Topics

A Definition of Entrepreneurship
Sample Business Plan Outline
The VC Pitch
A Definition of Entrepreneurship
The concept of entrepreneurship has a wide range of meanings. On the one
extreme an entrepreneur is a person of er! high aptitude who pioneers change"
possessing characteristics found in onl! a er! small fraction of the population.
On the other extreme of definitions" an!one who wants to wor# for himself or
herself is considered to $e an entrepreneur.
The word entrepreneur originates from the %rench word" entreprendre" which
means &to underta#e.& 'n a $usiness context" it means to start a $usiness. The
(erriam)*e$ster Dictionar! presents the definition of an entrepreneur as one
who organi+es" manages" and assumes the ris#s of a $usiness or enterprise.
Schumpeter's View of Entrepreneurship
Austrian economist ,oseph Schumpeter -s definition of entrepreneurship placed
an emphasis on innoation" such as.
new products
new production methods
new mar#ets
new forms of organi+ation
*ealth is created when such innoation results in new demand. %rom this
iewpoint" one can define the function of the entrepreneur as one of com$ining
arious input factors in an innoatie manner to generate alue to the customer
with the hope that this alue will exceed the cost of the input factors" thus
generating superior returns that result in the creation of wealth.
Entrepreneurship vs. Small Business
(an! people use the terms &entrepreneur& and &small $usiness owner&
s!non!mousl!. *hile the! ma! hae much in common" there are significant
differences $etween the entrepreneurial enture and the small $usiness.
Entrepreneurial entures differ from small $usinesses in these wa!s.
/. Amount of wealth creation ) rather than simpl! generating an income
stream that replaces traditional emplo!ment" a successful entrepreneurial
enture creates su$stantial wealth" t!picall! in excess of seeral million
dollars of profit.
0. Speed of wealth creation ) while a successful small $usiness can
generate seeral million dollars of profit oer a lifetime" entrepreneurial
wealth creation often is rapid1 for example" within 2 !ears.
3. Risk ) the ris# of an entrepreneurial enture must $e high1 otherwise" with
the incentie of sure profits man! entrepreneurs would $e pursuing the
idea and the opportunit! no longer would exist.
4. Innovation ) entrepreneurship often inoles su$stantial innoation
$e!ond what a small $usiness might exhi$it. This innoation gies the
enture the competitie adantage that results in wealth creation. The
innoation ma! $e in the product or serice itself" or in the $usiness
processes used to delier it.
Sample Business Plan Outline
Title Pae
5ame of compan!" date" contact information" etc.
Ta!le of "ontents
E#ecutive Summar$
/. Business Concept
0. Compan!
3. (ar#et Potential
4. (anagement Team
2. Distinct Competencies
6. 7e8uired %unding and its 9se
:. Exit Strateg!
%ain Sections
I. "ompan$ &escription
(ission Statement
Summar! of Actiit! to Date
Current Stage of Deelopment
Competencies
Product or Serice
o Description
o Benefits to customer
o Differences from current offerings
O$;ecties
<e!s to Success
=ocation and %acilities
II. Industr$ Anal$sis
Entr! Barriers
Suppl! and Distri$ution
Technological %actors
Seasonalit!
Economic 'nfluences
7egulator! 'ssues
III. %arket Anal$sis
Definition of Oerall (ar#et
(ar#et Si+e and >rowth
(ar#et Trends
(ar#et Segments
Targeted Segments
Customer Characteristics
Customer 5eeds
Purchasing Decision Process
Product Positioning
IV. "ompetition
Profiles of Primar! Competitors
Competitors- Products?Serices @ (ar#et Share
Competitie Ealuation of Product
o Distinct Competitie Adantage
o Competitie *ea#nesses
%uture Competitors
V. %arketin and Sales
Products Offered
Pricing
Distri$ution
Promotion
o Adertising and Pu$licit!
o Trade Shows
o Partnerships
o Discounts and 'ncenties
Sales %orce
Sales %orecasts
VI. 'perations
Product Deelopment
o Deelopment Team
o Deelopment Costs
o Deelopment 7is#s
(anufacturing Aif applica$leB
o Production Processes
o Production E8uipment
o Cualit! Assurance
o Administration
<e! Suppliers
Product ? Serice Delier!
Customer Serice and Support
Duman 7esource Plan
%acilities
VII. %anaement and 'rani(ation
(anagement Team
Open Positions
Board of Directors
<e! Personnel
Organi+ational Chart
VIII. "apitali(ation and Structure
=egal Structure of Compan!
Present E8uit! Positions
Deal Structure
Exit Strateg!
I). &evelopment and %ilestones
Time ma! $e specified on a relatie scale rather than specific calendar dates.
(ilestones ma! include some or all of the following.
%inancing Commitments
Product Deelopment (ilestones
o Protot!pe
o Testing
o =aunch
Signing of Significant Contracts
Achiement of Brea#)een Performance
Expansion
Additional %unding
An! other significant milestones
). Risks and "ontinencies
Some common ris#s include.
'ncreased competition
=oss of a #e! emplo!ee
Suppliers- failure to meet deadlines
7egulator! changes
Change in $usiness conditions
)I. *inancial Pro+ections
Assumptions AStart date" commissions" tax rates" aerage inentor!" sales
forecasts" etc.B
%inancial Statements ABalance Sheet" 'ncome Statement" Cash %low
StatementB
Brea# Een Anal!sis
<e! 7atio Pro;ections A8uic# ratio" current ratio" D?E" D?A" 7OE" 7OA"
wor#ing capitalB
%inancial 7esources
%inancial Strateg!
)II. Summar$ and "onclusions
Appendices
(a! include.
(anagement 7esumes
Competitie Anal!sis
Sales Pro;ections
An! other supporting documents
The VC Pitch
Some Tips for Success
Ac8uiring enture capital funding can consume a large amount of alua$le time
and effort. Dere are a few tips that can help !ou secure funding and get on with
the process of $uilding !our compan!.
"hoose the Riht V"
Carefull! research !our potential inestors. =earn a$out their focus areas and
their philosoph!. Then" go to enture capitalists who hae financed firms similar
to !our own1 the! will understand what !ou are sa!ing. Some VC-s are er!
hands)off" whereas others regularl! $ecome 8uite inoled with the operations of
their portfolio companies. Be sure to tal# to those that more closel! match !our
needs. Once !ou hae identified a good match" $e sure to tal# to the right person
within the firm. %or example" if !our idea is in the realm of medical technolog!" $e
sure that !ou are spea#ing to those people in the VC firm.
Business Plan
A VC li#el! will spend onl! a few minutes loo#ing through !our $usiness plan.
'llustrate concepts using diagrams so that one does not hae to read the plan to
figure it out. Assume that the VC will not read the entire plan" $ecause he?she
pro$a$l! won-t read it. A full $usiness plan ma! hae 2E pages or more" $ut the
VC pro$a$l! will not $e interested in that leel of detail during the initial reiew.
As such" it is a good idea to hae an executie summar! of no more than /E or
0E pages.
Build "redi!ilit$
%ocus on the results of !our team" showing an! demonstrations at the $eginning
of !our presentation. An initial demo helps to eliminate an! 8uestions that ma!
otherwise linger throughout the presentation and distract from !our pitch. (an!
start)ups originate from a team of students" $ut it is wise to recogni+e that !ou
will need a $roader team with more experience and contacts" so it is not a good
idea to list a team of onl! students. A team that alread! has wor#ed together has
a $etter chance of securing funding. 'n this context" wor#ing together means
haing done a similar $usiness pro;ect together. 'f !ou hae no team" !ou ma! do
$etter $! see#ing an incu$ator1 a ma;or ;o$ of incu$ators is to help !ou $uild a
team. *hile enture capitalists ma! spend time helping their portfolio companies
to recruit" VC-s do not want to $e !our D7 person.
Partner *irms
9se the logos of !our partners and potential partners on the opening page of
!our presentation. 9se $ig names if possi$le. VC-s are clu$$ish and would li#e to
$e a$le to associate with !our high)profile partners. Doweer" if a potential
partnering firm alread! has decided not to wor# with !ou" $e sure to remoe it
from the list.
"ompetitors
*hen listing potential competitors" it is not a good idea to mention giants li#e
Cisco S!stems or (icrosoft" or an! other competitors that are heail! funded.
Een if the! currentl! are far $ehind" the! hae the resources to 8uic#l! ta#e the
lead. Don-t forget how (icrosoft oertoo# 5etscape-s huge lead in the $rowser
mar#et.
Revenue %odel
Be sure that !ou are prepared to clearl! articulate how !ou will ma#e mone!.
VC-s li#e proen models" for example" one that signs up customers and
automaticall! hits their credit card each month for a certain amount. Such a
model often is considered superior to one that re8uires !ou constantl! to hae to
encourage people to use !our serice.
"ustomer Ac,uisition "osts
Fou should hae an estimate of !our customer ac8uisition costs. 'f !ou hae a
we$ site" #now how man! people will isit the site per dollar spent to get them
there. 'f !ou do not #now this num$er" ta#e the time to come up with a rough
estimate $ecause !ou li#el! will $e as#ed.
Valuation
The entrepreneur instinct usuall! is to gie up as little e8uit! as possi$le in
exchange for funding. As a result" entrepreneurs all too often will arrie a pre)
mone! aluation that is grossl! unreasona$le. 'f !ou insist that !our start)up is
worth G/2E million pre)mone!" !ou will lose credi$ilit!. 9nless otherwise
indicated" the assumption will $e that !ou hae onl! an idea. A'f !ou alread! hae
0EEE man)hours in software deelopment" $e sure to mention it in the pitch.B
Seed funding often assumes a G/ million to G0 million aluation. The first round
ma! $e in the G2 million to G/E million range. Fou ma! consider omitting the pre)
mone! aluation from the pitch altogether" or giing a genuinel! conseratie
num$er to $uild credi$ilit!.
Presentation St$le
VC-s want to see isionaries who are passionate a$out their idea. As such" !ou
should $e a$le to tal# without using notes or loo#ing at the pro;ector screen. The
VC is inesting in ision and passion" so show it. Four st!le is important $ecause
!ou hae to a$le to sell. Een if !ou secure the first round of financing" if !our
compan! is going to go pu$lic !ou will need additional rounds. Fou hae to $e
a$le to sell to inestors" partners" and customers. *hen !ou are giing the pitch"
pro;ect confidence $! not spea#ing too 8uic#l!. Show preparedness $! including
answers to expected 8uestions in the presentation. %inall!" pro;ect the image that
the train is leaing" and if the VC-s do not get on now the! will miss out.