3-1Copyright © 2009 The McGraw-Hill Companies, Inc., All Rights

Reserved.McGraw-Hill/Irwin

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Part Two

The Opportunity

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The Opportunity

• Screen and Choose opportunities with great care

• Venture capital investors fund no more than 1 or 2 percent of the ventures they review

• Good opportunities have risks and problems

• The perfect deal has yet to be seen

• Take steps to eliminate problems early during opportunity screening

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Chapter

3

The Entrepreneurial Process

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Entrepreneurship Defined

• Entrepreneurship—a way of thinking, reasoning, and acting that is opportunity obsessed, holistic in approach, and leadership balanced for the purpose of value creation and capture.

(This definition of entrepreneurship has evolved over the past three decades from research by Jeffry A. Timmons at Babson College and the Harvard Business School and has recently been enhanced by Stephen Spinelli, Jr. former Vice Provost for Entrepreneurship and Global Management at Babson College, and current President of Philadelphia University).

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Entrepreneurship Results

• Value:• Creation• Enhancement• Realization• Renewal

• For:• Owners• Stakeholders• All Participants

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Entrepreneurial Requirements

• Willingness to take risks• Personal • Financial• Calculated

• Shift the odds of success• Balancing risks with rewards

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Entrepreneurship is NOT just “Start-Ups Only”

• It includes companies and organizations• All types• At all stages

•Can occur and fail to occur• In old and new firms• Small and large firms• Fast and slow growing firms• Private, not-for-profit, and public sectors• All geographic points• All stages of a nation’s development

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Classic Entrepreneurship: The Startup

• Raw startup company—an innovative idea that develops into a high growth company

• Qualities of a startup company• Strong leadership from the main entrepreneur• Complementary talents and outstanding teamwork of team

members• Skill and ingenuity to find and control resources• Financial backing to chase opportunity

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Beyond Startups

• Giant firms of the past (IBM, Digital Equipment Corporation, Sears, AT&T) once thought to be invincible, have been reduced in size and scope by waves of entrepreneurial ventures.

• Large companies face shrinking payroll while new ventures add jobs.

• New entrepreneurial rivals are changing the pace of “business as usual.”

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“People Want to be Led!”

“People don’t want to be managed. They want to be led.”—Ewing M. Kauffman

• Characteristics of giant firms• Hierarchical in structure• Leadership as managing and administering from the top down• Rewards for “the largest” (assets, budgets, etc.)

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The Fall of the Giants

• Slow to change archaic strategy (average 6 years)

• Slow to change outdated culture (average 10 to 30 years)

• Slow to recognize and incorporate:• entrepreneurship, • entrepreneurial leadership, and • entrepreneurial reasoning

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Signs of Hope for Corporations

• Launching experiments and strategies to recapture the lost entrepreneurial spirit

• Working to instill the culture and practices of “entrepreneurial reasoning”

• Applying entrepreneurial thinking to invent their futures

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Metaphors for Entrepreneurship

• Improvisational• Quick• Clever• Creative• Resourceful• Inventive• Complex – compare to music (jazz or symphony

conductor), sports (golf), chess

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Paradoxes of Entrepreneurship (1 of 3)

• An opportunity with no or very low potential can be an enormously big opportunity.

• To make money you have to first lose money.• To create and build wealth, one must relinquish

wealth.• To succeed, one first has to experience failure.

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Paradoxes of Entrepreneurship (2 of 3)

• Entrepreneurship requires considerable thought, preparation, and planning, yet is basically an unplannable event.

• For creativity and innovativeness to prosper, rigor and discipline must accompany the process.

• Entrepreneurship requires a bias toward action and a sense of urgency, but also demands patience and perseverance.

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Paradoxes of Entrepreneurship (3 of 3)

•The greater the organization, orderliness, discipline, and control, the less you will control your ultimate destiny.

•Adhering to management best practice (especially staying close to the customer that created industry leaders in the 1980s), became a seed of self-destruction and loss of leadership to upstart competitors.

•To realize the long-term equity value, you have to forgo the temptations of short-term profitability.

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Think Big for Higher Potential Ventures

• Don’t think too small• Smaller often means higher failure odds• Getting the odds in your favor • Entrepreneurship should not be a job substitute• Odds for survival, growth, and a higher level of

success, changes when the ventures reaches a size of 10-30 people with $2-$3 million in revenues

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The Entrepreneurial Team

An entrepreneurial leader

• Learns and teaches—faster, better

• Deals with adversity, is resilient

• Exhibits integrity, dependability, honesty

• Builds entrepreneurial culture and organization

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The Entrepreneurial Team

Quality of the Team

• Relevant experience and track record

• Motivation to excel

• Commitment, determination, and persistence

• Tolerance of risk, ambiguity, and uncertainty

• Creativity

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The Entrepreneurial Team

Quality of the Team

• Team focus of control

• Adaptability

• Opportunity obsession

• Leadership

• Communication

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Sustainability as a Base

• Achieving economic, environmental and social goals

• Without compromising the same opportunity for future generations

• Driven by many factors

• By understanding these factors, the entrepreneur builds a firmer base girding the venture for the long term

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