Untitled Flashcards Set

Entrepreneurial Ecosystem

• What is it? 

  • System of orgs, institutions, processes that work together to affect entrepreneurial activity 

  • Policy, Finance, Culture, Supports, Human Capital, Markets

• Understand how it develops

  • Short period? Does it take a long time?

    • Generally takes a long time to develop 

• Be able to apply the framework to regions 

  • Silicon Valley 

    • Human capital: proximity to universities, talent pool

    • Finance: venture capitals everywhere

    • Culture: risk taking DNA

    • Markets: multiple to sell to, multicultural

    • Policy: business friendly 

    • Supports: incubators

    • Weakness

      • High cost of living and competition 

      • High risk of failure 

      • No work life balance 

  • Austin

    • Human capital: skilled workforce, universities 

    • Finance: less traditional VC’s but a lot of early stage angel groups/incubators

    • Culture: outside the box, hippies, entrepreneurial DNA

    • Markets: diverse/multicultural people, early adopters

    • Policy: business friendly 

    • Supports: incubators

• What did we learn about syracuse’s ecosystem

  • Human capital: universities, most leave after graduation

  • Finance: limited

  • Supports: some accelerators

  • Local investments going on: micron computer chip production should give about 50k jobs 

  • Pros: strong universities with human capital, lot of early stage supports, some areas of promise 

  • Cons: difficulty retaining young talent, other domains still require work to develop a thriving ecosystem

Effectual/Causal Thinking and Personalities 

• Personality

  • Common traits 

    • Conscientious, open to experience, low neuroticism, extravert, risk seeking

  • Roles

    • Only explains a small effect of variance in the success of new ventures

    • Founding team dynamics, business model, and industry connections explain it more

5 characteristics of a strong opportunity 

• Durable 

  • Opportunity is located in a market, industry, or trend that will continue to grow over a long period of time

• Profit potential

• Creates value for customers

  • They’re willing to pay a premium 

• Financing is available 

  • Investors should find it attractive 

• Fit between founders background/skills 

Customer discover and research 

• Why is it important 

  • Understand your customers, their problems 

  • Form assumptions you can better test 

  • Improve chances of product market fit 

• Type of data avail 

  • Market size 

• TAM, SAM, SOM 

  • Total Addressable Market (TAM): total size of the market for a product if 100% market share achieved 

    • $376B in total EV sales worldwide in 2023

  • Serviceable Available Market (SAM): portion of TAM that is served by your companies product

    • $88-221B in potential Tesla EV sales in 2023

  • Service Obtainable Market (SOM): portion of SAM that your company can realistically acquire 

    • $82B in Tesla EV sales in 2023

• Segmentation 

  • Innovators 

    • Tech enthusiasts 

  • Early Adopters

    • Visionaries 

  • Early majority 

    • Pragmatists 

  • Late majority 

    • Conservatives

  • Laggards

    • Skeptics 

Lean Startup

• What is it? 

  • Hypothesis driven approach to develop and validate a business model

  • Steps:

    • Establish a vision 

    • Develop and test hypotheses 

    • Learn from those tests, incorporate feedback into updating the business model 

• How is it different from previous approaches?

  • Experimentation vs elaborate planning 

    • Decompose business model into smaller elements that can be tested

  • Customer learning vs intuition

    • Obtain customer feedback to guide business model 

  • Iterative process vs upfront investment 

    • Avoid large resource commitments by developing products incrementally

• What are some benefits 

  • Changing your product in small increments 

  • Engaging w customers

• How can you apply it 

  • Set vision 

  • Develop hypothesis 

  • Specify mvp tests 

  • Run tests 

  • Hypothesis validated or rejected 

  • Persevere, pivot, or perish 

Testing 

• MVP

  • Minimum viable product 

  • Product with just enough features to get feedback from customers

  • I.e. simple webpage, explainer video 

  • Can support or reject assumptions of an early business model

• A and B 

  • Divide customers into two similar groups

  • One group (control) receives current product features 

  • Second group (treatment) receives the new product feature

• How to test 

  • Test with a small group of customers first 

  • Use a series of MVP tests

Business model canvas

• What is a business model 

  • Description of how a firm creates, delivers, and captures value

• Understand each block and what they mean, examples of each 

  • Customer Segments

    • Who are your customers

    • What do they do 

    • What obstacles do they experience

  • Customer Relationship

    • How do you acquire, keep, and grow customers

  • Channels

    • How do you reach your customers 

  • Revenue Streams 

    • How do you make money 

  • Value Proposition 

    • What is your product 

    • How does it address customers problems 

    • How is it unique

  • Key Activities 

    • What actions/processes does the value proposition require

  • Key Resources 

    • What assets does the value proposition acquire 

      • Human capital, tech, customer data, infrastructure

  • Cost Structure 

    • What are the most important costs to our business model 

  • Key Partners 

    • Who are the external partners what make our business model work 

• How can you understand business models using the canvas 

  • Allows you to list assumptions important to your business which you can then test

  • Describes how a firm creates, captures, and delivers value 

Founding Teams 

• Characteristics 

  • Diverse industry experience

  • Diverse prior company affiliations 

  • Broad functional experience 

  • Prior management experience

• How are they formed 

  • Sole founder initiated the idea, then searches for co-founders 

    • Idea usually comes first 

  • Group decides to start a business, then develop an idea 

    • Group first, then idea 

  • Interpersonal attraction, resource seeking, hybrid approach 

• What types of teams are generally more successful than other teams

  • Diverse teams with multiple skill sets 

• Common challenges 

  • Changing roles, generalists vs specialist 

  • Splitting equity 

    • Who brings the idea 

    • Who brings the capital 

    • Opportunity cost 

    • Future commitment 

Funding 

• Sources, preferences, motivations, when they are appropriate 

• Can you explain the logic of why a particular investor is appropriate for a company at a certain stage 

• Know the terms 

  • Dilution 

    • Ownership decreases with each funding round 

  • Preferred vs common stock

    • Preferred: given to investors

      • Provides them with certain privileges 

    • Common: given to founders and employees

  • Debt vs equity funding 

    • Debt: loan decisions based on historical cash flows 

      • Returns are bounded for investor

    • Equity: investors provide capital in exchange for ownership 

      • Greater upside for investors

      • Causes dilution 

  • Funding rounds

    • Seed round, series A round, B round, etc 

• seed/early stage 

  • FFF, bootstrapping 

    • Pros

      • Easy to access and convince 

      • Less tough negotiations 

    • Cons 

      • Have less to invest

      • You may end up with many small investors

  • Crowdfunding 

    • Raise money online 

    • Easy to make 

    • Funds a wide range of projects 

    • Small  

  • Incubators

    • Typically no investment

    • office space, networking

  • Accelerators 

    • Office space, networking 

    • Invest small amounts 

    • Set timeline

  • angels/angel groups

    • Pros

      • Larger  

      • Contribute experience and contacts 

      • More patient in timing of returns 

    • Cons 

      • Less committed

      • May not have enough money for future rounds 

      • May lack expertise

• Professional investors 

  • VC

    • Professional investors who invest in startups for equity on behalf of limited partners 

    • Financial motivations

    • Pros

      • More funding 

      • Introductions to customers, partners 

      • Strategic advice 

    • Cons 

      • Time pressure 

      • Less favorable deal terms 

  • CVC

    • Units in large corporations that invest in startups 

    • Financial and strategic motivations 

    • Pros

      • Startup earns credibility 

      • Access corporate resources 

    • Cons 

      • May limit future strategic options 

      • Risk of larger firm misusing startups intellectual property

  • Who, motivations, qualities preferred by investors 

Cases to date 

• RTR 

  • Lots of experimentation 

    • Resolve their concept w the designers 

    • Customer testing 

  • Lean startup

• Ockham 

  • Way in which the team was founded bc they were specialists 

  • Equity split became an issue - co-ceo thing 

  • Ken got less equity, they would dilute his share 

  • Building a team, founding team, roles, equity 

• Milkmade 

  • How they ran the kickstarter 

  • Economics of crowdfunding, what do the campaigns look like 

    • Learned from other cases 

  • Funding, crowdfunding, what does it look like, nature and reality 

• Main points of each case, important topics we discussed in class 

  • Key issues? How were they resolved