MBAX 6100 Entrepreneurship & Small Business Management Marshalling Resources Frank Moyes Leeds College of Business University of Colorado Boulder, Colorado Marshalling Resources

Today’s Agenda Jurismonitor Case Today’s Agenda Jurismonitor Case Advantages and disadvantages of strategic alliances & joint ventures Marshalling Resources Speaker: David Hunter CEO of Encrypt Corporation Deal structure: David Kendall, attorney Marshalling Resources

Strategic Alliances Over 75% of technology businesses are active in strategic alliances. 63% said critical or very important. (PricewaterhouseCoopers, Trendsetter Barometer 2001). Most are informal Joint venture – jointly owned entity Speed to market Access to markets, technology or knowledge Access to capital Spin-ins & spin-outs Access to international markets Intel 220 active investments in 2004 Marshalling Resources

Strategic Alliances Forms Marketing – access to distribution e.g. Nestle in Europe Technological – joint research, e.g. Celebrex for Pfizer Manufacturing – subcontract operations, e.g. Jurismonitor Investment – Intel 220 active investments in 2004 Marshalling Resources

Advantages to Strategic Alliances Gain access to a resource, e.g. production, skills Economies of scale Risk & cost sharing Gain access to international market Learning Speed to market Neutralizing or blocking competitors One partner has technology, another distribution Barringer & Ireland, Entrepreneurship Marshalling Resources

Disadvantages of Strategic Alliances Loss of proprietary information Management complexities High risk of failure Become dependent on partner Risk of opportunism Non performance Loss of decision autonomy Clash of cultures Precludes partnership with another firm or exit Different styles, objectives Marshalling Resources Barringer & Ireland, Entrepreneurship

What Resources Do New Ventures Have? What Resources Do New Ventures Have? Marshalling Resources

People Resources? Marshalling Resources Outside service providers People Resources? Outside service providers CCG & Earnst & Young Board of Directors Ferranti Advent Angels invest in people they like Marshalling Resources

Physical Assets? Sports Bra Entrepreneur Marshalling Resources

Financial Resources? Marshalling Resources

Social Resources? Marshalling Resources

Own or Control Resources? Own or Control Resources? “Key is not to own resources, but to have use of & be able to control or influence deployment”, Timmons Ask yourself where is the value added of my venture? R & D? Sales & Marketing? Manufacturing? Customer Service? Marshalling Resources

Attitude What is Bootstrapping? What is Bootstrapping? “Launching ventures with modest personal funds”, Bhide Using Other People’s Resources (OPR), Timmons Scrooge mode Attitude Marshalling Resources

Bootstrapping Examples Bootstrapping Examples Make vs buy Volume purchasing Hiring employees vs. temps or subcontract Employee benefits Office and location Used equipment PR vs. advertising & promotion Strategic alliances - Jurismonitor Grants Marshalling Resources

Benefits of Bootstrapping Enhances Funding Benefits of Bootstrapping Enhances Funding Need less capital Reduces financial exposure Reduces amount of money need to raise - less dilution Reduces risk Obsolescence Lower sunk costs Investor's love it Proves concept and management team Marshalling Resources

Benefits of Bootstrapping Provides Flexibility Benefits of Bootstrapping Provides Flexibility Fluctuating conditions and uncertainty Difficulty in predicting what resources are needed Make changes quickly Permits strategic experiments Cost of making a mistake is minimized Mistakes less likely to be fatal Inexperienced entrepreneurs can screw-up Don’t have the pressure of high growth Marshalling Resources

Benefits of Bootstrapping Improves Problem Solving Benefits of Bootstrapping Improves Problem Solving Like zero inventory in JIT Reveals hidden problems Forces management to solve them Focus is on profits Forces management to solve problems Price for profitability Reduces costs Lower fixed costs Higher variable costs, but high Gross Profit Margin solves Lower break-even point Marshalling Resources

Benefits of Bootstrapping Sets the Right Culture Benefits of Bootstrapping Sets the Right Culture Employees Suppliers Marshalling Resources

Bootstrapping Summary Bootstrapping Summary Requires less capital Lowers risk Improves decision making Enhances flexibility Focus on profitability Investors love it Establishes culture Marshalling Resources A Bhide, Bootstrap Finance, HBR

Can An Entrepreneur Have Too Much Money? Can An Entrepreneur Have Too Much Money? Marshalling Resources

What Is the Greatest Source of Cash? What Is the Greatest Source of Cash? Marshalling Resources

Marshaling Resources Conclusion Marshaling Resources Conclusion Control rather than own - OPR Money is not the solution. May be the problem. Bootstrapping is an attitude What is a downside of focusing on resources? Marshalling Resources