EEE Study Guide
Types of startups
• Salary substitutes – earn a living
• Lifestyle firms – doing your thing while earning a living
• Entrepreneurial firms – creating value (worth, importance, utility)
Economic impact of entrepreneurial firms
• Innovation – drives and is driven by competition
• Job creation creates new jobs
• Impact on society can go from good or bad
1. Decide to be an entrepreneur
2. Develop successful business idea
3. Move from idea to creating a venture
4. Manage and grow the venture
Why become and entrepreneur?
1. Desire to be their own boss
2. Desire to pursue their own ideas
3. Financial rewards
Entrepreneurship – the process by which individuals pursue opportunities without
regard to resources they currently control.
The entrepreneurial process
• Identify and opportunity
o Sources, types, criteria, window of opportunity
• Develop a Business concept
o Products, services, processes, value proposition
• Access the Necessary Resources
o Money, people, real estate, etc.
• Acquire the Needed Resources
o Leveraging resources
o Put operation into work, overcome obstacles
• Manage and harvest
o Strategically decide for growth, exit strategies
Value – relative worth, importance or utility
Underlying Dimensions of Entrepreneurship
o Developing novel, new products/services/processes • Risktaking
o Calculated or managed risk taking
o Clear sense of key risk factors
o Strategy for managing, mitigating, and sharing risks
o Action orientation
o Tolerance of failure
o No “NO” for an answer
Entrepreneurial Intensity – a combination of the extent that ‘events’ of the entrepreneur
are innovative, risky, and proactive, and the ‘amount of entrepreneurship,’ or the
frequency with which entrepreneurial events occur (Morris, 1998)
Integrative Model of Entrepreneurship
• Environment (source of opportunity, source of constraint, source of facilitating
• Business concept (unique value proposition for product, process, service)
• Resources (money, distribution channels, suppliers, location, facilities, patents,
• Organizational context (type of company)
Central Planning Economic Free Enterprise
Totalitarianism Democracy Political
Unlimited liability Legal Limited liability
Centralized/conservative Financial Decentralized/competitive
Underdeveloped/Obsolete Logistical Welldeveloped
Institutional Social Individualistic
Stagnant Technological Rapidly Changing
Stable Economic Widely Cyclical
Homogenous Customer Heterogeneous
Status Quo Competitor Threatening
Passive Legal/Regulatory Aggressive
Predictable Resource Unpredictable
Traditional Experimental Social
Nurturing Family experiences Authoritarian
Conforming/standardized Educational experiences Creative/ambiguous
Complacent/constraining Peer group experiences Bold/adventurous
Comfortable Work experiences Unsatisfactory
Business model – a firm’s plan for how it competes, uses its resources, structures its
relationships, interfaces with customers, and creates value to sustain itself on the basis of
the profit it generates Business plan – a written document that describes all the aspects of a business venture in
a concise manner
Corporate entrepreneurship – established firms with an orientation to acting
Entrepreneurial firms – bring new products and services to the market
Execution intelligence – the ability to fashion a solid idea into a viable business
• Developing a business model
• Putting together a team
• Leading and motivating employees
• Translating creativity and imagination into action
Lifestyle firms – provide their owner or owners the opportunity to pursue a particular
lifestyle and earn a living while doing so
Moderate risk takers – takes some risks, but not all. Chooses the risks wisely
Product/customer focus – puts as much importance into the customer as the product
Salarysubstitute firms – small firms that yield a level of income for their owner that is
similar to what they would earn when working for an employer
Triggering event – something that prompts and individual to become an entrepreneur.
Ex. An individual might lose his or her job and decide that the time is right to start a
Value – refers to vices to market by creating and then seizing opportunities
• Ability to learn
• Social skills and networking
• Guerilla skills
• Managerial skills
What makes entrepreneurs entrepreneurial?
• Expect the unexpected: allow business to grow organically.
• Know thyself: trust what you know.
• Build enduring relationships: capacity to understand and feel with another, desire
to help others, social process is important, need for strong positive relationships.
• Let your vision be your guide: what picture is carried in your mind.
• Surprise becomes opportunity: innovative, loves ideas, curios, desire to avoid
• Imagination, ingenuity, insight
• The act of relating previously unrelated things
• The application of a person’s mental ability and curiosity to discover something
Five Steps to Generating Creative Ideas
Preparation ▯incubation ▯Insight (Eureka moment, business idea conceived, problem
solved) ▯evaluation ▯elaboration
• Preparation – who you are – socially, academically, personally. Prior work
experience. • Incubation – conscious and unconscious process of problem solving. Mulling
• Insight: Eureka moment of conceiving an idea
• Evaluation – a candid and thorough look at the feasibility of realizing an idea
• Elaboration: Idea transformed into action.
Acquiring technical skills – the physical act of doing something repetitively engages
creativity. Cabinetmakers for instance.
Tacit knowledge – the more skill and knowledge one has, the more likely it is that their
skill and knowledge goes beyond their ability to express it.
Autonomy – working alone, solving problems alone. Acting maturely.
• Directs and focuses all thoughts and experiences into originality which relies on
repeated motion which excites creativity.
Failure – a positive experience that impels us forward towards reaching a satisfactory
conclusion or solving a problem. Also a common occurrence when learning by doing.
Also an incentive to continue to improve technique.
New Venture Team
• The group of founders, key employees, and advisers that move a new venture
from an idea to a fully functioning firm.
• Usually the team doesn’t come together all at once. Instead, it is built as the new
firm can afford to hire additional personnel.
• The team also involves more than paid employees.
o Many firms have board of directors, board of advisers, and professionals
on whom they rely for direction and advice.
Liabilities of newness – refers to the fact that new companies often falter because the
people involved can’t adjust fast enough to their new roles and because the firm lacks a
track record of success.
50 to 70% new firms start with more than one person.
Board of Directors
• If a new venture organizes a corporation, it is legally required to have a board of
• A board of directors is a panel of individuals who are elected by a corporation’s
shareholders to oversee the management of the firm.
• A board is typically made up of both inside directors and outside directors.
o An inside director is a person who is also an officer of the firm.
o An outside director is someone who is not employed by the firm.
Formal Responsibility of the Board
• A board of directors has three formal responsibilities
o Appoint the officers of the firm
o Declare dividends
o Oversee the affairs of the corporation
Frequency of Meetings and Compensation
• Most board of directors meet three to four times a year • New ventures are more likely to pay their board members in company stock or
ask them to service on a voluntary basis rather than pay a cash honorarium.
Non Profit Board
• Expected to give a leadership gift and raise funds from others
• Lend expertise
• Legal and lead
• Legal and leadership responsibilities similar to For Profit
• Insuring board members against liability claims.
• Before accepting for profit or notforprofit board membership, check up on being
Board of Advisors
• A panel of experts who are asked by a firm’s managers to provide counsel and
advice on an ongoing basis.
o Unlike a board of directors, an advisory board possesses no legal
responsibility for the firm and gives nonbinding advice.
o An advisory board can be established for general purposes or can be set up
to address a specific issue or need.
o Many people are more willing to serve on a company’s board of advisors
than its board of directors because it requires less time and there I no
potential legal liability.
o Like the members of a board of directors, the members of a company’s
board of advisors provide guidance and lend credibility to the firm.
Lenders and Investors
• Lenders and investors have a vested interest in the companies they finance, often
causing them to become very involved in helping the firms they fund.
• Like the other nonemployee members of a firm’s new venture team, lenders and
investors help new firms by providing guidance and lending advice.
• In addition, a firm’s lenders and investors assume the natural role of providing
• Volunteer for nonprofits such as SCORE
Founding team – more than one individual who starts a new firm (5070%)
Heterogeneous – members being diverse in terms of their abilities and experience
Homogenous – their areas of expertise are similar to one another
Networking – building and maintaining relationships with people whose interests are
similar or whose relationship could bring advantages to the firm.
Prior entrepreneurial experience – one of the most consistent predictors of future
Relevant industry experience – can have an impact on an entrepreneur’s ability to
successfully launch and grow a firm
Signaling – Bringing credible or important people to a firm. Skills profile – a chart that depicts the most important skills that are needed and where
skills gaps exist.
Opportunity – a favorable set of circumstances that creates a need for a new product,
service or business (resides in change. Change is constant)
• Perennial – always room to do something better, faster, etc.
• Occasional – new capability, demand surge, new segment
A opportunity has 4 essential qualities