Seed money, micro-lenders, venture capitalists, angel investors, crowdfunding opportunities, and IPOs.