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Business Development and Entrepreneurship Basics

Presented by:

Tony Redpath & Allyson Hewitt

Vice President, Partner Programs

Director, Social Entrepreneurship

MaRS Discovery District

14 October 2009

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Start with the Basics

1) Why do I want to start this business? What is my motivation?

2) What resources do I need? Basement vs. Corporate Office

3) How do I fit into the rest of the world? Is my service/product unique?

4) What is my business model? For profit, non profit, hybrid model

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The Organizational Spectrum

Social

Enterprise

Non-profit with Income

Activities

Traditional Charity

Traditional Corporation

Corporate Social

Responsibility (CSR)

Socially

Responsible Business

Mission Motive Stakeholder Accountability

Income invested in programs or overhead

Profit-Making Motive Shareholder Accountability

Profits redistributed to shareholders

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What are the types of organizations? …CONSULTING

 Key Characteristics:

  Multiple Participants, Diverse focus, Size

  Examples

–  Hatch Associates

 Benefits & Risks of Model

  Low Capital Costs & Minimal Input

  Liability Insurance; lack of support

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Consulting for Social Enterprises

  Social Enterprises

  Key Characteristics:

  Focused on leveraging core asset (tangible, intangible) to provide access to market, advice

  Examples

–  Sustainability Office @ U of Toronto

–  Aperio

  Benefits & Risks of Model

 Less Reliance on traditional funding

 Mission Drift ( Profit and Mission alignment)

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What are the types of organizations? … SERVICES

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 Key Characteristics:

  Specialty business serving existing businesses

  Examples

 Benefits & Risks of Model

  On-line software as a service

  Capital Costs can be high: labs services: servers

What are the types of organizations? …SERVICES

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Service Models for Social Enterprises

 Key Characteristics:

 Market Intermediary Role to serve target population

  Examples

 Benefits & Risks of Model

  Potential to Scale

  Quality Control

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What are the types of organizations? …PRODUCTS

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What are the types of organizations? …PRODUCTS   Products

  Key Characteristics:

  Tangible offering ( pharmaceutical compound, medical device, consumer product

  Examples

  Benefits & Risks of Model

  High development costs; market traction

  Production costs high: outsource?

 Potential for huge scale

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What are the types of organizations? …PRODUCTS

  Products

  Key Characteristics:

  Sell a particular product that benefits a disadvantaged group and/or promotes a more ethical form of existing product

  Examples: Vision Spring &

  Benefits & Risks of Model

  Competitive Landscape ( pro v. con)

  Potential for huge scale

 Production costs can be high

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Show me the Money….

  Forms of Financing  Debt - borrow from someone, using an asset as

security; rate & time period to be negotiated

  Equity - sell a piece of your venture to someone in exchange for an investment in the venture

  Bootstrap - self-fund and reinvest all profits for growth

  Grants – foundations/government funding

  Hybrid Models – important to both enterprise types

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The Lemonade Stand Example

Assume you’re 8 years old and you need $20 to set up a lemonade stand

Revenues Debt 50:50 Equity

Rain $10 lender loses $10 partner loses $15

entrepreneur gets $0 entrepreneur gets $5

Cloud $30 lender is even partner loses $5

entrepreneur gets $10 entrepreneur gets $15

Sun $50 lender is even partner makes $5

entrepreneur gets $30 entrepreneur gets $25

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Where can I get debt financing?

 YOU

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Sources of Equity Financing

 The 3F’s again – Friends, Family and Fools  Angels (aka high net worth individuals)

 Generally like to invest in areas that they have worked in or are comfortable with

 Can add valuable hands-on experience  http://www.angelinvestor.ca/  http://www.mapleleafangels.com/186103_186104.html

 Venture Capital Funds  Different funds invest at different stages in the growth

of a company  http://www.cvca.ca/

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Special Financing Sources

 Proof of Principle / Idea to Innovation   www.ResearchNet.com  www.nserc-crsng.gc.ca/index_eng.asp

 NRC - IRAP  http://irap-pari.nrc-cnrc.gc.ca/main_e.html

  Foundations:  Trillium Fund -www. trilliumfoundation.org

 Gates Foundation – www.gatesfoundation.org

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The Financing Life Cycle

Risk

Concept Start-up Growth Expansion

Grants

Venture Capital

Public Markets

Seed Funds

Angels

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The Financing Life Cycle

Risk

Concept Start-up Growth Expansion

Grants

Venture Capital

Public Markets

Seed Funds

Angels

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The Financing Life Cycle

Risk

Concept Start-up Growth Expansion

Grants

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How do I secure financing/support?

Investors/Backers are concerned

about Risk associated with any

start-up

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Risks…..

  Technology Risks   Stage of Development (concept proof of concept

prototype of product)

  Product development path (costs and “risks”

  Competitive technologies

  IP Risks  Nature of the invention

 Scope of the invention

  IP form: Patent, know-how, software

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Risks…..

  Market Risks   Market size, dynamics and growth potential

  Route to market, access, scalability

  USPs of the products or services

  Execution Risk  Knowledge of the market, networks

 Skills required to move the enterprise through all stages of development

 Reputation in the marketplace

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Risks for the Social Enterprise

  Mission Drift   Balancing a Social and Financial Bottom Line

  Execution Risk   Knowledge of the market, networks

 Skills required to move the enterprise through all stages of development

 Reputation in the marketplace

  General Skepticism in the Global Marketplace