Entrepreneurship

Andrew Zacharakis is John H. Muller, Jr. Chair in Entrepreneurship at Babson College. He is the Director of the Babson College Entrepreneurship Research Conference and past president of the Entrepreneurship Division of the Academy of Management. His writings and research focus on two major areas of entrepreneurship, the venture capital decision-making process and entrepreneurial growth strategies. Professor Zacharakis has been featured in The Wall Street Journal, The Boston Globe, the Bloomberg Small Business Report, and NPR Morning Edition. Andrew C. Corbett is Paul T. Babson Distinguished Professor of Entrepreneurial Studies and Faculty Director for the Butler Institute for Free Enterprise through Entrepreneurship at Babson College. His research examines behavioural aspects of the venturing process, corporate entrepreneurship and growth. Professor Corbett is also a Visiting Professor of Entrepreneurship at Nord University Business School in Bodo, Norway, and serves as a Director of the Board for the United States Association of Small Business and Entrepreneurship (USASBE). William D. Bygrave is Emeritus Professor of Entrepreneurship at Babson College, where he served as Director of The Center for Entrepreneurial Studies from 1993 to 1999. Bygrave founded a venture capital-backed high-tech startup, managed a division of a NYSE-listed company, co-founded a pharmaceutical database company, and sat on the investment committee of a venture capital firm. He has published more than 50 papers on venture capital, entrepreneurship, nuclear physics, hospital pharmaceuticals, and philosophy of science.

• Preface xvii1 An Opportunity to Lift All: The Power of Entrepreneurship 1Global Roots and an American Proliferation 3An Evolution of Entrepreneurship and Small Business in the United States 5An Entrepreneurial Evolution Becomes a Revolution 6Three Revolutions Converge 10Entrepreneurship Revolution Strikes Gold 11Causes of the Entrepreneurial Revolution 12Changes in the Entrepreneurial Framework Conditions 14Global Entrepreneurship Monitor 17Principal Findings from GEM 18Activity 19Gender 21Age Distribution of Early-Stage Entrepreneurial Activity 21Growth Expectations and Job Creation 22Environmental and Social Entrepreneurship 24Entrepreneurship and Today’s American Dream 25Conclusion 26Your Opportunity Journal 27Web Exercise 27Notes 27Case: Zoey Koko: Choosing an Alternative 302 The Entrepreneurial Process 39Critical Factors for Starting a New Enterprise 40Evaluating Opportunities for New Businesses 45Determining Resource Needs and Acquiring Resources 50Profit Potential 54Ingredients for a Successful New Business 55Conclusion 57Your Opportunity Journal 57Web Exercise 57Notes 57Case: Vedavoo 603 Opportunity Recognition, Shaping, and Reshaping 69From Glimmer to Action: How Do I Come Up with a Good Idea? 70Is Your Idea an Opportunity? 76The Opportunity Checklist 91“I Don’t Have an Opportunity” 91Conclusion 93Your Opportunity Journal 93Web Exercise 93Notes 93Case: ISlide, Inc. 954 Prototyping Your Ideas 102What Is Prototyping? 103Types of Prototyping 106Using AI to Accelerate Entrepreneurial Prototyping 111How Is AI Useful for Entrepreneurs? 111Using AI to Help Identify Unmet Needs 112Using AI for Idea Generation 114AI for Rapid Prototyping 114Risks of Using AI 116Conclusion 117Your Opportunity Journal 117Web Exercise 117Notes 117Case: Design a Better Cable Trainer 1185 The Importance of Business Models 126Introduction 126The Core (Steps 1, 2, and 3) 129The Market (Steps 4, 5, 6, and 7) 131Customer Segments (Step 4) 132Marketing Channels (Step 5) 132Distribution Channels (Step 6) 133Revenue Streams (Step 7) 134Product and Operations (Steps 8, 9, 10, and 11) 135Resources (Step 8) 135Partners (Step 9) 135Key Metrics (Step 10) 136Cost Drivers (Step 11) 136The External Environment and Financial Strategy (Steps 12, 13, and 14) 138Competitive Environment (Step 12) 138Industry Attractiveness (Step 13) 138Financial Strategy (Step 14) 138Conclusion 139Your Opportunity Journal 139Web Exercise 139Notes 139Case: Zumba Fitness 1406 Entrepreneurial Marketing 147Why Marketing Is Critical for Entrepreneurs 148Entrepreneurs Face Unique Marketing Challenges 148Acquiring Market Information 149Marketing Strategy for Entrepreneurs 151Segmentation, Targeting, and Positioning 151The Marketing Mix 152Value Proposition: Articulating the Entrepreneurial Strategy 164Social Media 167Guerrilla Marketing 168Marketing Skills for Managing Growth 169Understanding and Listening to the Customer 169Building the Brand 170Conclusion 171Your Opportunity Journal 171Web Exercise 171Appendix: Customer Interview 171General Outline: It Needs To Be Tailored To Meet Your Research Needs 172Notes 172Case: Raised Right 1747 Digital Marketing for Entrepreneurs 183Introduction 183Poem Model 184Generating Awareness and Leads Using Paid Media 185Metrics of Digital Advertising 185Paid Search Marketing 186Programmatic Advertising 188Native Advertising 188Sponsorships and Affiliate Marketing 189Connecting With Your Customers in Owned Media 189Owned Media: Websites and Landing Pages 189Internal Web pages versus direct landing pages 190Webpage Goals 192Conversion Centered Design Goals 193Making Your Website More Findable: Search Engine Optimization (seo) 193On-Site: Keywords 193Other Aspects of On-site SEO 194Off Site SEO: Backlinks 194Off Site SEO: Creating Useful Content 194Owned Media: Social Media 195Content Strategy for Organic Posts 196Types of Organic Social Posts 197Owned Media: Email 198Owned Media: Other Content 199Earned Media 199Sentiment and Marketing Research 199Influencers, Public Relations and Publicity 200Leveraging User generated Content (UGC) 200The Buyer’s Journey—Planning and Assessing Your Digital Marketing Content 201Conclusion 204Your Opportunity Journal 204Exercises 204Notes 205Case: PetPax Co. 2068 Building the Founding Team 213Power of the Team 214Where Do You Fit? 216How to Build a Powerful Team 219Bootstrapping: Building the Team Based on Stage-of-Venture Life 221Compensation 223Equity 223Salary 227Other Compensation Considerations 228External Team Members 228Outside Investors 229Lawyers 229Accountants 230Board of Advisors 230Board of Directors 231Keeping the Team Together 232Burnout 233Family Pressure 233Interpersonal Conflicts 234Conclusion 234Your Opportunity Journal 234Web Exercise 235Notes 235Case: Bin, Inc. 2369 The Business Planning Process 245The Planning Process 247The Story Model 248The Business Plan 249The Cover 249Executive Summary 249Table of Contents 250Industry, Customer, and Competitor Analysis 250Company and Product Description 254Marketing Plan 255Development Plan 260Team 261Critical Risks 263Offering 265Financial Plan 265Appendices 265Types of Plans 265Style Pointers for the Written Plan and Oral Presentation 266Conclusion 267Your Opportunity Journal 268Web Exercise 268Notes 268Case: ONSUNDAYS: Business Brief 26910 Building Your Pro Forma 282Financial Statements 283Common Mistakes 283Financial Statement Overview 284Building Your Pro Forma Financial Statements 285Build-Up Method 286Revenue Projections 287Cost of Goods Sold 288Operating Expenses 289Preliminary Income Statement 290Comparable Method 291Building Integrated Financial Statements 293Income Statement 295Balance Sheet 297Cash-Flow Statement 298Putting It All Together 299Conclusion 299Your Opportunity Journal 300Web Exercise 300Notes 300Case: ONSUNDAYS: Understanding Your Market and Building Realistic Proformas 30111 Raising Money for Starting and Growing a Business 314Bootstrapping New Ventures 315Informal Investors 316Business Angels 317Searching for Business Angels 318Types of Business Angels 318Putting Together a Round of Angel Investment 319Amount of Capital Needed to Start a Business 321Financial Returns on Informal Investment 321Crowdfunding 322Venture Capital 323Classic Venture Capital 323Mechanism of Venture Capital Investing 324Financial Returns on Venture Capital 325Dealing with Venture Capitalists 326Negotiating the Deal 328Valuation 328Scorecard Valuation 329Earnings Capitalization Valuation 330Present Value of Future Cash Flows 330Market-Comparable Valuation (Multiple of Earnings) 330Asset-Based Valuation 331Example of Market-Comparable Valuation 331Asset-Based Valuation Example 333Harvesting Investments 334Initial Public Offering 335Pros and Cons of an IPO 335The Process of Going Public 337BFAI Goes Public 338Selling the Company 338Why Be Acquired? 339Conclusion 340Your Opportunity Journal 340Web Exercise 340Notes 341Case: Auction Mobility 34312 Debt and Other Forms of Financing 349Getting Access to Funds—Start with Internal Sources 350Start with Credit Cards and Home Equity Lines 351Cash Conversion Cycle 352Working Capital: Getting Cash from Receivables and Inventories 352Using Accounts Receivable as Working Capital 353The Sales Pattern 354Cash versus Credit Sales 354Credit Policies 354Setting Credit Terms 355Collection Policies 356Setting Credit Limits for Individual Accounts 357Inventory 358Sources of Short-Term Cash: More Payables, Less Receivables 359Cash from Short-Term Bank Loans 359Cash from Trade Credit 359Cash Obtained by Negotiating with Suppliers 360Cash Available Because of Seasonal Business Credit Terms 360Advantages of Trade Credit 361Cash Obtained by Tightening Up Accounts Receivable Collections 361Obtaining Bank Loans Through Accounts Receivable Financing 362Pledging 362Pledging with Notification 362Factoring 362Recourse 362Obtaining Loans against Inventory 363Obtaining “Financing” from Customer Prepayments 363Choosing the Right Mix of Short-Term Financing 363Traditional Bank Lending: Short-Term Bank Loans 364Maturity of Loans 365Interest Rates 365Collateral 366Applying for a Bank Loan 366Restrictive Covenants 367General Provisions 367Routine Provisions 368Specific Provisions 368Equipment Financing 369Obtaining Early Financing from External Sources 369SBA-Guaranteed Loans 369Applying for an SBA Loan 370Conclusion 371Your Opportunity Journal 371Web Exercise 372Notes 372Case: FEED Resource Recovery 37313 Legal and Tax Issues, Including Intellectual Property 384Why, When, and How to Choose an Attorney 385Leaving Your Present Position 385Corporate Opportunity 385Recruitment of Fellow Employees 386Noncompetition 386Intellectual Property 387The Basics: What Is Protectable and How Should It Be Protected? 388Patents 388Trade Secrets 393Trademarks 395Copyright 397International Protection for Intellectual Property 399Choice of Legal Form 400Control 401Personal Liability 402Taxation 402Initial Investment of the Founders 404Choosing a Name 405Negotiating Employment Terms 405Disposition of Equity Interests 405Legal and Tax Issues in Hiring Employees 408Employees as Agents of the Company 408Employment Discrimination 409Employment Agreements 409Raising Money 409Conclusion 410Your Opportunity Journal 411Web Exercise 411Notes 411Case: Wefunder: Leading the Growth of a New Industry 412Appendix A: A Sample Wefunder Offerings 41814 Entrepreneurial Growth 420Making the Transition from Start-up to Growth 421Looking Forward: The Choice to Grow, or Not, or Sell 421A Model of Driving Forces of Growth 423The Growth Process 424Execution 425Instituting Controls 426Tracking Performance 427Managing the Cash Cycle 429Leveraging the Value Chain 431Maintaining the Entrepreneurial Organization 432Opportunity Domain 432Organizational Resources and Capabilities 435Obtaining Financial Resources for the Growing Company 435Intangible Resources and Capabilities 436Leadership 438Starting the Delegation Process 438First-Level Management 440From Delegation to Decentralization 440Professional Management and Boards 440Coordinating the Driving Forces 441Leading People; Developing Entrepreneurs 441Conclusion 442Your Opportunity Journal 443Web Exercise 443Notes 443Case: Connecting Students with Therapists Immediately 445Appendix: Competitors 451Glossary G- 1Index I- 1