Entrepreneurship and Business Models

Social Networks and Social Capital

• Definition of Social Capital: Personal social networks made up of people who cooperate, exchange information, and build trusting relationships.

• Three Dimensions of Social Capital:

  • Relational: Represents the quality of connections like trusting relationships.
  • Cognitive: Includes shared norms, values, interpretations, and beliefs.
  • Structural: The arrangement and components of one's network.

Varieties of Social Capital

• Bonds: Connections with people who are similar to us (e.g., close friends, family).
• Bridges: Links that extend beyond shared identities (e.g., acquaintances from diverse backgrounds).
• Linkages: Connections regardless of their organizational position (e.g., mentors, industry experts).

Advantages of Networks

• Private Information: Exclusive insights not available to the public, enhancing decision-making.
• Access to Diverse Skill Sets: A varied network broadens perspectives, allowing knowledge and skill exchange.
• Power: Connections to influential individuals can foster expert advice and opportunities.

Impression Management

• Impression Management: Actively influencing how others perceive you through thoughtful behavior and communication.
• Implicit Bias: Unconscious attitudes affecting perceptions and actions.

Self Selected Stakeholders

• Definition: Individuals who voluntarily join a venture to provide resources and guidance.
• Key Principles (Peter Senge):
  1. Be enrolled in yourself.
  2. Be truthful.
  3. Allow others to make choices.

Startup Incubators vs Accelerators

Startup Incubator

• Purpose: Transitions ideas to viable business models.
• Stage: Early-stage startups in validation phase.
• Length: Open-ended (up to 5 years).
• Fee: Sometimes applicable, typically low if it's a nonprofit.
• Selection: Generally non-competitive, more selective lately.

Startup Accelerator

• Purpose: Accelerates growth for established startups.
• Stage: Startups with a minimum viable product (MVP).
• Length: Cohort-based for a fixed term (e.g., 6 months).
• Fee: No fee, often provides funding for equity.
• Selection: Highly competitive with rigorous application processes.

Networking Tips

• Help Others: Focus on what you can contribute to others.
• Ask Questions: Engage prospects with insightful inquiries.
• Share Passions: Be authentic and open about interests.
• Read Regularly: Stay informed and knowledgeable.
• Follow Up: Send personalized notes post-meetings quickly.
• Prepare Introduction: Have a concise self-description ready.

Building a Founding Team

• Definition: A group with complementary skills and shared commitment to grow a startup.
• Cognitive Comprehensiveness: Teams should analyze issues from various perspectives to form robust strategies.

Revenue Models

Definition and Components

• Revenue: Income generated from sales of goods/services.
• Revenue Model: Identifies methods for earning revenue, crucial to business models.

Common Revenue Models

• Unit Sales Revenue Model: Revenue from the sale of products directly to consumers. Example: Retail sales.
• Razor and Blade Model: Selling a primary product at low cost while charging higher prices for consumables (e.g., printers and ink).
• Advertising Revenue Model: Revenue from ad sales, includes models like cost per click (CPC) and cost per action (CPA).
• Data Revenue Model: Earning through selling data assets.
• Intermediation Revenue Model: Third-party brokers generating revenue from transactions.
• Licensing Revenue Model: Earnings from granting permission to use IP in return for royalties.
• Subscription Revenue Model: Charging for continuous access to goods/services.
• Utility and Usage Models: Charging based on frequency of use of products/services.

Revenue Drivers

• Customers: Number of customers and their payment capacity.
• Frequency of Purchase: How often customers come back.
• Selling Process: Operations hours and upselling opportunities.
• Price Strategy: Setting prices higher or lower than competitors, based on value perception.

Cost Drivers

• COGS: Cost of goods sold when sales occur.
• Operating Expenses: Ongoing costs required for business operation (e.g., rent, utilities).

Pricing Strategies

• Positioning and Understanding Brand: Recognizing the market position of products.
• Competition-led Pricing: Aligning prices to those set by competitors.
• Customer-led Pricing: Setting prices based on consumer willingness to pay.
• Psychological Pricing: Pricing products to appear cheaper.
• Loss Leader: Selling at a loss to attract customers.
• Introductory Offers: Free trials to entice customers initially.
• Bundled Pricing: Offering discounts when purchasing multiple items together.

Startup Challenges and Failures

Common Reasons for Startup Failure

• Lack of a Solid Business Model: Not having a clear strategy.
• Poor Timing: Launching at the wrong moment.
• Inattention: Losing focus on core business activities.
• Process Inadequacy: Ineffective operational processes hinder success.
• Uncertainty: Making irrational decisions based on unclear future prospects.

Learning from Failure

• Reframe Goals: Analyze failures for opportunities to learn.
• Seek Support: Help from mentors and peers.
• Intelligent Failures: Optimizing lessons learned from setbacks.

Bootstrapping

Definition

• Bootstrapping: Building a business with minimal external investment.

Pros and Cons

• Pros:
  • Full ownership without investor pressure.
  • Greater flexibility in decision-making.
  • Enhanced creativity.
• Cons:
  • Higher financial risk.
  • Slower growth potential.

Bootstrapping Strategies

• Utilize personal savings or credit.
• Generate funds from existing job salaries.
• Engage in crowdfunding for capital.

Crowdfunding Overview

• Types: Patronage, Lending, Reward-based, and Investor models.
• Advantages: Feedback gathering, low-risk capital raising, publicity, and customer relationship building.

Successful Crowdfunding Strategies

• Address real problems with your product.
• Test and refine the product concept.
• Prepare thoroughly to attract backers.
• Build anticipation and engage potential supporters early in the campaign.