Entrepreneurship Chapter 1 (7-19) & Chapter 9

Elements of a New Venture Team

(founders at the middle) -key employees -board of directors -other professionals -lenders and investors -board of advisors -management team

Attributes of Strong Board Members

- Strong personal and professional networks - Respected in their field - Willingness to make personal introductions on behalf of the firm - Strong interpersonal communication skills - Pattern recognition skills - Investment and/or operating experience - Ability and willingness to mentor the CEO and the firm's top managers

Angels investor -Work ____, faster to get money -Use _____ money (25k-100k invested) -Primarily offer _____ -Invest in companies in _____ stages

Alone; their own; financial support; early

Investors - -

Angel investor Venture capitalist

Signaling:

having a credible name on the team "signals" that the company has potential to be successful

An advantage businesses have in using freelancers and virtual assistants is that they are considered to be "______." As a result, a business is not responsible for costs (such as Social Security and Medicare taxes, workers' compensation insurance, paying into an unemployment fund, and benefits) beyond their hourly or contracted pay.

independent contractors

A board of directors is typically made up of both _____ and _____ directors.

inside; outside

As with the other nonemployee members of a firm's new-venture team, lenders and investors help new firms by providing guidance and _____ legitimacy and assuming the natural role of providing _____ oversight. In some instances, lenders and investors also work hard to help new firms fill out their ______ teams.

lending; financial; management

The Management Team and Key Employees One technique available to entrepreneurs to help prioritize their hiring needs is to maintain a _______.

skills profile

Interestingly, many of the respondents to the survey reported a lack of ______ as a key reason behind the challenges they are having finding candidates for open jobs.

technical skills

A new-venture team (entrepreneurial team) is

the group of founders, key employees, and advisers that move a new venture from an idea to a fully functioning firm.

groupthink

the tendency of group members to conform, resulting in a narrow view of some issue

homogeneous

their areas of expertise are very similar to one another

heterogeneous

they are diverse in terms of their abilities and experiences

Businesses typically find freelancers via _____ or through websites such as Guru or Upwork.

word of mouth

Team members can easily disagree in terms of ____ habits, tolerance for ____, levels of _____ for the business, ideas on how the business should be run, and similar key issues

work; risk; passion

When a new venture is started by a team, several issues affect the value of the team 1. Teams that have ______ have an edge 2. If the members of the team are ______, meaning that they are diverse in terms of their abilities and experiences, rather than _______, meaning that their areas of expertise are very similar to one another, they are likely to have different points of view about technology, hiring decisions, competitive tactics, and other important activities.

worked together before; heterogeneous; homogeneous

The Roles of the Board of Directors

-provide expertise -lend legitimacy

An inside director is _______ An outside director is _______

a person who is also an officer of the firm; someone who is not employed by the firm.

intern

a person who works for a business as an apprentice or trainee for the purpose of obtaining practical experience

Myth: Entrepreneurs love the spotlight The vast majority of entrepreneurs (do/do not) attract public attention.

do not

The average entrepreneur (does/does not) make more money than someone with a similar amount of responsibility in a traditional job.

does not

Other Important Roles - - - -

-Array of "employees" -Board of directors -Investors and lenders -Other professionals

Steps firms can take to overcome liability of newness

-Assembling a talented and experienced new-venture team -Attending entrepreneurship-focused workshops and events, such as business plan competitions. -Start-up accelerators provide entrepreneurs access to mentors, investors, subject matter experts (such as attorneys and accountants), and other entrepreneurs

What are the benefits of having a team for your new venture?

-Founders share efforts and tasks with others -Improved ability to analyze market information and make decisions due to varied perspectives -The right team allows firm to focus on developing before hiring -Can provide credibility in eyes of investors and creditors

Consultants fall into two categories:

-Paid consultants -Consultants who are made available for free or at a reduced rate through a nonprofit or government agency

Attributes of Effective Board of Directors

-Strong communication with CEO -Customer-focused point of view -complementary mix of talents -decisiveness -mutual respect -stands up to CEO -strong ethics

Preferred Attributes of the Founder(s) of an Entrepreneurial Venture

-firm started by a team -higher education -prior entrepreneurial experience -relevant industry experience -broad social and professional network

Sources of Labor that new ventures utilize to get their work done:

-full or part time employee -intern -freelancer -virtual assistant

Common Mistakes Made in Putting Together A New Venture Team

-placing unqualified friends or family members on the team -Assuming that success in previous industries automatically translates into your new industry -presenting a "one person team" philosophy - meaning that one person (or small group) is wearing all the hats with no plans to holster the team -hiring top managers without sharing ownership of the firm -not disclosing or talking dismissively of management team skill or competency gaps -vague or unclear plans for filling the skill or competency gaps that clearly exist

Five Primary Reasons Passion is Important for the Launch of a Successful Entrepreneurial Organization

1. The ability to learn and iterate 2. A willingness to work hard for an extended period of time 3. Ability to overcome setbacks and "no's" 4. The ability to listen to feedback on the limitations of your organization and yourself 5. Perseverance and persistence when the going gets tough

There are three potential pitfalls associated with starting a firm as a team rather than as a sole entrepreneur.

1. The team members may not get along. 2. If two or more people start a firm as "equals," conflicts can arise when the firm needs to establish a formal structure and designate one person as the chief executive officer (CEO) 3. If the founders of a firm have similar areas of expertise ,they may duplicate rather than complement one another; this can be problematic. Team members can easily disagree in terms of work habits, tolerance for risk, levels of passion for the business, ideas on how the business should be run, and similar key issues

A board of directors has three formal responsibilities:

1. appoint the firm's officers (the key managers) 2. declare dividends 3. oversee the affairs of the corporation

Founders team generally of ____ people

2-3

According to a 2016 survey reported by the Society of Human Resource Management (SHRM), more than _____ of the 3,300 organizations included in the survey indicated that they are having a difficult time recruiting for job openings. ---- A general rule of thumb for an employer that offers benefits is that the benefits and taxes cost ____ percent of the base pay.

2/3; 33

Studies show that ____ to ____ percent of all new firms are started by more than one individual.

50; 70

Most boards of advisers have between ___ and ____ members.

5; 15

Common Traits and Characteristics of Entrepreneurs

A moderate risk taker, persuasive, promoter, resource assembler/leverager, creative, self-starter, tenacious, tolerant of ambiguity, visionary, optimistic disposition, a networker, achievement motivated, alert to opportunities, self-confident, decisive, energetic, a strong work ethic, and a lengthy attention span.

_____ also play a role in establishing the legitimacy of new ventures and their initial management teams. Research evidence rather consistently suggests that the presence of _____ is a favorable signal to other capital providers.

Bankers; bank loans

Why do people become entrepreneurs?

Be their own boss Pursue their own ideas Pursue financial rewards

Conflict +/-

Cognitive (task-specific, judgemental differences) Affective (emotional, personal incompatibilities)

Who to work with?

Complementarity Similarity Conflict

Cognitive (task-specific, judgemental differences): _______ Affective (emotional, personal incompatibilities) (bad): _____

Conflict around ideas and viewpoints, which helps improve the idea; Conflict around emotions, feelings

Other professionals include

Consultants, informal advisors

relevant industry experience

Experience in the same industry as their current venture will have a more mature network of industry contacts and will have a better understanding of the subtleties of their respective industries.

The Roles of the Board of Directors -Provide _______ -To provide guidance and support to the firm's managers. -Lend ______ -Well-known and respected board members bring instant _____ to the firm.

Expertise; Legitimacy; credibility

Several guidelines are followed when organizing a board of advisors.

First, a board of advisors should not be organized just so a company can boast of it. Second, board members who are compatible and complement one another Third, a company should carefully spell out to the individual the rules in terms of access to confidential information. Fourth, firms should caution their advisers to disclose that they have a relationship with the venture before posting positive comments about it or its products on blogs or on social networking sites.

The idea that entrepreneurs are gamblers originates from two sources: - -

First, entrepreneurs typically have jobs that are less structured, and so they face a more uncertain set of possibilities than managers or rank-and-file employees. Second, many entrepreneurs have a strong need to achieve and often set challenging goals, a behavior that is sometimes equated with risk taking.

Product/customer focus: _____ products with the capability to _____ customers

Good; satisfy

Age Distribution of Business Owners Highest/Lowest:

Highest: ages 45-54 at 26.6% Lowest: ages 35-44 at 22.9%

TYPES OF SKILLS TO HAVE When you try to find co-founders, what skill sets will you look for from your potential cofounders? -____ background -_____ knowledge -Relevant ____ knowledge -_____ competence -______ diversity Etc.

Industry; Contact; task; Managerial; Cultural

Complementarity

Knowledge, skills, experience complement each other --> communication

Characteristics of Successful Entrepreneurs

Passion for the business Product/customer focus Tenacity despite failure Execution intelligence

Similarity

People have similar skills and experience and motives, communication → groupthink

Most consistent predictors of future entrepreneurial performance

Prior entrepreneurial experience -industry experience -networking

Full or Part-time Employee

Someone who works for a business, at the business's location, utilizing the business's tools and equipment and according to the business's policies and procedures.

______ provide entrepreneurs access to mentors, investors, subject matter experts (such as attorneys and accountants), and other entrepreneurs

Start-up accelerators

Execution intelligence -___________ -The ability to effectively execute a business idea means developing a business model, putting together a new venture team, raising money, establishing partnerships, managing finances, leading and motivating employees, and so on. -It also demands the ability to translate thought, creativity, and imagination into action and measurable results.

The ability to fashion a solid idea into a viable business

"In 1970, _____ became friends with Steve Jobs, when Jobs worked for the summer at a company where Wozniak was working on a mainframe computer. Together they sold some of their possessions, raised USD $1,300, and assembled the first prototypes in Jobs's bedroom and later (when there was no space left) in Jobs's garage." "______ attended Lakeside School, a private school in Seattle, and befriended Bill Gates, who was almost three years his junior but shared a common enthusiasm for computers. They used Lakeside's Teletype terminal to develop their programming skills on several time-sharing computer systems."

Wozniak; Paul Allen

skills profile

a chart that depicts the most important skills that are needed and where skills gaps exist. -help prioritize their hiring needs

virtual assistant

a freelancer who provides administrative, technical, or creative assistance to clients remotely from a home office

An advisory board is

a panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis. -People you need to help advance your company's success

board of directors

a panel of individuals who are elected by a corporation's shareholders to oversee the management of the firm

A consultant is

an individual who gives professional or expert advice -can conduct in-depth analyses on behalf of a firm, such as preparing a feasibility study or an industry analysis.

The main purpose of a _______ is to provide guidance and lend legitimacy to a firm. The most important thing that advisory board members can do is make ________ to early customers, suppliers, and business partners.

board of advisors; high-level introductions

If a new venture organizes as a corporation, it is legally required to have a ______-a panel of individuals who are elected by a corporation's shareholders to oversee the management of the firm.

board of directors

Networking

building and maintaining relationships with people whose interests are similar or whose relationship could bring advantages to a firm.

entrepreneurship-focused workshops example

business plan competition

Venture capitalist -Part of a ______ - ____ million invested (average) -Look for strong product with competitive advantage in a good market → measure potential of company to measure their return on investment -Look for a _____/management position in company —> Less control -Invest in companies in ____ stages because they need to see a promising investment

company; 7; leadership; later

Another way entrepreneurs overcome the liability of newness is by attending _______ and events, such as business plan competitions.

entrepreneurship-focused workshops

A new venture team (or entrepreneurial team) usually _____ over time, not built all at once. It is critical to overcoming liabilities of _________.

evolves; newness

Myth: Entrepreneurs should be young and energetic -Entrepreneurial activity is fairly evenly spread out over age ranges -What makes an entrepreneur "strong" in the eyes of an investor is _____ in the area of the proposed business, _____ and abilities that will help the business, a solid reputation, a track record of success, and passion about the business idea.

experience; skills

Founders fail when they believe their visions are _____. Listening to experienced advice can help you sort through whether your vision is a hallucination. Unlike a board of directors, an advisory board possesses no _____ responsibility for the firm and gives nonbinding advice.

facts; legal

Myth: Entrepreneurs are gamblers -Entrepreneurs are usually _____ risk takers, as are most people. ___% of participants rated themselves as conservative rather than risky -The idea that entrepreneurs are gamblers originates from two sources. First, entrepreneurs typically have jobs that are ______, and so they face a more uncertain set of possibilities than managers or rank-and-file employees. -Second, many entrepreneurs have a strong need to achieve and often set ______, a behavior that is sometimes equated with risk taking.

moderate; 79; less structured; challenging goals

Assembling a talented and experienced ________ is one path firms can take to overcome these limitations.

new-venture team

freelancer

person who is in business for themselves, works on their own time with their own tools and equipment, and performs services for a number of different clients

Passion for the Business -Number 1 characteristic shared by successful entrepreneurs -Passion typically stems from the entrepreneur's belief that the business will _______ -Willingness to learn and work hard -Ability to overcome ______ and listen to feedback; Perseverance

positively influence people's lives; setbacks

Start-up accelerators

provide entrepreneurs access to mentors, investors, subject matter experts (such as attorneys and accountants), and other entrepreneurs

Liability of newness

refers to the fact that companies often falter because the people who start them aren't able to adjust quickly enough to their new roles and because the firm lacks a "track record" of success and with outside buyers and suppliers.

Prior entrepreneurial experience

relevant industry experience and networking are other attributes that strengthen the chances of a founder's success. Most consistent predictors of future entrepreneurial performance

One reason the founders are so important is that in the early days of the firm, their knowledge, skills, and experience are the most valuable _____ the firm has. People judge a firm's future prospects by evaluating the _________. Education, expertise

resource; strength of its founders and initial management team