Mgmt 160 Final

Increase LTV

• Scalable Pricing • Cross Sell/Upsell • Product line expansion • Lead Gen for 3rd parties

Crowdfunding size

o $11B in debt-based crowdfunding in 2014 • Debt markets measured in trillions o$1.5B in equity-based capital worldwide in 2014 • VC investment in the U.S. in 2014 was $48B

Crowdfunding benefits The article discusses five benefits of crowdfunding for startups. Please list three of them. (3 points)

o *Validates the business idea o *Product validation o *Market validation o Marketing o Establishing a loyal community of customers

Dynamic consistency

o A successful strategy that creates a competitive advantage for a firm requires an integrated set of choices that demonstrate internal and external consistency. oMaintaining "Dynamic Consistency" is about successfully dealing with threats. oCommon threats to competitive advantage include: • Imitation - other firms copying your features. • Substitution - substitute offerings reducing your wedge. • Holdup - when the bargaining power of a firm's buyers, suppliers, or complements increases, allowing them to capture more value. • Slack - poor management and suboptimal performance.

Convertible equity

o Convertible Equity (newer method) • Similar to Convertible Note • Removes interest provisions and repayment at maturity

Blue ocean strategy

"A business's creation of a new, uncontested market space that marginalizes competitors and creates new customer value while decreasing costs." oCreators of blue oceans never use the competition as their benchmark • They make it "irrelevant" by creating a leap in value for both buyers and the company itself oBlue ocean strategy is based on the view that market boundaries are industry structure are not given and can be reconstructed by the actions and beliefs of industry players • "reconstructionist" view oBy stimulating the demand side of the economy, blue ocean strategy expands existing markets and creates new ones oMore than just innovation, it is about strategy that embraces the entire system of a company's activities

Phenomenon Fill-in-the-blank-question: In the article, Prof. Stevenson defines "Entrepreneurship as a ____________________ Phenomenon".

"Behavioral"

Reduce CAC

• Viral effects • Inbound Marketing • Free or Freemium • Open Source • Free Trials • Touchless conversion • Inside Sales • Channels • Strategic partnerships

Customer insights techniques The VPC text describes six techniques to gain customer insights. These techniques help you understand the customer's perspective when designing value proposition's. Name four of the techniques and in a sentence and describe each

"ACIDS-J" The Anthropologist = Observe potential customers in the real world to get good insights into how they really behave The Co-Creator = Integrate customers in the process of value creation to learn with them The Impersonator = "be your customer" = spend a day in their shoes The Data Detective = Building on existing work with desk research The Journalist = Talk to potential customers to gain customer insights The Scientist = Get customers to participate in an experiment

LLC What does "LLC" stand for? (2 points)

"LLC" stands for Limited Liability Company.

B2B2C

"business-to-business-to-consumer" - a model in which business A sells to business B, but interacts directly with business B's customers under their own brand. ex. Yahoo powered by Google

Strategic orientation Fill-in-the-blank question: In the article, Prof. Stevenson discussed strategic orientation as a continuum from "_______________________" (nickname) to "_________________" (nickname) as the level of controlled resources increased. Hint: we are not looking for a definition here in the blanks, but rather the nickname that Prof. Stevenson assigned to each.

"promoter" to "trustee" --> increasing level of control of resources p = driven by perception of opportunity t = driven by resources currently controlled

Entrepreneurship Define "Entrepreneurship" according to Stevenson

"the pursuit of opportunity without regard to resources currently controlled"

Opportunity recognition

- searching and capturing new ideas that lead to business opportunities - involves creative thinking that leads to discovery of new and useful ideas

Investor Pitch The article discusses an 11-slide investor pitch. Name FOUR of the slides or describe the contents of four of the slides. (4 points)

1) Executive summary = captures and presents succinctly the essence of the plan 2) Market positioning/problem description 3) Product positioning 4) Business network positioning 5) Competition/substitutes 6) Customer benefits 7) Operations 8) Financials 9) Risks 10) Implementation, status and traction, and financing 11) Closing slide

Critical dimensions of business practice In addition to "Strategic Orientation", there were five additional critical dimensions of business practice as defined by Stevenson. List the five additional dimensions. Hint: These were also discussed in lecture in the form of a question so you can alternatively list the question form as an answer here. (5 points)

1) Strategic Orientation 2) Commitment to Opportunity 3) Resource Commitment Process 4) Control over Resources 5) Management structure 6) Reward Philosophy Question form: What is an opportunity? What resources are necessary? What do I need to own, borrow, or steal? How do we manage the operation? How and when do we harvest?

Revenue streams The text discusses that a business model can involve two different types of revenue streams. What are the two types?

1) Transaction revenues resulting from one-time customer payments 2) Recurring revenues resulting from ongoing payments to either deliver a Value Proposition to customers or provide post-purchase customer support

Basic Accounting Principles (12) The article discusses 12 basic accounting concepts and assumptions that anyone interested in financial statements need to understand. Excluding the "Dual Aspect", list FOUR of the other 11 and describe in a sentence or two. (8 points)

1. Business Entity - Financial statements that are prepared for a business entity that is separate and distinct from its owners 2. Going Concern - Unless evidence suggests otherwise, it is assumed the entity will continue operations into the foreseeable future 3. Monetary unit - Accounting is a measurement process that deals only with events that can be measured in monetary terms. 4. Historical cost - Nonmonetary and monetary assets are ordinarily initially recorded at their acquisition price. 5. Accounting period - Accounting measures activities for a specific interval of time, called the accounting period. 6. Consistency - Similar transactions are reported in a consistent fashion. 7. Matching - Accounting profit is the net result of matching related costs and revenues. 8. Dual aspect - Every transaction affects at least 2 items in the basic accounting equation 9. Reliability of evidence - Accountants recording events rely as much as possible on objective, verifiable documentary evidence. 10. Disclosure - Accounting reports should disclose enough information that they will not mislead careful readers reasonably well informed in financial matters 11. Materiality - Accounting standards apply only to significant items 12. Conservatism - A degree of professional skepticism should be adopted when assessing the prospects that incomplete transactions will be concluded successfully.

VC Portfolio

60% of value comes from around 4% of the cost that is invested in companies with >10x yield 60% of cost only results in 4% value

Business Model According to Osterwalder & Pigneur, what is the definition of a "business model"

A "business model" describes the rationale of how an organization creates, delivers, and captures value.

Pitches According to the article, what are a "business pitch" and an "elevator pitch"? How do they differ? (5 points)

A "business pitch" is a presentation that is used to communicate the business model to investors, partners, customers, advisors, potential employees, and stakeholders. An "elevator pitch" is a one paragraph description of a new business opportunity that is generally executed verbally and quickly to a listener that is unfamiliar with the venture.

Call to action As defined in the text, what is a "Call to Action"? How is a "call to action" used (i.e. why is it discussed in the text)?

A "call to action" prompts a subject to perform an action; used in an experiment in order to test one or more hypotheses. These experiments can be used to test if customers are interested, what preferences they have, and if they are willing to pay for what you have to offer.

Limited Partnership What is a "limited partnership"? Define in a few sentences. (3 points)

A limited partnership is a hybrid form of organization that has both limited and general partners. The general partner is assumes management responsibility and unlimited liability for the business and has at least 1% interest in profits and losses. The limited partner is not involved with management and is only legally liable for the amount of capital contribution and any other debts.

Sole Proprietorship What is a sole proprietorship? (3 points)

A sole proprietorship is a person who undertakes a business without other formalities associated with other forms of organization; the person and business are one and are the same for tax and legal liability purposes.

Earlyvangelist According to the text, Steve Blank coined the term "Earlyvangelist". What is an "Earlyvangelist"? The book lists five traits of an Earlyvangelist. List three of the five traits.

An "earlyvangelists" are customers that are willing and able to take a risk on a new product or service. Has a problem or need Is aware of having a problem Is actively looking for a solution Has put together solution out of piece parts Has or can acquire a budget

Angel Investors Who are angel investors? Give some characteristics and discuss their motivations, etc. (4 points)

Angel investors are individuals, or groups of individuals, who invest their own money in startup ventures. They are different from VC investors because of their use of personal rather than professionally raised and managed funds. They tend to have smaller portfolios and seek lower investment amounts and projects that have less aggressive growth targets. They can provide connections to customers, industry knowledge, or act as an advisor to companies.

Common business valuation methods

Asset based approaches Earning value approaches Market value approaches

Bootstrapping What does the term "bootstrapping" when referring to a startup? (3 points)

Bootstrapping utilizes quick cash flow & personal resources while retaining full ownership over the company. It limits pace of growth, excess spending, and chasing too many ideas/products.

Competitive advantage The article discusses the purpose of strategy is to create a "competitive advantage". What is competitive advantage?

Competitive advantage is a firm's ability to create a large gap ("or wedge") between the amount its customers are willing to pay and the costs it incurs.

Convertible preferred stock What is "convertible preferred stock"? In other words, how does convertible preferred stock differ from common stock? (3 points)

Convertible preferred stock is a form of stock that can be redeemed at face value of the investment (with any accumulated dividends) or converted into common stock to get a pre-negotiated share of the company.

Cost structures

Cost driven - aims at creating and maintaining the leanest possible cost structure, using low price value propositions, maximum automation, and extensive outsourcing (focus on minimizing costs wherever possible) Value driven - characterized by premium value propositions and a high degree of personalized service (focus on value creation)

Ownership Equations The article provides simple equations for "Current Investors' Ownership" and "Previous Investors' Ownership". Please list the two equations (4 points)

Current Investors' Ownership: (investment amount) / (post-money valuation) Previous Investors' Ownership (pre-money amount) / (post-money valuation)

Debt vs. Equity Investors As discussed in the article, what are some of the primary differences between "debt" and "equity" fundraising? How are the motivations of debt and equity financiers different? Give an example of a debt investor and an example of an equity investor as discussed in the reading. (5 points)

Debt investors lend a fix sum of money over a specified amount of time at a given interest rate. The downside is a complete loss of principal. The upside is limited. Thus, debt investors usually invest in less risky ventures as they are concerned with downside protection. An example of a debt investor is a bank. Equity investors are offered a stake in the company in exchange for their money. They too can lose the full value of their investment, but unlike debt investors their upside is unbounded. Thus, assuming one venture they invest in pays off, they can afford to invest in other uncertain ventures. An example of equity investors are venture capital investors or angel investors.

Six stakeholders, customer profiles in B2B and B2C The VPC text discusses that value propositions in business-to-business (B2B) transactions typically involve six stakeholders in the search, evaluation, purchase, and use of a product or service. Each one has a different profile and a different value proposition canvas. Stakeholders can tilt the purchasing decision in one direction or another. List FOUR of stakeholders given in the text and describe in a sentence describing each, OR list all six stakeholders without definitions to receive full credit.

Decision makers = The person or group responsible for the choice of a product/service and for ordering the purchase decision Economic buyers = The individual or group who controls the budget and who makes the actual purchase Saboteurs = The individuals or groups who can obstruct or derail the process of searching, evaluating, and purchasing a product or service Influencers = Individuals or groups whose opinions might count and whom the decision maker might listen to, even in an informal way Recommenders = The people carrying out the search and evaluation process and who make a formal recommendation on whether or not to purchase End users = The people who end up benefitting from the product or service

Depreciation

Depreciation is an accounting method of allocating the cost of a tangible or physical asset over its useful life or life expectancy. Ex. $1 million dollar factory, lasts 10 years Financial Statement Entries: • On the Balance Sheet, the "Cash" will reduce by $1M • In the first year, You will list an "investment" of $1M only the first year on the Cash Flow Statement • Assuming straight-line depreciation, you will only get to expense $100k of the factory each year • You can do this every year for 10 years • You will book the $100k of depreciation expense on the Income Statement • Depreciation is a non-cash expense so it gets added back on the Cash Flows Statement!

Change in Business Plans According to the article, has the prevalence of full-length business plans changed? If so, why and what has replaced them? (3 points)

Detailed business plans are much less common now because mini-plans and pitch decks that enable more efficient, rapid exchange of information between entrepreneurs and targeted stakeholders have replaced them.

Crowdfunding types (3) The article discusses three types of crowdfunding. What are they and briefly define each in a sentence or two. (6 points) Note: the article "Financing Entrepreneurial Ventures" uses four types of crowdfunding, while the JOBS Act of 2012 used three main categories of regulated crowdfunding. You can alternatively list the categories from one of these articles for full credit, but you can't mix and match since the categories overlap!

Donation crowdfunding = In the donation crowdfunding model, the founder receives money from a crowd without any tangible return for that contribution Lending crowdfunding = Lending crowdfunding, often referred to as peer-to business (P2B) or peer-to-peer (P2P) crowdfunding, raises money with the expectation that founders will repay supporters. Lending crowdfunding is the largest crowdfunding type by funding volume Equity crowdfunding = In the equity crowdfunding model, the venture raises money from a crowd in exchange for an ownership stake in the firm. Investors are offered equity or bond-like shares. Equity crowdfunding is the fastest growing crowdfunding category and the average campaign value is high

Four actions framework The article discusses the "Four Actions Framework." Describe the four forces and discuss how you can use the framework to develop a business strategy.

Eliminate = forces a company to consider eliminating factors that companies in an industry have long competed on Reduce = forces a company to determine whether products or services have been over-designed in the race to match and beat the competition ~~ Raise = pushes a company to uncover and eliminate the compromises an industry forces customers to make Create = helps a company to discover entirely new sources of value for buyers and to create new demand and shift the strategic pricing of the industry

Pre-money valuation vs. post-money valuation How are pre-money and post-money valuations linked? Hint: this can be given by a simple equation. (2 points)

Equation: pre-money valuation + investment amount = post-money valuation

True or false: In the article, Prof. Stevenson argues that entrepreneurship and intrapreneurship are very different. Why or why not?

False = Professor Stevenson argues that entrepreneurship and intrapreneurship are a false dichotomy. Entrepreneurship is a behavioral phenomenon/an approach to management that can be applied in start-up situations as well as within more established businesses. Intrapreneurship = entrepreneurship in the context of the larger corporation

Data traps The book describes "five data traps to avoid". Name THREE data traps and describe each in a sentence or two

False-positive trap = When your testing data mislead you to conclude, for example, that your customer has a pain they don't have. False-negative trap = When your experiment fails to detect, for example, a customer job that it was designed to unearth The "Exhausted Maximum" trap = When you think an opportunity is larger than it is in reality The Wrong Data trap = When you abandon an opportunity because you are looking at the wrong data The "Local Maximum" trap = When you conduct experiments that optimize around the local maximum while ignoring the greater opportunity

Financial Forecasts What is the typical length of time for financial forecasts (i.e. pro-forma financial statements) included in the business plan? Are there are reasons why these may be shorted or longer? Explain. (3 points)

Financial forecasts are generally projected over 3 to 5 years. A reason that this time frame may be longer is if a venture needs long term investments before turning cash flow positive.

Strategic positioning

Finding and occupying a point on the landscape.

Customer jobs When describing "Customer Jobs", the text distinguishes between three main types of customer jobs to be done and supporting jobs. List the three types of customer jobs to be done and briefly describe in a sentence (4 points).

Functional jobs = When your customers try to perform or complete a specific task or solve a specific problem. Social jobs = When your customers want to look good or gain power or status. These jobs describe how customers want to be perceived by others. Personal/emotional jobs = When your customers seek a specific emotional state, such as feeling good or secure.

Rewards for entrepreneurs

Growth rewards = what people get from facing and beating challenges Income rewards = money made by owning your own business Flexibility rewards = can structure life to fit their needs

Porters Forces The article discusses "Porter's Forces that Shape Industry Competition." As discussed in the article, what are the six forces? Sketch a simple diagram showing the six forces. In a sentence, define and describe each force.

Industry competitors = Rivalry among existing firms Suppliers = bargaining power of suppliers Customers = bargaining power of buyers Substitutes = Threat of substitute products and services *Potential Entrants = Threat of new entrants Complements = goods or services that make those of another firm more valuable

Intellectual property What is "intellectual property"? (2 points)

Intellectual property is rights as a result from physical manifestation of original thought, either naturally or in compliance with statute (property of the mind).

Strategy Define "strategy" as given in the article.

It is the integrated set of choices that positions the business in its industry so as to generate superior financial returns over the long run.

Operational effectiveness

Performing the activities of creating, producing, selling, and delivering a product or service "better" (e.g. faster, with fewer inputs, defects, etc.) than rivals.

Crowdfunding for each stage The article discusses a framework for startup crowdfunding. The framework breaks the startup stage into three phases: Pre-startup, Startup, and Growth. According to the article, what is the optimal type of crowdfunding for each stage? You DO NOT need to explain why each is best, simply list the best type for each! Hint: question #2 above lists the three types of crowdfunding! (3 points)

Pre-startup: Donation crowdfunding Startup: Lending crowdfunding Growth: Equity crowdfunding

Fit List the three types of "fit" discussed in the text. Specifically, for each "fit", list the "name" (e.g. foo-bar fit), the "slang" term used for each (e.g. "on-the-exam fit"). Describe the key attributes of each fit in a sentence of two.

Problem-solution fit ("on paper"): - You have evidence that customers care about certain jobs, pains, and gains - Design a value proposition that addresses those jobs, pains, and gains - No evd. that customers care about this value proposition Product-Market fit ("in the market") - You have evidence that your products and services, pain relievers, and gain creators are actually creating customer value and gaining traction in the market - Long and iterative process Business model fit ("in the bank") - You have evidence that your value proposition can be embedded in a profitable and scalable business model - Do not have business model fit until you can generate more revenues with your value proposition than you incur costs to create and deliver it

Oceans Define the terms "red oceans" and "blue oceans" according to Kim & Mauborgne

Red oceans = represent all the industries in existence today. This is the known market space which is "bloody" with competition (profits and growth are reduced). Blue oceans = denotes all the industries not in existence today. This is the unknown market space in which companies can seek new profit and growth opportunities.

Sketch and label the "Value Proposition Canvas" (hint: the "circle" and the "square"). After labeling each, please provide a few sentences describing each of the label quadrants / "pie" sections.

Products & services = physical/tangible = goods, such as manufactured products intangible = products such as copyrights or services such as after-sales assistance digital = products such as music downloads or services such as online recommendations financial = products such as investment funds and insurances or services such as the financing of a purchase Gain creators = describe how your products and services create customer gains. They explicitly outline how you intend to produce outcomes and benefits that your customer expects, desires, or would be surprised by, including functional utility, social gains, positive emotions, and cost savings Pain relievers = describes how exactly your products and services alleviate specific customer pains. They specifically outline how you intend to eliminate or reduce some of the things that annoy your customers before, during, or after they are trying to complete a job or that prevent them from doing so. ~ Gains = describe the outcome and benefits your customers want. Some gains are required, expected, or designed by customers, and some would surprise them. Gains include functional utility, social gains, positive emotions, and cost savings. Pains = describe anything that annoys your customers before, during, and after trying to get a job done or simply prevents them from getting a job done. Pain also describe risks, that is, potential bad outcomes, related to getting a job done badly or not at all Customer jobs = describe the things your customers are trying to get done in their work or in their life. A customer job could be the tasks they are trying to perform and complete, the problems they are trying to solve, or the needs they are trying to satisfy

Customer gains When describing "Customer GAINS", the text distinguishes between four types of customer GAINS. List the four types of customer gains OR list two types and briefly describe each in a sentence or two (4 points).

Required gains = these are gains without which a solution wouldn't work Expected gains = these are relatively basic gains that we expect from a solution, even if it could work without them Desired gains = these are gains that go beyond what we expect from a solution but would love to have if we could. These are usually gains that customers would come up with if you asked them. Unexpected gains = these are gains that go beyond customer expectations and desires. They wouldn't even come up with them if you asked them.

Step 4 vs. step 2 In the figure above, according to the book, why is the "step" 4, i.e. necessary? That is, to some, it initially may seem redundant to step #2 above, but it isn't.

Step 4 ("prioritize tests") is a very important step in the beginning when uncertainty is high as it directs the company to conduct cheap and quick tests first. Then as the company becomes more established and uncertainty is reduced, it can run more expensive, more reliable tests.

Strategy canvas What is a "strategy canvas"? How is a "strategy canvas" to be used? What does the horizontal axis (i.e. "x-axis") represent on the strategy canvas? What does the vertical axis (i.e. "y-axis") represent on the strategy canvas? What is the "line" connecting the dots on the strategy canvas called and what does it stand for?

Strategy canvas is both a diagnostic and an action framework for building a compelling blue ocean strategy. It describes the current state in the known market space. The horizontal axis represents the range of factors the industry competes on and invests in. The vertical axis of the strategy canvas captures the offering level that buyers receive across all of the key factors. The "value curve" is a graphical depiction of a company's performance across its industry's factors of competition.

Same customer, different contexts The text discusses the idea "Same Customer, Different Contexts" when discussing value propositions. What are the authors talking about? Hint: If you remember the example in the book when discussing "Same Customer, Different Contexts", you can use it here to help you answer.

The authors are explaining how the features of your value proposition will differ depending on the context. Context often changes the nature of the jobs that a person aims to accomplish. For example, the job requirements for a person using their phone will differ based on context, like if the phone is used in the car, at home, or in a meeting.

Intellectual property types According to the article, what are the four common forms of intellectual property (IP)? For each of the forms, list the approximate length of time of exclusivity and the common use (i.e. what does it cover). Note: for the purposes of this class, "Contractual Agreements" are NOT a form of intellectual property, so you cannot use it as part of your answer to this question. (12 points)

The four forms of intellectual property are patents, copyrights, trademarks, and trade secrets. Patents usually used for protection of commercial and industrial products, exclusivity lasts around 14 years for design patents and 20 years for utility (scrubdaddy). Copyrights protect creative works and these rights last the lifetime of the author plus 70 years (Disney). Trade secrets protect processes or formulas that give a company competitive advantage (Coca cola recipe). The length of protection is not limited to a certain term. Trademarks are a distinctive word, slogan, or image that identifies a product and its origin (nike). They can remain exclusive for unlimited ten year increments as long as the owner meets requirements.

Dual Aspect The "Dual Aspect" explains that every transaction affects at least two items in the basic accounting equation and preserves the equation's equality. What is the fundamental accounting equation? (2 points)

The fundamental accounting equation is: Assets = Liabilities + Stockholder's equity

Crowdfunding What is crowdfunding? (2 points)

The goal of crowdfunding is to enable companies to raise funds from individual investors online.

Business Plan Types According to the article, what are the four common types of business plans? Briefly define each in a sentence or two, and discuss if the plan type is for external stakeholders or internal stakeholders. (6 points)

The plans used for external stakeholders are mini business plans and traditional business plans. A mini-business plan is a document that summarizes the most important components of a new venture's go to market and operating plans and how these plans relate to financial predictions. A traditional business plan is a detailed document that notes a venture's concept, market approach, financial plan, team, and operating plan. The plans used for internal stakeholders are go-to-market plans and operating plans. The go-to-market plan describes the unmet needs the venture will address for early customers, value proposition and the benefits the venture aims to provide.

Core financial implications of the business model (3) The article discusses three core financial implications of the business model. What are the three core financial implications, and explain each in a sentence or two. (6 points)

The three core financial implications of the business model are underlying profitability, asset intensity, and pace of growth. The underlying profitability details the value of output vs. the cost of input. Asset intensity is the amount of assets tied up in the business in order to generate sales. Pace of growth is the speed at which a company needs to grow.

Core Financial Statements (3) What are the three core financial statements? Briefly define the purpose of each statement (i.e. what is the gist of each statement). Indicate for each statement if it is for a point in time or a period of time. Hint: "The Statement of Changes in Shareholders Equity" and "The Footnotes" are NOT one of the three core financial statements! (6 points)

The three core financial statements are balance sheets, income statements, and statements of cash flow. The balance sheet depicts a company's financial position at a point in time by reporting its assets, liabilities, and stockholders' equity. Income statements show the results of the company's operating activities for a specific period of time. The statement of cash flow shows where the firm generates cash and where it spends cash for a period of time.

Historical definitions of entrepreneurship Professor Stevenson discusses two historical definitions of entrepreneurship which he argues are both flawed. What were the two "Schools of Thought" on the way to define entrepreneurship according to Stevenson? According to Stevenson, what is the major flaw to each of the two?

The two schools of thought are entrepreneurship being defined by economic function and as having a common set of individual traits. The flaw of the economic function definition is that it does not make sense to decide what economic functions are "entrepreneurial." The flaw of the other school of thought is that there is not just one psychological profile of an entrepreneur. In fact, there are many successful entrepreneurs that are the opposite of each other in terms of personality.

Liquidity measurements - short term

These calculations determine the firm's ability to meet obligations: • Working Capital = Current Assets (CA) - Current Liabilities (CL) • PROXY FOR: Firm's short term debt paying ability! • Difficult to compare across firms of different sizes

Markets

Total Addressable Market: 100% of the market for type of product you sell (e.g. all coffee drinkers in USA) Total Serviceable (or Served Available) Market: 100% of the market you could actually sell to (e.g. all coffee drinkers on-campus) Target (Beachhead) Market: You initial most likely buyers. oSales Forecast: Bottom-up forecast of how much you can sell given current or expected resources (e.g. # of salespeople, hours of operation, etc.) oMarketing: everything that you do to reach and persuade prospects (identifying and satisfying a customer need) oSales: everything that you do to close the sale

Experiment types The text describes approximately 12 experiments types in the "Experiment Library". For example, the text describes "Ad Tracking" as one type of experiment. Name 4 others and describe in a sentence.

Unique link tracking = Set up unique link tracking to verify potential customers' or partners' interest beyond what they might tell you in a meeting, interview, or call. Life-size experiments = Get your customers to interact with life-size prototypes and real-world replicas of service experiences. Split testing = Split testing, also known as A/B test-ing, is a technique to compare the performance of two or more options. Presale = The main objective of this type of presales is to explore customer interest; it is not to sell. Speed Boat = Get your customers to explicitly state the problems, obstacles, an risks that are holding them back from successfully performing their jobs to be done by using the analogy of a speed boat held back by anchors. Product Box = In this game, you ask customers to design a product box that represents the value proposition they'd want to buy from you. You'll learn what matters to customers and which features they get excited about. Buy a feature = This is a sophisticated game to get customers to prioritize among a list of predefined (but not yet existing) value proposition features. Customers get a limited budget of play money to buy their preferred features, which you price based on real-world factors.

Rounds What is an "up round" and a "down round"? (2 points)

Up round: A round of financing in which the value of a venture has increased since the previous round Down round: A round of financing in which the value of a venture has dropped since the previous round

Two fundamental questions The article discusses that "strategy is a firm's answer to two fundamental questions". What are the two questions?

Where should we compete? How should we compete?

"Why" Questions The article discusses that a good pitch should answer three "Why" questions. What three questions to (e.g. "Why ...?") are discussed? Briefly describe each (3 points).

Why this? - This question explains why the audience should be interested in this venture/product. Why now? - This question explains why this product/service makes sense for this time. Why this team? - This question describes how is every individual on the team is qualified and essential to the success of the venture. Answers to these questions help investors to decide whether or not to invest in the venture.

Liabilities

are creditors' claims for funds, usually because they have provided funds, or goods and services, to the firm. • Examples: Accounts Payable, Unearned Income, Notes Payable, Buildings, Accrued Salaries oCurrent Liabilities (Paid with cash in 1 year or less) oNoncurrent Liabilities (All other liabilities)

Assets

are economic resources with the potential to provide future economic benefits to a firm. • Examples: Cash, Accounts Receivable, Inventories, Buildings, Equipment, intangible assets (like Patents) oCurrent Assets (Convert to cash in 1 year or less) oNoncurrent Assets (All other assets)

Business Plan Definition

document that articulates the proposed venture's business model and provides significant detail

Environment map

helps you understand the context in which you create - key trends - industry forces - macroeconomics - market forces

Cost structure characteristics The BMC text discusses four characteristics of "Cost Structures". List three of the four and define in a sentence.

o Fixed costs = costs that remain the same despite the volume of goods or services produced o Variable costs = costs that vary proportionally with the volume of goods or services produced o Economies of scale = cost advantages that a business enjoys as its output expands o Economies of scope = cost advantages that a business enjoys due to a larger scope of operations

Market vs. industry

o Industry: consists of sellers - typically organizations - that offer products or classes of products that are similar and close substitutes for one another o Market: consists of a group of current and/or potential customers having the willingness and ability to buy products (goods or services) to satisfy a particular class of wants or needs • Scale: size of market: - Mass market: large portions of the population - Niche market: narrowly defined segment of the population that is likely to share interests or concerns Scope: geographic range covered by the market - Local to Global

Relation between income statement and balance sheet

o The income statement links beginning balance sheet with ending balance sheet o Retained Earnings is increased by net income and decreased by dividends.

Legal form of organization The article discusses three key criteria which can be used help choose a legal form of organization. Name two of the three (3 points)

o Who will the investors and owners be? o What is the time frame for the life of the business? o What are the capital requirements and cash flow characteristics of the business likely to be?

Cach vs. accrual accounting

oAccrual basis of accounting: revenues and expenses are recorded when they are earned, regardless of when the money is actually received or paid. • This method is more commonly used than the cash method. • The upside is that the accrual basis gives a more realistic idea of income and expenses during a period of time, therefore providing a long-term picture of the business that cash accounting can't provide. • The downside is that accrual accounting doesn't provide any awareness of cash flow; a business can appear to be very profitable while in reality it has empty bank accounts. oCash basis of accounting: recognizes revenues when cash is received, and expenses when they are paid. This method does not recognize accounts receivable or accounts payable. • Many small businesses opt to use the cash basis of accounting because it is simple to maintain. • The cash method is also beneficial in terms of tracking how much cash the business actually has at any given time. • Also, since transactions aren't recorded until the cash is received or paid, the business's income isn't taxed until it's in the bank.

Formulating a business plan

oAn opportunity to test ideas and determine whether viable business opportunities exist oThe foundation for debating and analyzing key assumptions, developing financial forecasts, and designing early experiments oA baseline that clarifies aspirational milestones as the entrepreneur experiments to build a minimal viable product or service offering that will engage the market oA clear statement of the metrics that will be used to test assumptions and measure performance as the team works to achieve key milestones oAn approach to communicating with others about the business while raising money; assembling a team; and attracting suppliers, customers, and partners

Crowdfunding problems solved

oCoordination oGatekeeping oInexperience oPatronage

CAC & LTV formulas

oDefinition of Churn Rate (C): • (avg # months for a customer) = 1 / C oDefinition Lifetime Value (LTV): • LTV = M * G / C • M = monthly subscription price • G = gross margin • C = churn rate o"Rule of Thumb for SaaS" (David Skok, Matrix Partners): • LTV > 3 * CAC • (# months to recover CAC) < 12 months

3 generic strategies by Porter Three widely applicable classic strategies for businesses of all types— differentiation, overall cost leadership, and focus.

oDifferentiation: creating something that is perceived industrywide as being unique. • Many possible forms of differentiation: Design, brand image, technology, customer service, dealer network, etc. • Provides insulation against competitive rivalry because of brand loyalty by customers and resulting in lower sensitivity to price. oOverall cost leadership: offering a combination of cost benefits industrywide. • A low-cost position defends the firm against powerful buyers because buyers can exert power only to driver down prices to the level of the most efficient competitor. oFocus: targets a particular buyer group, segment of the product line, or geographic market with differentiation, cost leadership, or both.

Revenue streams cont.

oExamples of Revenue Streams • Asset sale • Usage fee • Subscription fees • Lending/Renting/Leasing • Licensing • Brokerage fees • Advertising oPricing Mechanisms • Fixed Menu Pricing (predefined prices are based on static variables) • Dynamic Pricing (prices change based on market conditions)

Balance sheet details

oItems are grouped by category oAssets listed in decreasing order of liquidity oValuable assets may not be included

Accounting types

oManagerial accounting • Accounting methods that are specifically intended to be used by managers for planning, directing, and controlling a business (e.g. include forecasting, may be limited in scope). oTax accounting • An accounting approach based on specific accounting requirements set by governmental taxing agencies. oFinancial accounting • A formal, rule-based set of accounting principles and procedures intended for use by outside owners, investors, banks, and regulators.

Common risks for entrepreneurial firms

oMarket Risks oCompetitive Risks oTechnology & Operational Risks oFinancial Risks oPeople Risks oLegal & Regulatory Risks oSystemic Risks

Value propositions

oNewness oPerformance oCustomization o"Getting the job done" oDesign oBrand/Status oPrice oCost reduction oRisk reduction oAccessibility oConvenience / Usability

Patentability test

oNovelty • Must not be known or used by others, patented, or described in a printed publication oNon-obviousness • An "invention" may be novel, but really simple-minded • Must not be easily deducible from the current body of knowledge, nor obvious to "one skilled in the art" oUsefulness • Must have a legal and moral use • Must have utility

Get customers & CAC

oPaid Media • Public Relations • Advertising • Trade Shows • Webinars • Email marketing • On-line SEM • Biz Dev oEarned Media • Publications in journals • Conference speeches/papers • Educational seminars • Public relations • Blogging / Sharable content • Social Media • Communities

Income statement

oResults of the operating activities of a firm for a specific time period. oBasic Income Equation: Net Income = Revenues - Expenses oRevenues (aka sales or turnover) are inflows of assets from selling goods and services. oExpenses are outflows of assets used in generating revenues.

Liquidity measurements - long term

oSimilarly for long term debt paying ability (Solvency): • Assets - Liabilities = Owners Equity oTo compare across companies • Debt-to-Equity Ratio = Total Liability / Shareholders Equity • Represents the relative proportion of a company's assets that are financed by debt vs. equity

Choosing a business form

oSix major factors at play: • Personal liability of the business owner • Taxation of both the entity and its owners • Complexity and organizational costs in setting up • Control of the business • Continuity of the business • Ability of the business to raise capital

Balance sheet

oSnapshot of the investing and financing activities at a moment in time oAssets, Liabilities, Owners' Equity oBasic Accounting Equation: Assets = Liabilities + Shareholders' Equity

Statement of cash flows

oThe statement of cash flows (also called the cash flow statement) reports information about cash generated from or used by: • operating • investing • financing activities during specified time periods

Three factors determine financing needs

oUnderlying Profitability • Value of the output vs. cost of the input oAsset Intensity • Amount of assets tied up in the business • Machinery and Plants (High Fixed costs) • Working Capital • Inventory • Accounts Payable vs. Accounts Receivable oPace of Growth • Speed at which company needs to grow

VC investment strategy

oVenture Capitalists invest in stages • WHY? • Reduce: • Risk • Financial Exposure • Uncertainty • Induces: • Pressure to achieve milestones • Test of management to deliver

Industry life cycle

shake out = # of firms decrease maturity = demand stabilizes

Shareholder's equity

shows the amounts of funds owners have provided and, in parallel, their claims on the assets of a firm. • Examples: Common Stock, Contributed Capital, Retained Earnings

Increase CAC (DONT WANT)

• Field Sales • Outbound Marketing

Decrease LTV (DONT WANT)

• High Churn Rates • Low customer satisfaction

Convertible note

• Looks like Debt or a Loan • Usually occurs with seed rounds - due to unknown valuations • Pros: • Quick, easy, no negotiation of valuation • Cons: • Accumulation of interest rates (can be different for different investors) • Startups show large debts on books (hard to raise bank loans) • Reaches maturity may bankrupt startup • Converts to shares on the 1st round of financing • Usually given a discount rate and cap due to risk put in