1. Venture Planning Chapter 1 Dowling Dowling BA 560 Fall 2005

2. BA560 Venture Planning Prof. Dowling2 The Entrepreneurial Revolution During the last 30 years, America has unleashed the most revolutionary generation the nation has experienced since its founding in 1776.

3. BA560 Venture Planning Prof. Dowling3 The Entrepreneurial Revolution  Nearly four of ten households in America – 39.5% – includes someone with a primary role in a new or emerging business.  Uniformly, the self-employed report the highest levels of personal satisfaction, challenge, pride and remuneration.

4. BA560 Venture Planning Prof. Dowling4 The Entrepreneurial Revolution  More than 90% of the Inc. 500 founders and 80% of the executives said smaller entrepreneurial companies have become role models for the way businesses should operate.  69% of entrepreneurs, but only 40% of executives, say “I love what I do for a living.”  1/3 of executives say, if they could live their lives over again, they would choose to run their own company.

5. BA560 Venture Planning Prof. Dowling5 The Entrepreneurial Revolution  New industries replace and displace older ones in the creative birth and destruction process, articulated by Joseph Schumpeter.  Birch reported the pace of this process increased from the 1960s through the 1990s. In the 1960s, it took 20 years to replace 35% of firms on Fortune 500. By the 1990s, the same level of replacement occurred every 3 to 4 years.

6. BA560 Venture Planning Prof. Dowling6 The Entrepreneurial Revolution Fully 95% of the wealth in America was created after 1980.

7. BA560 Venture Planning Prof. Dowling7 The Entrepreneurial Revolution Drucker’s Postulate A tenfold increase in the productivity of any technology results in economic discontinuity.

8. BA560 Venture Planning Prof. Dowling8 How important are entrepreneurs and entrepreneurship?  Leadership: Management, economic and social renewal  Job creation  Innovation  R&D effectiveness  Competitiveness & productivity  Formation of new industries  Regional economic development  Risk capital formation

9. BA560 Venture Planning Prof. Dowling9 The Entrepreneurial Revolution  David Birch: The Job Creation Process, groundbreaking research  New & growing businesses generate of all new jobs.  New & growing businesses generate 81.5% of all new jobs.

10. BA560 Venture Planning Prof. Dowling10 The Entrepreneurial Revolution mis-Fortune 500?  Since 1980, 34 million new jobs created.  In same period, 5 million jobs lost from Fortune 500 firms. New Job Creation 1980-2000

11. BA560 Venture Planning Prof. Dowling11 The Entrepreneurial Revolution Small business creates 81.5% of all new jobs in the U.S. Notable 99% of all employers are small businesses, and their numbers are rising. In 1975 there were 13.3 million small businesses in the U.S. In 2000, there were 27.5 million – an increase of 107%. Source: Small Business Survival Index 2001; Raymond J. Keating, Small Business Survival Committee

12. BA560 Venture Planning Prof. Dowling12 The Entrepreneurial Revolution Small Business Survival Index Oregon Rank: 36 Oregon Score: 50.01 Comparisons Nevada Rank:1 Nevada Score:27.06 Washington Rank:3 Washington Score:32.01 Rhode Island Rank:50 Rhode Island Score:59.01 Notable Rank shows Oregon’s overall placement among national totals. Lower scores are best, and figure in such factors as taxes, level of bureaucracy, minimum wage levels and other indicators of small business success. Source: Small Business Survival Index 2001; Raymond J. Keating, Small Bus. Survival Committee

13. BA560 Venture Planning Prof. Dowling13 Oregon Firms By Industry Service businesses make up fully 35 percent of total Oregon firms. Note: F.I.R.E.: Finance, Insurance and Real Estate Source: Corporate Demographics: Corporate Almanac; Cognetics, Inc. 2001

14. BA560 Venture Planning Prof. Dowling14 Oregon Firms By Revenue Oregon ranks 16 th in the nation in percentage of businesses grossing $500,000 or less each year. Source: Corporate Demographics: Corporate Almanac; Cognetics, Inc. 2001

15. BA560 Venture Planning Prof. Dowling15 Oregon Firms by Survival Rate Oregon’s overall survival rate for 1996-2000 of 81.5 percent compares favorably with California (80.6%) and Washington (80.0%). Source: Corporate Demographics: Corporate Almanac; Cognetics, Inc. 2001 Age of firms

16. BA560 Venture Planning Prof. Dowling16 Oregon Firms by Employees Oregon is reliant on small businesses – only seven states have a higher percentage of businesses with only 1 to 4 employees. Source: Corporate Demographics: Corporate Almanac; Cognetics, Inc. 2001

17. BA560 Venture Planning Prof. Dowling17 The Entrepreneurial Revolution Woman-owned businesses in 1970:  Employed fewer than 1,000,000 workers  Totaled 4% of all businesses Woman-owned businesses in 2001:  Employed more than 18,000,000 workers  Totaled 35% of all businesses

18. BA560 Venture Planning Prof. Dowling18 The Entrepreneurial Revolution Increasingly Diverse 621,000 African-American business owners with sales of $32 billion. 706,000 Asian-American business owners with sales of $1.0 trillion. 1.5 million Hispanic business owners with sales of $200 billion.

19. BA560 Venture Planning Prof. Dowling19 The Entrepreneurial Revolution ‘Radical Innovation’ Since WWII, small entrepreneurial firms have been responsible for half of all innovation and 95 percent of all radical innovation in the United States.

20. BA560 Venture Planning Prof. Dowling20 The Entrepreneurial Revolution ‘Radical Innovation’  Smaller firms generated twice as many innovations per R&D dollar as the giants  Twice as many innovations per R&D scientists than the giants  24 times as many innovations per R&D dollar versus firms with more than 10,000 employees

21. BA560 Venture Planning Prof. Dowling21 The Entrepreneurial Revolution Venture Capital “Venture capital has deep roots in our history … and is the rocket fuel of America’s entrepreneurial engine.” (Timmons, P.9)

22. BA560 Venture Planning Prof. Dowling22 The Entrepreneurial Revolution Angels Among Us?  Angels invest $60-80 billion in the entrepreneurial process, and can serve as coach, confidant, mentor and cheerleader. Who are these ‘Angels’?  Private investors. Moderately wealthy to very wealthy, they generally invest close to home with limited portfolios of activities – activities about which they are very familiar. Conversely, traditional venture capitalists are into whatever’s ‘hot,’ not necessarily the industries they know.

23. BA560 Venture Planning Prof. Dowling23 The Entrepreneurial Revolution Key points – Chapter 1  Successful entrepreneurs are obsessed with opportunity and driven by it.  The lead entrepreneur can make a significant difference in the odds of success

24. BA560 Venture Planning Prof. Dowling24 The Entrepreneurial Revolution Key points – Chapter 1 (Cont.)  To build a major small company from the initial venture, additional management team members are usually required.  A business plan can provide the entrepreneur with the robust framework and discipline for evaluating and shaping the startup opportunity, evaluating the gaps, identifying the necessary resources to make it happen, and securing needed capital.

25. BA560 Venture Planning Prof. Dowling25 The Entrepreneurial Revolution Discussion Question ‘We are at the dawn of the new age of equity creation … Entrepreneurs create value and realize that value through the creation of equity through ownership. The entrepreneurial process is about making the pie bigger.’ Timmons, P. 14 Do you agree with this assessment of the American/global economic scene?

26. BA560 Venture Planning Prof. Dowling26 The Entrepreneurial Revolution Discussion Question Many people prefer predictability to unpredictability. Yet, the entrepreneurial process is inherently chaotic and unpredictable. Who will succeed and who will falter in this dynamic process? What skills and mindsets are required?

27. BA560 Venture Planning Prof. Dowling27 The Entrepreneurial Revolution Interview an Entrepreneur Step 1: Contact the person Step 1: Contact the person Step 2: Identify specific questions Step 2: Identify specific questions Step 3: Conduct the interview Step 3: Conduct the interview Step 4: Evaluate what you’ve learned Step 4: Evaluate what you’ve learned Step 5: Write a thank-you note Step 5: Write a thank-you note