Entrepreneurship and Innovation Exam 2

Equity Crowdfunding

A form of crowdfunding that gives investors the opportunity to become shareholders in a company

Common Pricing Strategies: Skimming

A form of high pricing method, generally used for new products or services that face very little or no competition

Copyright

A form of protection provided to the creators of original works in the areas of literature, drama, art, music, film and other intellectual areas

Patent

A grand of exclusive property rights on invention through the US and other governments

Founding Team

A group of people with complementary skills and a shared sense of commitment coming together in founding an enterprise to build and grow the company

Brand Strategy

A long-term plan to develop a successful brand; it involves how you plan to communicate your brand messages to your target customers

Career Support

Sponsorship Coaching Exposure and visibility Challenging assignments Protections and preservation

Resources for IP Information

US Patent and Trademark Office US Copyright Office Invent Now Google Patents Pat2PDF Inventors Digest Patent Wizard Patent Pro

10 Popular Revenue Models

Unit Sales Revenue Model Advertising Revenue Model Data Revenue Model Intermediation Revenue Model Licensing Revenue Franchising Revenue Model Subscription Revenue Model Professional Revenue Model Utility and Usage Revenue Model Freemium Revenue Model

Why Write a Business Plan?

A business plan can be useful at the stage when you have partners or team members on board. It allows everyone to articulate their vision and strategy, and ensures that everyone is aligned with current and future plans for the business. It is also a valuable benchmarking tool as it forces you to be honest about your company's performance by not only showing areas where your business exceeded expectations, but also those instances when your strategies didn't work out, and the lessons you learned from this

Income Statement (aka Profit and Loss Statement)

A financial report that measures the financial performance of your business on a monthly or annual basis

Guerilla Marketing

A low-budget strategy that focuses on personally interacting with a target group by promoting their products and services through surprise or unconventional means Very popular in social media Low budget Spreads quickly Surprises audience Spread by technology While guerrilla marketing can be a creative and affordable way to reach your desired target market, it has its limitations. In order to conduct a successful guerilla campaign, you need to have a good understanding of your target market and where the high traffic exists; for example, subway, mall, university campus and so on. You also need to get the timing right: should you conduct the campaign during business hours, at weekends, or morning or night? Guerilla marketing can also be difficult to measure: how do you know the good feeling or memory you're giving your customer is going to translate into sales? Monitoring the media (newspapers, radio) for mentions of your campaign, and taking the time to scout blogs, forums, and social networks to see who is talking about your company and your product is a good start in measuring the campaign's impact on sales.

Positioning

A marketing strategy that focuses on how your customers think or talk about product and a company relative to competitors

Groupthink

A phenomenon where people share too similar a mindset, which inhibits their ability to spot gaps or errors

Common Pricing Strategies: Psychological Pricing

A pricing method intended to encourage customers to buy on the basis of their belief that the product or service is cheaper than it really is

Common Pricing Strategies: Value-Based Pricing

A pricing method that involves pricing a product based on how in benefits the customer

Common Pricing Strategies: Introductory Offer

A pricing method to encourage people to try an new product by offering it for free or at a heavily discounted price

Common Pricing Strategies: Loss Leader

A pricing method whereby a business offers a product or service at a lower price in an attempt to attract more customers

Common Pricing Strategies: Target-Return Pricing

A pricing method whereby the price is based on the amount of investment you have put into your business

Packaging

A process that explores every single visual element of the external appearance of an offering through the eyes of your customer

Entrepreneurial Marketing

A set of processes adopted by entrepreneurs based on new and unconventional marketing practices in order to gain traction in competitive markets Investment of time, energy, creativity Main factor is customer Goal is to satisfy customer needs Long-term customer relationships Marketing message is a dialogue Innovation, risk taking, resourcefulness, value creation, and proactivity are some of the main features of entrepreneurial marketing. It focuses on building trust, finding out customer preferences, and creating long-term competitive advantage. It also provides the entrepreneur with the opportunity to highlight the company's strengths while showcasing the different ways the product adds value.

Basic Principles of Marketing: Marketing Mix

A tool that helps to define the brand and how it differentiates from the competition The marketing mix is constantly changing; you don't simply develop it and move on. By continually reviewing and tweaking your marketing mix you will be better able to adjust to an ever-changing competitive environment. While the 4 Ps model is arguably the most recognized, newer marketing models have been developed to enhance the traditional model. Some of them extend the 4 Ps to 7 Ps, including people, which refers to the people responsible for every aspect of sales and marketing; packaging, which is a process that explores every single visual element of the external appearance of an offering through the eyes of your customer; and positioning, which is a marketing strategy that focuses on how customers think or talk about product and a company relative to competitors.

Common Pricing Strategies: Cost-led Pricing

A type of pricing strategy that involves calculating all the costs involved in manufacturing or delivering the product or service, plus all other expenses, and adding an expected profit or margin by predicting your sales volume to get the approximate price

Common Pricing Strategies: Competition-led Pricing

A type of pricing strategy when prices are guided by other businesses selling the same or very similar products and services

Common Pricing Strategies: Customer-led Pricing

A type of pricing strategy when you ask customers how much they are willing to pay, and then offer it at that price

Common Pricing Strategies: Bundled Pricing

A type of pricing strategy whereby companies package a set of goods or services together and then sell them for a lower price than if they were to be sold separately

Trademark

Any word, name, symbol, or device used in business to identify and promote a product. Its counterpart for service industries is the service mark

4 P's: Product

Anything tangible or intangible (such as a service) offered by the company that includes the features, the brand, how it meets customer needs, how and where it will be used, and how it stands out from competitors

Bootstrapping Strategies

Be frugal Renting/ leasing before buying Minimize personal salary Use your network Offering equity reimbursement Low operating inventory Above all, remember the old saying "cash is king." Rather than spending too much time fretting over balance sheets, forecasts and profit and loss, focus on the amount of cash you have to keep your business operative. How long can you keep your business afloat with the cash you have? Weeks? Months? It's important to be mindful of your cash flow: cash in, cash out, and overall all cash needs

Role Modeling

Behavior to emulate Work ethic and values Inspiration and motivation

Traditional Marketing

Big cash investment Main focus is on product Goal is to maximize profit Short term customer relationship Marketing message is monologue

Utility and Usage Revenue Model

Charging customers fees on the basis of how often goods or services are used

Subscription Revenue Model

Charging customers payment to gain continuous access to a product or service

Common Crowdfunding Mistakes

Choosing the wrong platform Setting an unrealistic funding goal Not having enough presence on social media Lack of updates or communication Failure to get feedback and advice from the "crowd" Insufficient media coverage Failure to deliver product or rewards If your first crowdfunding campaign does not succeed, it doesn't mean that all is lost. Small changes can go a long way to ensuring your chances of success next time around. In the next chapter we will explore how entrepreneurs use equity financing to launch their new ventures.

Data Revenue Model

Company generates revenue by selling high-quality, exclusive, valuable information to other parties

Common Pricing Strategies

Competition-led pricing Customer-led Pricing Loss Leader Introductory Offer Skimming Psychological Pricing Fair Pricing Bundle Pricing

Trade Secret

Confidential information that provides companies with a competitive edge and is not in the public domain, such as formulas, patterns, compilations, programs, devices, methods, techniques, or processes

Four Types of Intellectual Property (IP)

Copyright Trademark (and service mark) Trade secret Patent

Calculating Prices

Cost-Led Pricing: Price based on all costs associated with producing and adding an expected profit Target-Return Pricing: Price based on the amount of investment Value-Based Pricing: Price based on how it benefits the customer

Four Key Revenue Drivers

Customers Frequency Selling Process Price

Four Contexts of Crowdfunding: Patronage Model

Describes the financial support given by backers without any expectation of a direct return for their donations. A large proportion of these donations are given to the arts For example, when sculptor Carrie Fertig failed to get funding for a giant pair of glass dove wings to hang in Chichester Cathedral in the UK, she turned to crowdfunding website Indiegogo for help. Fertig received the funds with no strings attached and was able to realize her artistic dream.

Important aspects to include in a business brief

Description of the business idea (company overview) Value proposition that highlights the problem being solved or need being met Customer profile and market size Proof of market demand and future growth Description of the entrepreneur/team Actions taken to date and future actions planned Simple pro forma income statement (up to 3 years)

Generating Revenue for Free

Direct Cross-Subsides: Give away services, sell products Give away products, sell services Give away software, sell hardware Give away hardware, sell software Give away the show, sell the drinks Give away the drinks, sell the show Multi-Party Markets Freemium

Licensing Revenue

Earning revenue by giving permission to other parties to use protected intellectual property (patents, copyrights, and trademarks) in exchange for fees

Psychosocial Support

Encouragement and emotional support Acceptance and confirmation Counseling Friendship Personal feedback

Franchising Revenue Model

Franchises are sold by an existing business to allow another party to trade under the name of that business

Freemium Revenue Model

Free (mainly web-based) basic services are mixed with premium or upgraded services

Four Contexts of Crowdfunding: Lending Model

Funds are offered as loans with the expectation that the money will be repaid. Lending models can take different forms; for example, some backers will expect interest to be paid on the loan, while other backers might only expect to be reimbursed if and when the project starts generating revenue, or if it begins to make a profit. There can also be elements of the patronage model within the lending process For example, in the case of microfinanced loans, where small amounts of money are loaned to impoverished people in developing countries, backers might waive any expectation of repayment as the loans are promoting the social good

TRIM - I

Idea What is the clearest and most simple description of the idea? How is the idea unique or differentiated? What problem is being solved? How do you know this is a problem? What needs are being met? How do you know this is a need? What is the value proposition? What trends support the idea? Is there anyone doing what you're doing? If yes, how are you doing it better? How can you learn from what they've already done? If no, how are people solving the problem currently? What is the most important benefit of your product/service? Do people really care about this benefit? Is there intellectual property involved? Is there anything patentable?

Characteristics of a Great Founding Team

Industry experience Ability to manage complex problems Ability to cope with pressure Drive to overcome obstacles to achieve growth Positive social relations within the team are also key when it comes to providing social and emotional support

Intellectual Property

Intangible personal property created by human intelligence, such as ideas, inventions, slogans, logos, and processes

Four Contexts of Crowdfunding: The Investor Model

Involves giving backers an equity stake in the business in return for their funding. This model takes a few different forms; for example, investors can either buy shares in the company, which means they would be given a degree of ownership or certain rights in a project; or investors can take a share of the future revenue or profits of a company without taking ownership. Morph Costumes, described in the Entrepreneurship in Action feature, gave away a minority stake in their business to investors in exchange for £4.2 million (nearly $6 million) in order to grow their costume enterprise

Four Contexts of Crowdfunding: Reward-Based Model

Involves rewarding backers for supporting a project. As in the example of Kickstarter, this is the most popular form of crowdfunding today. Rather than giving away precious equity or a large share in the profits, entrepreneurs give rewards to their backers which can often take the form of more unique offerings such as product samples or experiences. For example, Coolest Cooler founder Ryan Grepper rewards his backers by giving them the option to receive a discount on the Coolest Cooler product, or branded T-shirts and beverage cups. Backers who donate over $2000 receive a promise from Grepper himself to attend parties featuring the Coolest Cooler and to personally man the bar!

TRIM

Is a planning tool that identifies the types of people needed for the team, the resources available and needed, the details of the idea, and the potential market for the product or service. It serves as a tool for determining the types of people you would like on your team and how you might go about attracting them to your business, the resources you have available to grow the business and the types of access you may have to other resources, the validity of your idea, and the potential market for your product or service

Key Components of Business Model Canvas (BMC)

Key partners, key activities, value proposition, customer relationships, customer segments, key resources, and channels

Crowdfunding Sites

Kickstarter—U.S. based Indiegogo—Global RocketHub—Science-related projects Peerbackers—Creative, civic, entrepreneurial projects Quirky—for inventors Crowdrise—nonprofit fundraising Just as crowdsourcing is a useful way to acquire valuable feedback and information, crowdfunding can be an effective way of getting the funds you need to really get your business off the ground. Crowdfunding is rapidly gaining momentum and shows no signs of slowing down. Crowdfunding has helped to raise billions in funding for all types of businesses, including art, theatre, photography, charity, retail, fashion, gaming, real estate and much more. Crowdfunding makes all types of entrepreneurship accessible to those who want to start their own business. In a time when banks have become more nervous about lending money, and investors are more cautious than ever before, crowdfunding has become a democratized method of raising money for many budding entrepreneurs—and the momentum is still growing.

Building Networks

Local events Public lectures Chambers of Commerce Meetup groups Forging connections goes beyond striking up conversations with friends and acquaintances; a really useful network expands to meeting other individuals in your geographic location. Check online for public calendars of local events, including public lectures at universities, Chambers of Commerce, and events announced in the local newspaper. Many cities around the world have Meetup groups—local get-togethers of people who share a passion for interests, ranging from hiking, to sightseeing, to biking, to meditations, to entrepreneurs. They provide a way to find people locally who share a common interest with you There are also more formal networking groups solely for the entrepreneur community

TRIM - M

Market Who is your primary customer? What do they care about? How will you reach them? How will they hear and learn about your product/service? How much does it cost to acquire a customer? How will you keep them? How much does that cost? How many potential customers are there? Is this number growing? What are they willing to pay? What feedback have you received from your customers? What is the overall size of the market in dollars? What percent of the market can you realistically acquire in year 1, 2, and 3?

Quick Guide to Successful Crowdfunding

Money matters Focus on the pitch Make the most of your campaign Commit to your campaign Avoid the crowdfunding curse

The Value of Team Diversity

Not only difference in demographics, but also... Career path Goals Viewpoints Educational backgrounds Life experience Homogeneous and heterogeneous teams Groupthink and healthy conflict Both bring more insight and ideas into play

Social Capital

Personal social networks populated with people who willingly cooperate, exchange information, and build trusting relationships with each other

Generating Revenue for Free: Direct Cross-Subsidies

Pricing a product or service above its market value to pay for the loss of giving away a product or service for free or below its market value

Forms of Planning: Back of a Napkin

Primary Audience—Friends and prospective team members Purpose—To gain clarity on the idea Output—A drawing on napkin

Form of Planning: Business Plan

Primary audience—Banks and investors Purpose—Obtain funding Output—Approximately 25+ page formal document and appendices A written description of the future your envision for your business, including what you plan to do and how you plan to do it

Form of Planning: Pitch Deck

Primary audience—Early investors, incubators, and accelerators Purpose—To obtain funding and meetings with potential investors Output—Approximately 10-20 slide professional Presentation

Forms of Planning: Business Brief

Primary audience—Friends and family investors, advisors, other interested stakeholders Purpose—To have a concise written document to provide to interested parties Output—2-3 page-typed professional document

Forms of Planning: Business Model Canvas (BMC)

Primary audience—Team members and advisors Purpose—To identify gaps and evaluate business integration Output—Completed and tested business model canvas

Forms of Planning: Sketches on a Page

Primary audience—Team members and early employees Purpose—To visualize the future potential Output—More detailed drawing or informally written

Forms of Planning: Feasibility Study

Primary audience—Team members and early investors Purpose—To prove that the venture has market potential Output—10 page-typed professional document

The Value of Networks

Private information Access to diverse skillsets Power There are three main advantages to networks: private information, access to diverse skillsets, and power. Private information is the type of information that is not available to the general public. Gathering unique information from network contacts, such as the release date of a new product, or what investors look for during a pitch can give entrepreneurs the edge over the competition. The value of private information increases when trust is high in the network. Secondly, networks provide access to diverse skillsets. A highly diverse network of contacts gives you a broader perspective of certain situations, and allows you to trade information and skills with people who have different experiences and backgrounds to your own. By actively taking part in events and seeking out new contacts at meetings, you will be able to find people with complimentary skills and experience to help you grow your venture. As the late Nobel Prize winner Linus Pauling said, "The best way to have a good idea is to have a lot of ideas." Finally, networks can give you access to power—people in senior or executive positions who can provide expert advice and introduce you to other powerful people in their network.

Basic Principles of Marketing: The 4 P's of Marketing

Product - what are the benefits and features of my product? Price - what is the value of my offering and what are customers willing to pay? Promotion - how will they know my business exists? Place - how will the customer be reached? where will they buy my product or service?

Professional Revenue Model

Professional services on a time and materials contract

Advantages of Crowdfunding

Provides funding Gauges interest and enthusiasm Builds early relationships with customers Variety of options Builds excitement There are many benefits to crowdfunding for entrepreneurs all over the world. Not only will crowdfunding provide the money you need to get your business off the ground, but it also provides you with an idea of the level of enthusiasm and interest in your product or service before launch. This saves you money on expensive marketing as well as enabling you to gather valuable customer feedback, and enables you to test ideas at very little cost. Crowdfunding also allows you to build early relationships with customers who have a keen interest in your product and who will most likely purchase it when it is launched. When backers choose to fund a project they become emotionally invested—not only in the development process, but in the product itself when it comes to fruition.

Common IP Traps

Publicly disclosing innovations Failure to protect product and processes Inability to determine originality Failure to assign ownership Failure to protect IP in global markets

TRIM - R

Resources What do you currently have that you can use to get started? What cash resources do you have at your disposal? What people resources can you use beyond the founding team? Can you tap into advisors or mentors for knowledge and other resources? What assets (equipment, people, and technology) are needed to start? Can you lease equipment or is it necessary to own? Do you need to rent space or can you leverage your apartment, a garage, or an incubator? How can you use limited resources to get the business started? What are your startup costs? What are your primary expenses?

Revenue

Revenue is the income gained from sales of goods or services

Revenue Model

Revenue model is a key component of the business model that identifies how the company will earn income and generate profits. The revenue model is a framework for identifying where and how a venture generates income. It specifies what product or service will be created, how pricing is calculated, and the venues and markets in which the product or service will be sold. More succinctly, the revenue model identifies how the business will become profitable.

TRIM - T

Team Who needs to be on the team at the start? What skills does each person bring to the table? Are there any skill gaps? Can these gaps be outsourced? What type of work experience is related to the idea? What is the network of each member? Do you have ways of attracting new team members? What are the personal and business goals of each member? What is the role of each member and is each role distinct? How are you dividing ownership?

Pitch

The act of clearly presenting and describing a product or service to others

4 P's: Promotion

The activities that involve all the ways in which companies tell their customers about their offering

Advertising Revenue Model

The amount of revenue gained through advertising products and services

Unit Sales Revenue Model

The amount of revenue generated by the number of items (units) sold by a company.

4 P's: Price

The amount that the customer is expected to pay for the product, its perceived value, and the degree to which the price can be raised or lowered depending on market demand and how competitors price rival products

Impression Management

The concept of how people pay conscious attention to the way they are perceived and the steps they take to be perceived by others in a certain way

Bonds

The connections with family, friends, and others who have a similar cultural background or ethnicity

Operating Expenses

The costs of running your business, including your rent, utilities, administration, marketing/advertising, employee salaries and so on

Common Pricing Strategies: Fair Pricing

The degree to which both businesses and customers believe that the pricing is reasonable

Intermediation Revenue Model

The different methods by which third parties such as brokers (or "middlemen") can generate money

Sweat Equity

The increase in value or ownership interest created as a result of hard work

Bridges

The links that go further than simply sharing a sense of identity; for example, making connections with distant friends or colleagues who may have different backgrounds, cultures, or other characteristics

4 P's: Place

The location where the product is actually distributed to your target market For example, trade fairs, retail stores, catalogs, mail order, online and so forth

Marketing

The method of placing the right product at the right place and the right time. Marketing for entrepreneurs involves showing how a product meets customer needs, pricing the products in a way that accurately represents the value perceived by the customer, promoting products in innovative ways to reach customers, implementing delivery of the products, and maintaining the relationship with the customer even after the sale is made.

Brokers

The people who organize transactions between buyers and sellers

Bootstrapping

The process of building or starting a business with very little funding or capital or virtually nothing at all Bootstrapping is all about finding creative ways to access every resource you have available to launch your business venture while minimizing the amount of cash you spend

Branding

The process of creating a name, term, design, symbol, or any other feature that identifies a product or service and differentiates it from others

Crowdfunding

The process of raising funding for a new venture from a large audience (the "crowd") typically through the Internet Crowdfunding is such a recent phenomenon that very little research on it has been conducted.

Crowdsourcing

The process of using the internet to attract, aggregate, and manage ostensibly inexpensive or even free labor from enthusiastic customers and like-minded people.

Costs of Good Sold (COGS)

The value of goods sold when a sale takes place

Critical Elements of a Feasibility Study

To produce a feasibility study there must be action, testing, information gathering and analysis in order to reduce uncertainty and gain greater confidence about the opportunity and your approach. For example, If you haven't talked to at least 50 potential customers, you are not ready to decide whether the business idea is viable. "Talking" can include contacts by phone, social networking, and other electronic "conversations," but don't overlook the value of interviewing prospective customers face to face