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Lecture 7

ENT 3003 Lecture 7: ENT3003- Cupcake 7 Information (Module 7)


Department
Entrepreneurship
Course Code
ENT 3003
Professor
Christopher Garrett Pryor
Lecture
7

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Module 7 (Feb. 25)
Introducing Resources:
The Entrepreneurship Process
o Identify an Opportunity
o Develop Concept
o Acquire and Manage Resources
o Manage and Grow
o Exit
Resources: Inputs in a firm’s production process
o Financial
Can include money, lines of credit, etc.
o Organizational
Created inside the firm, culture inside too (Albert and Alberta, “Go
Gators”)
o Physical
Hard assets (e.g. Heavener Building)
o Technology/Intellectual
Gatorade licensing
o Cultural
Culture of the firm (e.g. link arms and sing the anthem after the Gators
football game)
o Innovative Capacity
R&D capacity
o Reputation
Protecting their reputation
Two things to keep in mind about tangible vs. intangible resources
o 1) Intangible resources are ‘invisible,’ which makes them harder to copy.
o 2) The more you use an intangible resource, the more you have of it. The
opposite is true for tangible resources.
Capabilities:
What do you do than nobody else can do?
When applied in a venture, that’s called your capability (AKA “Secret Sauces” and
“Unfair Advantages”)
Different Types of Capabilities
o Human Resources
o Distribution
o Information Systems
o Management
o R&D
o Manufacturing
Value Chain

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o Supporting Activities
Human Resources
Technology
Strategy
Research & Development
o Primary Activity
Inbound Logistics
Production & Operations
Outbound Logistics
Marketing & Sales
Service
o Margin is the value minus the cost
VRIN Analysis “Sustainable Competitive Advantage”
o Valuable
Enables the firm to exploit opportunities or neutralize threats in its
external environment
o Rare
The resource is possessed by few, if any, competitors
o Inimitable
Resources that firms cannot easily develop:
Unique Historical Conditions
Causally Ambiguous
Socially Ambiguous
o Non-Substitutable
Resources that do not have equivalents
Financing No. 1:
MONEY
Some popular misconceptions
o Claim: Venture Capitalists (VC) fund most businesses
TRUTH! 38 out of 100,000- or .048 percent of startups receive VC
investment (you are more likely to get struck by lightning 2x than receive
receive VC funding)
o Claim: Banks led to start-ups
o Claim: But that’s what the Small Business Association is for! Start-ups can receive
SBA loans
TRUTH! Nope
o Claim: The government provides grants to start-ups
TRUTH! Kind of
Most businesses are self-funded and will NEVER receive outside investment
For the sake of argument…. What drives the financing decision?
o The business model
o Type of growth aspirations you have
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o Entrepreneur’s own aspirations
o Life cycle of the business itself
Four Sources of Finance, Part 1: SELF
o 75% of all businesses
o 95% of women-owned businesses
o Average person start-up: $10,000 (using personal savings, credit loans, home
mortgage, borrowing instead of purchasing [bootstrapping])
o Pros:
Easy to obtain
Avoids partnership hassles
Retain equity
You keep the payoff, not investors (Michael Dell vs. Steve Jobs)
Exit is easy
o Cons:
Can lead to impulsive decision-making
It can cap your potential
Limits growth
Increases personal exposure
You avoid partnership hassles (and benefits!)
Financing No. 2:
Four Sources of Finance, Part 2: Friends & Family
o 90% of all businesses rely on only self or FF financing
o Feel the Burn
Investors enter a deal as a friend or family member, they exit a deal as an
enemy and ex-family member
o What You Can Do
Set up a formal transaction
Write a business plan
Provide accurate information
Set boundaries
Structure investment as a loan
Four Sources of Finance, Part 3: Equity
o Equity investments involve the exchange of ownership for financing
Angel Investors (private individuals)
Tend to specialize in industries
$50k to $1 million investments
20% - 50% returns
Plugged into networks
Local focus- 2/3 of investments are in companies
Within a 100-mile radius
Venture Capitalists
Tend to finance very few businesses- 38/100,000
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