Technology Ventures: From Idea to EnterpriseChapter 6: Summary Our greatest glory is not in never falling but in rising every time we fall. Confucius What determines the success of entrepreneurial efforts and how can they be managed? A new venture that creates a novel solution to a problem will be subject to uncertainty of outcome. An action in an uncertain market is sure to experience a risk of delay or loss. It is the entrepreneur’s task to reduce and manage all risks as much as possible. Summary Risk and Return 6

Chapter 6: concept Risk is the chance or possibility of loss. Regret is the amount of loss a person can tolerate. Risk and Return 6 Technology Ventures: From Idea to Enterprise

Chapter 6: Figure 6.1 Risk = Hazard x Uncertainty Decision Risk and Return 6 Technology Ventures: From Idea to Enterprise

Chapter 6: concept Economies of scale are expected based on the concept that larger quantities of units sold will result in reduced per-unit costs. Scalability refers to how big a firm can grow in various dimensions to provide more service. Question: A new firm plans to develop and sell a database offering information on college admissions and selectivity. If successful, will this firm expect economies of scale and scalability? Risk and Return 6 Technology Ventures: From Idea to Enterprise

Chapter 6: Figure 6.7 Network economies arise in industries where a network of complementary products is a determinant of demand (also called network effects). + + Re-enforcing Loop Utility (Value) of the network Wide visibility and recognition of the value of the network + Number of users on the network The reinforcing characteristic of a positive loop exhibiting network effects. Risk and Return 6 Technology Ventures: From Idea to Enterprise

Chapter 6: Figure 6.9 – return vs. risk Risk and Return 6 Technology Ventures: From Idea to Enterprise

Chapter 6: Principle The entrepreneur seeks to manage risks and attain economies of scale, scope, and networks while achieving scalability of the business. Risk and Return 6 Technology Ventures: From Idea to Enterprise

Chapter 6: Venture Challenge VENTURE CHALLENGE 1)Describe the major risks for your venture. How can you reduce these risks? 2)What is the potential for economies of scale and scope? Is this business scalable? 3)Describe the venture’s potential for creating network effects. Risk and Return 6 Technology Ventures: From Idea to Enterprise

Chapter 6: DVD Video DVD Video “Types of Risks” Jerry Kaplan (Winster) Risk and Return 6 Technology Ventures: From Idea to Enterprise