Resource Requirements Venture Planning Chapter 11 Dowling Fall 2005

Resource Requirements The Entrepreneurial The Entrepreneurial Approach to Resources People People Financial resources Financial resources Assets (plant, equipment, etc.) Assets (plant, equipment, etc.) A business plan A business plan

Resource Requirements Entrepreneurship Entrepreneurship The process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled. The process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled. Entrepreneurs seek to use the minimal possible amount of all types of resources at each stage in their venture’s growth. Entrepreneurs seek to use the minimal possible amount of all types of resources at each stage in their venture’s growth. Don’t own resources – control resources. Don’t own resources – control resources.

Resource Requirements Entrepreneurs reduce some risk by… Entrepreneurs reduce some risk by… Capital Capital Amount required is smaller, reducing Amount required is smaller, reducing dilution of founder’s equity Flexibility Flexibility Without ownership of resources, entrepreneurs can Without ownership of resources, entrepreneurs can commit and de-commit quickly

Resource Requirements Entrepreneurs reduce some risk by… Entrepreneurs reduce some risk by… Low sunk cost Low sunk cost Sunk costs are lower if firm exercises Sunk costs are lower if firm exercises option to abort Costs Costs Fixed costs are lowered, favorably Fixed costs are lowered, favorably affecting breakeven Reduced risk Reduced risk Reduce total exposure, and avoid problems such as Reduce total exposure, and avoid problems such as obsolescence of hard assets

Resource Requirements Bootstrapping Bootstrapping Entrepreneurs ask at every step how they can accomplish more with less. Entrepreneurs ask at every step how they can accomplish more with less. “For the great majority of would-be founders, the biggest challenge is not raising money but having the wits and hustle to do without it.” – Amar Bhide “For the great majority of would-be founders, the biggest challenge is not raising money but having the wits and hustle to do without it.” – Amar Bhide

Resource Requirements OPR OPR Using OPR (‘Other People’s Resources’) is an important approach for entrepreneurs. Using OPR (‘Other People’s Resources’) is an important approach for entrepreneurs. The key is to have use of the resource and being able to control or influence the deployment of the resource. The key is to have use of the resource and being able to control or influence the deployment of the resource.

Resource Requirements Outside people resources Outside people resources Boards of directors Boards of directors The decision The decision Selection criteria Selection criteria Reasons appointees decline: Reasons appointees decline: Liability Liability Harassment Harassment Time and risk Time and risk Consider alternatives to boards Consider alternatives to boards

Resource Requirements Analyzing financial requirements Analyzing financial requirements Last step of the process Last step of the process Determine what financial resources are Determine what financial resources are required only after the: Opportunity has been assessed, Opportunity has been assessed, A new venture team has been formed, and A new venture team has been formed, and All resource needs have been identified. All resource needs have been identified.

Resource Requirements Key points summary Key points summary Successful entrepreneurs bootstrap to marshal and minimize resources. Successful entrepreneurs bootstrap to marshal and minimize resources. Control, not necessarily ownership, of resources is key to the “less is more” resource strategy. Control, not necessarily ownership, of resources is key to the “less is more” resource strategy. Entrepreneurs are creative at winning OPR. Entrepreneurs are creative at winning OPR. Must you find outside advisors? Only if they add value through know-how and networks. Must you find outside advisors? Only if they add value through know-how and networks. Access to resources is better today than ever before. Access to resources is better today than ever before.

Resource Requirements Discussion question Discussion question Think of the interview you conducted with an entrepreneur. Did your subject provide insights as to how she or he “bootstrapped” their own ventures? Think of the interview you conducted with an entrepreneur. Did your subject provide insights as to how she or he “bootstrapped” their own ventures?