Econ 125 final

most important question to ask when creating startup business model

"What makes you believe this business could eventually make money?"

4 reasons why every startup should boot strap

1. Helps you stay scrappy 2. Helps you attract the right community 3. Helps maintain control while finding the right parties to scale 4. Helps attract talent, people are betting them on themselve

what are steps to relationship funding from reading "startups need relationships before they ask for money?"

1. If you want money, ask for advice Build trust before you ask for money 2. Show that you know what you don't know (and have a plan to figure it out ) 3. Meet investors when you arent raising money

how to develop strategic position with a clear focus and strategic vision using SWOT?

1. Use your competitive strengths 2. address strategic weakness 3. identify strategic weakness 4. monitor initiatives over time

key elements of a pitch

1. clearly identified customer need/pain point 2. UVP 3. feasible and viable 4. effectiveness of pitch

9 new entrants to the funding game

1. corporations making equity investments in startups 2. Corporate venture funds 3. Angels and angel consortiums 4. High net worth individual who provides financial backing for small startups or entrepreneurs Super angels Equity investment funds pouring money into deals Boutique VC firms Supper connected accelerators and and incubators Crowdfunding platforms Global money

lean canvas steps

1. customer segments 2. problem 3. revenue streams 4. solution 5. UVP 6. channels 7. key metrics 8. cost structure 9. unfair advantage

why use a lean canvas?

1. fast time to market 2. understand your segments 3. focus on viable metrics (key metrics)

6 great challenges of our time

1. human rights 2. water shortage 3. health crisis 4, well being gap 5. climate change 6. loss of biodiversity

4 rounds of funding

1. pre-seed 2. seed - first round 3. round A of VC funding 4. Round B of VC funding

6 framework P's for pitching

1. problem 2. product 3. people 4. proof 5. process 6. profit the ask

what are three ways to combat threat of new entries?

1. product differentiation ex: ikea, whole foods 2. economies of scale ex: walmart, amazon 3. brand loyalty ex: coca cola, brand loyalty

What are Porter's five forces?

1. threat of new entries 2. bargaining power of buyers 3. bargaining power of suppliers 4. threat of substitute products or services 5. rivalry among existing competition

reasons to use a business model canvas

1. value orientation 2. focus 3. fast, clear, and flexible 4. risk preventative 5. common language

3 questions UVP asks

1. what customers? 2. which needs? 3. what relative price?

what is the runway of a new business with no revenue that has $100k and a monthly spending cost of 10k?

10 months

for every ___ investors, ____ 10 go big

100, 10

Hook your audience

30 seconds to get people interested, if it doesn't happen, everything else will be forgotten

Based on the article "Startups Need Relationships Before They Ask For Money," which of the following is NOT key to building trust before asking for money? A. Focusing on your product in a conversation B. Establishing common relationships C. Being conversationally humble D. Show that you know what you don't know

A. Focusing on your product in a conversation

Which of the following is NOT a core question when evaluating whether your venture is financially viable? A. How can I attract customers? B. How many customers will pay for my product/service? C. How much will it cost me to acquire a customer? D. How much should I charge for my product/service?

A. How can I attract customers?

Which of the following is NOT an example of fixed costs? A. costs to deliver your product/service B. employee compensation C. legal and accounting costs D. costs to develop a software system to deliver your digital product

A. costs to deliver your product/service

Which of the following is an element in the lean canvas? A. Key metrics B. Key partners C. Key activities D. Key resources

A. key metrics

The back-of-the-envelope model is built to determine: A. whether your startup idea could be profitable B. whether the target users would like your idea C. whether the potential investors would like your idea D. whether your idea is competitive in the market

A. whether your startup idea could be profitable

SWOT: BOXED

An online and mobile membership-free wholesale retailer that offers direct delivery of bulk-sized packages via the Boxed app or the website strengths: great relationship between employees and employer, convenience, no membership fees, branding, centralized warehouse keeps costs low weakness: forced signup make turn people away, limited assortment, less flexibility in distribution channel, weak bargaining power with brands, frequent update of product selections opportunities: - increased deployent of automated packing system, partner with existing stores, expand service to corporate customers, use of machine learning algorithm threats: increasing competition from other retailers like amazon, brick-and-mortar wholesale retailers shift focus to online shopping, as company grows, benefits like paying tuition and wedding not feasible

BUILD acronym for pitches with passion and repeatability

B-begin with 3 p's U- use each P to write a diff hook I-identify with P elicits passion L- leverage passion by devloping a pitch D- develop the other two P's into a story around your passion P

Which is NOT cited in the presentation as evidence conscious capitalism is on the rise? A. There is a new generation of businesses trying to solve environmental and social problems B. 80% of corporations want to prioritize employees and stakeholders C. 85% of students want to work for socially responsible and ethical corporations D. 75% of young adults believe companies should address the needs of society

B. 80% of corporations want to prioritize employees and stakeholders

Which is NOT cited in the presentation as evidence conscious capitalism is on the rise? A. There is a new generation of businesses trying to solve environmental and social problems B. 80% of corporations want to prioritize employees and stakeholders C. 85% of students want to work for socially responsible and ethical corporations D. 75% of young adults believe companies should address the needs of society

B. 80% of corporations want to prioritize employees and stakeholders

Which of the following is an example of Customer Segmentation? A. Merging with competitors to raise prices B. A textbook publisher offering different versions of a book for teachers and students C. Increasing advertising D. Shifting all focus towards lowering costs

B. A textbook publisher offering different versions of a book for teachers and students

According to the article "How the democratization of funding is changing the venture capital landscape", what action will create visibility for an entrepreneur and allow them to correctly value their company? A. Iterating their prototype B. Market validation C. Launching their website D. None of the above

B. Market validation

What comprises the triple bottom line? A. Revenue, expenses and profit B. People, profit and planet C. People, process and technology D. Channels, suppliers and customers

B. People, profit and planet

Which of the following is NOT mentioned as a funding source for ventures in the article "How the democratization of funding is changing the venture capital landscape"? A. VCs B. Angel investors C. Credit Card D. Crowd-funding

C. Credit Card

Which of the following is NOT a focus of the lean canvas tool? A. Focusing on the viable metrics instead of the useless ones B. Foreseeing a quicker idea-to-product transition C. Emphasizing customer interrelation and channels D. Considering various customer segments to cover a wider range of potential product users

C. Emphasizing customer interrelation and channels

Which of the following is NOT one of the new rules for thriving businesses described in John Replogle's presentation? A. Values instead of value B. Stakeholders instead of shareholders C. Planning instead of reacting D. Collaborate instead of compete

C. Planning instead of reacting

Lean canvas is A. a tool to develop a thorough analysis of a business' strengths and weaknesses B. a formal business plan used to pitch to investors C. a problem-solution approach for new entrants in the market D. All of the above

C. a problem-solution approach for new entrants in the market

According to the article "13 Tips on How to Deliver a Pitch Investors Simply Can't Turn Down", what is an important aspect of the pitch startups usually miss? A. the fixed and variable costs B. a working prototype C. an exit strategy D. each of their competitors

C. an exit strategy

Which of the following is NOT an example of an unfair advantage for a venture? A. Exclusive access to a community B. Exclusive data access C. Brand reputation D. A new market trend

D. A new market trend

Which of the following is NOT the focus when seeking to understand whether you will have a profitable and financially viable venture idea? A. Estimating the revenue B. Estimating the cost of acquiring a customer C. Estimating the fixed cost D. Estimating competitors' fixed costs

D. Estimating competitors fixed costs

Which one of the following is not listed as one of the six greatest challenges of our time in John Replogle's speech? A. Human Rights B. Water Shortage C. Climate Change D. Nuclear Power

D. Nuclear Power

According to the HBS article "How to Build a Great Pitch that Hooks Investors," which 3 P's are essential for creating a pulse-raising hook? A. Problem, proof, people B. Product, profit, process C. People, product, profit D. Problem, product, people

D. Problem, product, people

To estimate the revenue you do NOT need to forecast A. What you will charge for your product/service B. How many customers will pay C. How many times they will pay D. You need all of the above

D. You need all of the above

According to the article "Lean Canvas - a Tool Your Startup Needs Instead of a Business Plan" Stanislav explains that the business model canvas is more suitable for ____ while the lean canvas is more suitable for _____ A. small businesses; large businesses B. startups; existing businesses C. large businesses; small businesses D. existing businesses; startups

D. existing businesses; startups

what are expenses made up on in the business model?

Direct (variable) costs Fixed overhead costs

lean canvas: UVP

High-level concept Ex: Uber Uber attracts customers with its speed and low price but a package of services that allow you to find a safe ride at any time, drivers at uber in turn get to manage their schedule, manage their revenue, navigate routes through the app, and forget about taxi licenses High-level concept (like elevator pitch): like a cheaper and safer elevator pitch

what are some other barriers to entry in porters five forces mentioned in the virtual session?

How do you make your product sticky so that its hard to switch to a competition Can you develop an exclusive distribution channel thats not available to others? Can you develop some favorable cost advantages that are had to copy?

what do you do if your venture does not earn a profit?

Increase revenue, decrease costs or Pivot

reasons to create a financial model

Is your venture idea viable? How long is your runway? Or how much money do you need to raise? Whats your potential valuation? (done at quarterly or monthly level

how does walmart achieve strategy?

Low cost, high variety with laser focus (all activities centered around this)

lean canvas: cost structure

Mixed variable costs Ex: product development, marketing expenses, salaries

porters five forces: threat of substitutes

Not the same product or service, but provides the same function, easy to switch Ex: soda vs gatorade Carbonated vs non carbonated drink (still sugary, but potentially healthier) Lots of substitutes Ex: airlines, alternatives are driving and train No substitutes Ex: orange water sewer authority- local utility supplier

Lean canvas outlines a set of activities which a venture performs and how it performs so as to _____________ and _____________

Offer customer benefits that they want Earn a profit and be viable

2 things it takes to solve a problem

Pace: step change vs incremental Scale: sufficient critical mass and resources to change

sources of funding

Personal finance Grants Crowdsourcing incubators/accelerators Venture capital and angel investors (outside funding is often critical for success)

revenue streams

Represents cash a company generates from each customer segment Ex: platform for UNC students to make informed course selections For what value is your customer willing to pay? How much cash does each overall revenue stream contribute to overall revenues? Ex: UNC advising, UNC alum, undergrad students yearly fee

reframing view of business

Shifting from: Bottom line - maximize short-term shareholder value To triple bottom line - maximize long term shared value Business as a force for food- solving a higher purpose Conscious capital on the rise Benefit corporations Bcorps use power of business to solve social and environmental probelms Ex: patagonia

lean canvas: unfair advantage

Special feature competition are not able to copy or maintain Ex: UBEr Low priced at the push of a button

example of strong vs weak power of buyers

Strong vs weak Strong ex: airlines Only two parts suppliers Weak ex: walmart

example of strong vs weak bargaining power of buyers

Strong: airlines Customers have many airline options (delta, america, southwest) Weak: provider of magazine or platform Ex: netflix original, can only view it there

porters five forces: bargaining power of suppliers

Suppliers raise the price of materials (now you cant lower prices )

4 differences between lean canvas and business canvas model

Switch problem with key partners Switch solution with key activities Switch unfair advantage with customer relationships Switch key metrics with key resources

cost structures

What are the key costs incurred to operate your venture idea business model? How much money do you need to prove your idea? What are the most important costs inherent in a business model? Which costs are most expensive? Are your assumptions realistic? Where did you get your numbers?

whole foods UVP

What customers: middle aged, affluent and educated customers, passion with food and healthy Which needs: catered to specific nutritional needs (gluten, dairy), natural, fresh, organic What relative price: premium

Ikea UVP

What customers: young, first-time price, sensitive buyers with design sophistication Which needs: stylish, space efficient, and compatible furniture lines Very low price

2 questions SWOT analysis answers

What's your current position? What potential actions to take?

what is the purpose of porter's five forces?

a framework to understand competitive environment of the industry your venture is entering into Forces directly impactability to have effective strategy and sustainable competitive advantage

lean canvas

a one-page business model to visualize and present the core values of your venture idea

Which of the following is NOT one of Porter's 5 competitive forces referenced in the virtual session? A. Infringement of intellectual property B. Threat of new entrants C. Rivalry among existing competitors D. Bargaining power of buyers

a. infringement of intellectual property

What should you do to perform SWOT analysis? Consider the information you need Analyze each element of SWOT Create a strategic mission that is consistent with all four All of the above

all of the above

burn rate

amount of cash a company needs to spend before making its own income

fixed (overhead costs)

costs that do not vary with production or sales level ex: yearly rent

SWOT: threats

current and emerging external factors that may challenge the company's performance ex:New entrants Talent poaching New legislation Supply channel problem ex : ridesharing List competitive positioning matrix to determine

porters five forces: bargaining power of buyers

customers have many potential alternatives be aware of: Large customers who can dictate terms Customer whose cost structure depends on product and service Customer who can replicate the product or service easily themselves

unique value proposition

does your solution meet customer needs? A statement that conveys what your venture idea is does and how does it differs from the competition

According to the HBR Article: What is Strategy? Michael Porter explains that in order to outperform rivals, companies must: Have a competitive pricing strategy Establish a difference that it can preserve Be more innovative than all competitors Have been in the industry for at least 5 years

establish a difference that in can preserve

SWOT: opportunities

external opportunities New technology Tax cut/reform New market trends

According to the article "How to Build a Great Pitch that Hooks Investors", if you can't show passion point in Problem, Product, and People, you will lose investor interests. True False

false

two-sentence pitch

for the target audience who has a need, for the product name is a product category that offers a key benefit. Unlike competitor or substitute, we are different in one key way

new rules of business

from shareholders, value, transaction, and competition to stakeholders, value, relationship, collaborate

elevator pitch

how do you summarize your venture? Show, don't tell Explain it to a six/sixty year old Aim for core questions (UVP) Ex: linkedin: facebook for professionals Ex: tesla, all electric porsche roadster Not always needed (google for pets that use amazon -- can be confusing)

runway

how long a company can survive with expected income and expenses

SWOT: strength

internal strength Establish brand trust Lower production cost Superior customer service Patent technology Ex: apple Michael porter - the essence of strategy is choosing what not to do

SWOT: Weaknesses

internal weaknesses Lack of capital Lack of brand recognition Few distribution channels Does it contain features and function expected by target audience Ability to exceed expectations of these customers Does it solve critical problem or provide delightful user experience

Which of the following is NOT a reason trade-off occurs? Choosing to compete in one way and not another to hold a competitive advantage It is never possible for a company to improve quality and cost at the same time Inconsistencies in reputation of a company Tailoring a company to operate in a specific manner to meet a certain strategy

it is never possible for a company to improve quality and cost at the same time

lean canvas: problem

list customers top 3 problem and existing alternatives Specify customer problem your product is meant ro solve List closest competitors already solving the problem Ex: Uber Problem: expensive taxis, car availability, lack of drivers, people want to know who you drive, part-time job opportunity Existing alt: public transport, classic taxi service

lean canvas: key metrics

list key numbers that tell you how your business is doing Ex: Uber #of users, rides, income

lean canvas: customer

list target customers and users Narrow down to each specific segment Sep users and customers Specify actual people who will be the first to use a raw product and provide feedback Ex: UBER Passengers and drivers Early adopters; public transport, classic taxi service

lean canvas: solution

outline possible solution for each problem Explain what experience the customers are meant to have Ex: uber: cheaper ride, wide car network, driver passenger experience, flexible work schedule

2 great qualities all pitches share

passion and repeatability

lean canvas: channels

paths to your customers Ex: uber - WOM, PR, user referral

what is strategy?

positioning your venture outside competitors and outside forces and gain a sustainable competitive advantage. choosing who your partners will and won't be, and implement activities to attract and keep them - michael porter

direct costs

price that can be directly tied to the production of specific goods or services. Direct costs are often variable costs, meaning they fluctuate with production levels such as inventory.

Which of the following BEST describes how IKEA creates a barrier to entry for competitors? Economies of scale Exclusive distribution channel Iterating fast and pivoting Product differentiation

product differentiation

profits =

revenue - expenses

"back of the envelope model" YDAT example

revenue= - what you'll charge (5$ subscription fee) - how many customers will pay (5% user sign up) - how many times they will pay( will keep half of clients) 2 month assumption each customer acquired = 5 x 2 months = $10 lifetime revenue cost = What it'll cost you to acquire a customer YDAT no cost What it'll cost you to deliver your product or service to a customer -5$ cost to deliver: .60 cents total costs: $5.60 10-5.60 - 4.40 profits per unit

lean canvas: revenue streams

sources of revenue Ways to make money for EACH customer segment Ex: Uber 25% of pay for each ride

SWOT: Uber

strength: well-recognized brand, high standard of service, app-based method, low operation cost and low competition weakness: idea is easily imitated, relationship between uber and drivers is ethically questionable, company and customers have no bonding costs of operating vehicles are high, drivers dont earn much, privacy concerns opportunities: customers dissatisfied with traditional cab companies, can exploit new and big markets in other countries, can tap growing market in suburban areas threats: drivers unhappy with low profit margins, some new legal regulations will ban uber from operating in other countries, increasing competition will decrease prices, fraud and scandals increasing

t/f: You should develop a strategy because you will not be able to continually out-execute the competition

true

pulse raising test

using 3 p's to find a hook that creates an emotional response Problem Product people