1. Marshalling Resources MBAX 6100 Marshalling Resources Frank Moyes Leeds College of Business University of Colorado Boulder, Colorado

2. Marshalling Resources Today’s Agenda  Barbara Mowry, CEO Silver Creek Systems  Strategic alliances  Marshalling resources  Bootstrapping  Mid-term review

3. Marshalling Resources Next Week  Legal Issues  Intellectual property  Employee agreements  Read BZ-9 & 10  Case: Mason and Sheppard  Cooley Godward

4. Marshalling Resources Strategic Alliances

5. 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

6. 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 had 220 active investments in 2004

7. Marshalling Resources Advantages to Strategic Alliances  Gain access to a resource, e.g. production, skills, capital  Economies of scale  Risk & cost sharing  Gain access to international market  Learning  Speed to market  Neutralizing or blocking competitors Barringer & Ireland, Entrepreneurship

8. Marshalling Resources Risks 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 Barringer & Ireland, Entrepreneurship

9. Marshalling Resources

10. What Resources Do New Ventures Have?  People  Physical Assets  Intangible  Financial  Social & Personal

11. Marshalling Resources Social Network  Network  Industry contacts  Mentors, YPO  Family  Outside service providers- legal, accounting, bankers  Board of Directors and Advisors  Owe you favors

12. Marshalling Resources Personal Resources  Staying power  Your personal resources  Borrowing capacity  Spouse who works  Culture that you create  Personal characteristics  You are likeable  Integrity

13. Marshalling Resources What is Bootstrapping?  “Launching ventures with modest personal funds”, Bhide  Other People’s Resources (OPR), “Key is not to own resources, but to have use of & be able to control or influence deployment”, Timmons  Scrooge mode

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

15. Marshalling Resources 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  Reduces risk

16. Marshalling Resources Benefits of Bootstrapping - Provides Flexibility  Permits strategic experiments  Make changes quickly  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

17. Marshalling Resources 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

18. Marshalling Resources Benefits of Bootstrapping - Sets the Right Culture  Employees  Suppliers

19. Marshalling Resources Can An Entrepreneur Have Too Much Money?  Don’t focus or address real issues  Throw money at it  Dot.bombs  Try-it, fix-it approach is difficult  “Are we being fooled twice”  Try to compete on price – buy market share  Don’t focus on achieving high margins

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

21. Marshalling Resources 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?