2. Contributed by: K. Kumar, Faculty & Chair Person NSRCEL -IIM B, India Getting Started: Entrepreneurial Goals and Choice of Ventures

3. ©Prof.K.Kumar, IIMB Getting Started … Entrepreneurial motivations, goals, expectations and capabilities vary across individuals Likewise, opportunities also vary in their characteristics and critical success factors Opportunities are to be screened for both viability and ‘fit’ with the entrepreneurs before they are pursued

4. ©Prof.K.Kumar, IIMB Entrepreneurial Strategy Heuristics Venture Characteristics *Typology of Ventures Entrepreneurial Fit *Personal goals *Entrepreneurial Capacity Strategy to Exploit * Research& Analysis *Process *Resources *Growth Iterative

5. ©Prof.K.Kumar, IIMB Typology of New Ventures Revolutionary ventures Niche ventures Ventures that are propagators of new technology or innovations Hustle ventures Speculative (deal) ventures

6. ©Prof.K.Kumar, IIMB Revolutionary Ventures- Characteristics Involve a revolutionary idea, innovation or concept Involve new processes or manufacturing techniques Can shake up a matured industry or can create a new industry Examples?

7. ©Prof.K.Kumar, IIMB Revolutionary Ventures- Critical Success Factors Large investments spread over time with uncertain outcomes Building organizational capabilities and sustainability Requires a lot of creativity and exceptional managerial capabilities to execute

8. ©Prof.K.Kumar, IIMB Revolutionary Ventures and Entrepreneurial Fit Suits those who want to win or lose on a grand scale New entrepreneurs can attempt but should be clear about their role in the future growth of the venture Entrepreneurs should have extraordinary organizing capabilities

9. ©Prof.K.Kumar, IIMB Niche Ventures- Characteristics Need not be a radical concept or idea Serve segments with a unique need not served by mainstream offerings Examples?

10. ©Prof.K.Kumar, IIMB Niche Ventures- Critical Success Factors Existence of a niche that can be economically serviced Simple and easy to use product or service Modest managerial and leadership skills

11. ©Prof.K.Kumar, IIMB Niche Ventures and Entrepreneurial Fit Ideal for entrepreneurs with insightful knowledge of the larger market and the niche in particular Suits entrepreneurs with moderate growth/wealth ambitions and limited resources

12. ©Prof.K.Kumar, IIMB Propagatory Ventures- Characteristics Propagate an emerging technology or a product Examples?

13. ©Prof.K.Kumar, IIMB Propagators- Critical Success Factors Superior execution – speed and efficiency Nimbleness rather than a great strategy Investment and Managerial capacity to attempt market dominance

14. ©Prof.K.Kumar, IIMB Propagators – Fit With Entrepreneurs Ideal for entrepreneurs with proven superior capability to execute Suits entrepreneurs with competence in deal making and fund raising to support growth Entrepreneurs should want be excited by high growth

15. ©Prof.K.Kumar, IIMB ‘Hustle’ Ventures- Characteristics Does not need an innovative approach No avenues to build proprietary assets Low capital requirements Limited exit options Examples?

16. ©Prof.K.Kumar, IIMB ‘Hustle’ Ventures- Critical Success Factors Extraordinary ability to execute Meticulous selection and grooming of resources Vision and values of the organization

17. ©Prof.K.Kumar, IIMB Hustle Ventures- Fit With Entrepreneurs Suits entrepreneurs with limited resources and modest growth ambitions Fits those who value professional satisfaction and do not seek high growth Ideal for entrepreneurs who seek a lifestyle business and satisfactory cash flow as against high growth and wealth creation

18. ©Prof.K.Kumar, IIMB Speculative Ventures- Characteristics An opportunity to buy low and sell high Financial risks depend on the terms of the deal No staged commitments- fully exposed once the deal is made Examples?

19. ©Prof.K.Kumar, IIMB Speculative Ventures- Critical Success Factors Risk Taking Ability Insight and Timing Speculative Instinct

20. ©Prof.K.Kumar, IIMB Speculative Ventures-fit With Entrepreneurs Suits those who want quick profits Those who are willing to take commensurate risks Those who have the financial strength and staying power to go through the deal

21. ©Prof.K.Kumar, IIMB Use of Typology For understanding the broad strategic issues Types are not exhaustive and often overlap For assessing the fit between the venture, resources and the entrepreneur’s preferences For assessing the growth potential and sustainability For assessing the nature and level of analysis required before getting the venture off the ground

22. © Prof.K.Kumar IIMB Acquiring Resources Acquiring resources for a new venture is a task of enlisting stakeholders  Customers  Financiers  Employees  Suppliers

23. © Prof.K.Kumar IIMB What Are the Challenges? Uncertainty surrounding the venture Downside risk perceived by the stakeholder (resource provider)

24. © Prof.K.Kumar IIMB Desirable Attributes in Stakeholders Well diversified Experienced and specialized Has excess capacity Demonstrated risk seeking disposition

25. © Prof.K.Kumar IIMB Convincing Stakeholders Entrepreneurial attributes ( fairness and commitment) Ham and egging Basic sales closing skills Special deals and benefits ‘Mimicry’ ( appearance of stability and size)

26. © Prof.K.Kumar IIMB Convincing Stakeholders Framing (accentuating positives and playing down negatives) Broad search Incremental commitments (trial orders, pilot projects, ad hoc limits) Second tier resources Using social capital

27. Sources of Finance Own funds Outside equity Debt Internal generation

28. Bootstrap Finance VC is a poor fit for many ventures Money from outside investors comes with strings attached

29. Hidden Costs of Outside Money False sense of security leading to complacency and lack of control Diminished flexibility to adopt the ‘try it- fix it’ approach required in new ventures Conflicts between investors and managers can be debilitating Hence - bootstrap !

30. How to Bootstrap? Get operational quickly Look for quick break even and cash generating projects Offer high value products or services that can sustain personal selling Forget about the crack team Keep growth in check

31. How to Bootstrap? Focus on cash, not on profits, market share or anything else Cultivate the banks before the business becomes creditworthy

32. Limits to Bootstrapping Ideal for hustle and niche ventures Revolutionary ventures can’t be completely bootstrapped Speculative ventures are even more difficult to bootstrap

33. Limits to Bootstrapping Ventures outside the promoter’s knowledge domain are difficult to bootstrap Ventures that require some critical assets to be deployed even before testing out the business concept can’t be bootstrapped Need to change tact as the business approaches the growth phase