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Showing posts with label Entrepreneurship. Show all posts
Showing posts with label Entrepreneurship. Show all posts

How to Start a New Venture

Go on a DXpedition ...

The Desire Phase ...
Determine why you (and your teammates) want to start a new venture

The Discover Phase ...
Form initial core entrepreneurial team
Identify problems or opportunities

The Define Phase ...
Screen problems or opportunities
Define the value proposition

The Design Phase ...
Generate potential solutions
Create a business venture hypothesis
Design a business venture plan

The Deploy Phase ...
Acquire needed resources
Launch the venture

The Develop Phase ...
Test, validate, and refine the venture hypothesis
Develop and iterate the venture based on real customer experiences

Perspectives on the Nature of Entrepreneurship

  1. Creation of Wealth ... assume risks in exchange for profit
  2. Creation of Enterprise ... founding a new business where none existed before
  3. Creation of Innovation ... making existing products or methods obsolete
  4. Creation of Change ... adjusting, adapting, modifying to meet new opportunities
  5. Creation of Employment ... employing, managing, developing the factors of production
  6. Creation of Value ... creating value for customers by exploiting untapped opportunities
  7. Creation of Growth ... sales, income, assets, and employment
[Thank you, Michael H. Morris]

Ten Entrepreneurship Myths

  1. It takes a lot of money to finance a new business. Not true. The typical start-up only requires about $25,000 to get going. The successful entrepreneurs who don’t believe the myth design their businesses to work with little cash. They borrow instead of paying for things. They rent instead of buy. And they turn fixed costs into variable costs by, say, paying people commissions instead of salaries.
  2. Venture capitalists are a good place to go for start-up money. Not unless you start a computer or biotech company. Computer hardware and software, semiconductors, communication, and biotechnology account for 81 percent of all venture capital dollars, and seventy-two percent of the companies that got VC money over the past fifteen or so years. VCs only fund about 3,000 companies per year and only about one quarter of those companies are in the seed or start-up stage. In fact, the odds that a start-up company will get VC money are about one in 4,000. That’s worse than the odds that you will die from a fall in the shower.
  3. Most business angels are rich. If rich means being an accredited investor –a person with a net worth of more than $1 million or an annual income of $200,000 per year if single and $300,000 if married – then the answer is “no.” Almost three quarters of the people who provide capital to fund the start-ups of other people who are not friends, neighbors, co-workers, or family don’t meet SEC accreditation requirements. In fact, thirty-two percent have a household income of $40,000 per year or less and seventeen percent have a negative net worth.
  4. Start-ups can’t be financed with debt. Actually, debt is more common than equity. According to the Federal Reserve’s Survey of Small Business Finances, fifty-three percent of the financing of companies that are two years old or younger comes from debt and only forty-seven percent comes from equity. So a lot of entrepreneurs out there are using debt rather than equity to fund their companies.
  5. Banks don’t lend money to start-ups. This is another myth. Again, the Federal Reserve data shows that banks account for sixteen percent of all the financing provided to companies that are two years old or younger. While sixteen percent might not seem that high, it is three percent higher than the amount of money provided by the next highest source – trade creditors – and is higher than a bunch of other sources that everyone talks about going to: friends and family, business angels, venture capitalists, strategic investors, and government agencies.
  6. Most entrepreneurs start businesses in attractive industries. Sadly, the opposite is true. Most entrepreneurs head right for the worst industries for start-ups. The correlation between the number of entrepreneurs starting businesses in an industry and the number of companies failing in the industry is 0.77. That means that most entrepreneurs are picking industries in which they are most likely to fail.
  7. The growth of a start-up depends more on an entrepreneur’s talent than on the business he chooses. Sorry to deflate some egos here, but the industry you choose to start your company has a huge effect on the odds that it will grow. Over the past twenty years or so, about 4.2 percent of all start-ups in the computer and office equipment industry made the Inc 500 list of the fastest growing private companies in the U.S. 0.005 percent of start-ups in the hotel and motel industry and 0.007 percent of start-up eating and drinking establishments made the Inc. 500. That means the odds that you will make the Inc 500 are 840 times higher if you start a computer company than if you start a hotel or motel. There is nothing anyone has discovered about the effects of entrepreneurial talent that has a similar magnitude effect on the growth of new businesses.
  8. Most entrepreneurs are successful financially. Sorry, this is another myth. Entrepreneurship creates a lot of wealth, but it is very unevenly distributed. The typical profit of an owner-managed business is $39,000 per year. Only the top ten percent of entrepreneurs earn more money than employees. And the typical entrepreneur earns less money than he otherwise would have earned working for someone else.
  9. Many start-ups achieve the sales growth projections that equity investors are looking for. Not even close. Of the 590,000 or so new businesses with at least one employee founded in this country every year, data from the U.S. Census shows that less than 200 reach the $100 million in sales in six years that venture capitalists talk about looking for. About 500 firms reach the $50 million in sales that the sophisticated angels, like the ones at Tech Coast Angels and the Band of Angels talk about. In fact, only about 9,500 companies reach $5 million in sales in that amount of time.
  10. Starting a business is easy. Actually it isn’t, and most people who begin the process of starting a company fail to get one up and running. Seven years after beginning the process of starting a business, only one-third of people have a new company with positive cash flow greater than the salary and expenses of the owner for more than three consecutive months.
[Thank you, Scott Shane]

Entrepreneurial Mindset

  1. Take responsibility
  2. Get results
  3. Create value
  4. Earn a profit
  5. Solve customer problems
  6. Create competitive advantage
  7. Customer and quality driven
  8. Generate wealth
  9. Share the wealth with those that create it

Types of Entrepreneurship

  1. Spontaneous ... trying to sell snacks in class
  2. Small business ... “mom & pop” sandwich shop
  3. Conventional ... software development firm
  4. Corporate ... internal venture, spin-off
  5. Acquisition ... merge strengths ... example: Disney; Pixar
  6. Transformational ... “change the way” pizza is delivered ... example: Domino’s Pizza
  7. Visionary ... “change the way” people use computers ... example: Microsoft, Apple, Amazon

10 Tips for Launching a New Venture

  1. Don't wait for a revolutionary idea ... it will never happen ... just focus on a simple, exciting, empty space and execute as fast as possible.
  2. Share your idea ... the more you share, the more you get advice and the more you learn ... meet and talk to your competitors.
  3. Build a community ... use blogging and social software to make sure people hear about you.
  4. Listen to your community ... answer questions and build your product with their feedback.
  5. Gather a great team ... select those with very different skills from you ... look for people who are better than you.
  6. Be the first to recognize a problem ... everyone makes mistakes ... address the issue in public, learn about and correct it.
  7. Don't spend time on market research ... rather, launch test versions as early as possible ... keep improving the product in the open.
  8. Don't obsess over spreadsheet business plans ... they are not going to turn out as you predict, in any case.
  9. Don't plan a big marketing effort ... it's much more important and powerful that your community loves the product.
  10. Don't focus on getting rich ... focus on your users ... money is a consequence of success, not a goal.
[Thank you, Loic Le Meur]