Management 160 Final UCLA

revenue

inflow of assets

beach head

initial most likely buyers

2 types of Multiple Fit

intermediary (wholesale clothing), platform (airbnb)

Industry life cycle

introduction growth shake out maturity decline death/reentrenchment

current investor ownership

investment amount/post money valuation

waterfall planning

product development in phases, completed by different organizational units

BMC: value proposition

products/services that create value for customer segment

Strategic orientation is a continuum from _ to _?

promoter to trustee

call to action definiton

prompts a subject to perform an action - used in experiments in order to test hypotheses (if customers are interested etc.)

types of donation crowdfunding

pure and reward

What is the quick ratio?

quick assets/current liabilities

scale

size of market

Business hypothesis

something that needs to be true for your idea to work but has not been validated yet

tax accounting

specific accounting requirements set by government

High Growth phases: 3rd round

steady increase in revenue to achieve profit

What is constrained functionality?

temporary or makeshift technology that delivers the MVP's functionality.

jobs

things customers are trying to get done in life

intellectual property

those rights which result from the physical manifestations of original thought

IPO

transition of private to public

3 core financial implications of business model

underlying profitability- value of output relative to input asset intensity - amount of assets that must be tied up in business to generate sales pace of growth - sometimes optional

managerial accounting

used by managers for planning, directing, controlling business

3 why questions answered by a good pitch

why this? why now? why this team?

incumbents

competitors

3D Business Landscape

conceptualizes a business' choices and strategy. How a firm engages with its environment

liabilities

creditors claims for funds

What is the current ratio?

current assets divided by current liabilities

gains

describe outcomes and benefits your customers want

3 types of crowdfunding

donation: no tangible return (pre startup) lending: repay supporters (startup) equity: ownership stake (growth)

promoter

driven by perception of opportunity

High Growth phases: startup

experiment to develop product, engage market

5 data traps to avoid

false positive (not actually there), false negative (overlooking), local maximum (missing out on real potential), exhausted maximum (overlooking limitations), wrong data (searching in wrong place)

financial accounting

formal, rule based accounting principles

What are the 4 stages in the get-customers pipe?

Awareness Interest Consideration Purchase

Types of customer jobs

functional jobs (to perform a specific task), social jobs (want to look good/gain status), emotional jobs (seeking a specific emotional state)

scope

geographic range of market

market

group of current/potential customers with willingness and ability to buy

incubators

help entrepreneurs launch by providing office space, business services assistance and funding

Competitive advantage defintion

Firm's ability to create a large gap between the amount it's customers are willing to pay and the costs it incurs

High Growth phases: mgmt buyout

acquire business or division

pass through taxation

business earnings distributed to owners who pay individual taxes on earnings

12 Basic accounting concepts: historical cost

business transactions are measured initially in terms of actual historical cost

convertible preferred stock

can be redeemed at face value of an investment plus accumulated dividends or converted into common stock for a pre-negotiated share of company

What are quick assets?

cash, short term investments, accounts receivable

debt vs equity fundraising

debt: fixed sum for fixed period of time at fixed interest; traditional bank; company profit equity: long term ownership in a venture in exchange for capital; angel investors; motivated by company success

Strategy canvas

diagnostic and action framework for a compelling blue ocean strategy captures current state of play in known markets line is value curve, shows company's relative performance horizontal axis is industry factors, vertical is offering level

BMC: customer segment

diff groups of people/orgs that enterprise seeks to serve

Business Plan

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

trustee

driven by resources currently controlled

assets

economic resources with potential to provide future economic benefits to a firm

lean startup

follows principles of hypothesis driven entrepreneurship, refine along the way for success

types of lending crowdfunding

forgiveable loans (interest only if project has profit/revenue) presales (finished product) traditional (interest fixed)

bootstrapping

to achieve early cash flow and become profitable by drawing on personal resources without giving up equity to investors

Up round Down Round

when a value of a venture increases/decreases between financing events

3 criteria to choose legal form

who are investors? what are capital requirements and cash flow characteristics? what is the time frame for business life?

Liquidity Meaurements short term

working capital = current assets - current liabilities

Fit

you achieve fit when customers like your VP meaning you address important jobs, alleviate extreme pains and create essential gains

Dual aspect

Every transaction affects two accounts

What is the number one thing most likely to lead to a business idea

Experience in particular industry or market

Testing process

Extract hypotheses prioritize hypotheses design tests prioritize tests run tests capture learnings make progress

What are the 4 main areas of business

-Customers -Offer -Infrastructure -Financial Viability

What are two reasons crowdfunding has risen in popularity

-JOBS made it easier for small investors to participate in equity fundraising -Consumers familiarity with online payment system has risen

Critical Dimensions of Business Practice according to Stevenson

-strategic orientation -commitment to opportunity: willing to act in short time frame and chase opportunity quickly -commitment of resources: maximizes value by minimizing resource set and accepting risk -control of resources: use other's resources -management structure: need for coordination of uncontrolled resources, flexibility maximized, employees want independence -reward philosophy: focus on creation and harvest of value and base compensation on perfomance

What are the five phases of channels?

1) Awareness 2) Evaluation 3) Purchase 4) Delivery 5) After Sales

Two "schools of thought" for entrepreneurship definition

1) Entrepreneurship as an economic function -doesn't make sense to decide what economic functions are entrepreneurial 2) Entrepreneurship as a set of traits -single psychological profile of an entrepreneur doesn't exist *Both only focus on some aspects of some entrepreneurs

What are two benefits of using an MVP for testing?

1) Shortens product development because you can incorporate customer feedback from the beginning 2) Easier to interpret test results and diagnose problems because you can isolate features

Two types of pricing mechanisms

1) fixed menu pricing: predefined based on static variables 2) dynamic pricing: change based on market conditions (i.e. auctions)

What are the 4 steps in the learning test card

1. Hypothesis 2. Observations 3. Learning and Insights 4. Decisions and actions

What are the 4 steps in the experiment test card

1. Hypothesis 2. Test 3. Metric 4. Criteria

What are two major causal factors in a recession?

"Irrational exuberance" Asset Bubbles

What are 3 categories of ways to value a business?

-Asset-based -Earning value -Market value

Good Reasons to Burn Through Cash

-Building proprietary tech/regulatory hurdles -Social Network Effect -Building brand awareness

What is the equation for churn rate

1/average customer lifetime in months

TAM

100% of market for the type of product you sell

TSM: total servicable market

100% of market you could actually sell to

Number of months to recover CAC has to be less than

12

High Growth phases: 1st around

1st launch, develop marketing, sales, distribution

Typical length of financial forecast

3-5 years, longer if you need long term investments before profit

Strategy definition

An integrated set of choices that positions the business in its industry so it can generate superior financial returns in the long run

Three Core Financial Statements

Balance sheet: point in time, snapshot of investing and financing activities. portrays financial position of company Income statement: period, how company performed during presented periods, net profit or loss Statement of change in shareholder equity: period, reconciles activity in equity section of balance sheet

What kind of phenomenon is entrepreneurship?

Behavioral

Business Model Definiton

Business model describes the rationale of how an organization creates, delivers and captures value

What is convertible equity and how is different from convertible debt

Convertible equity is like a convertible note but with no interest and no maturity date

What are the 4 phases of customer development?

Customer Discovery, Customer Validation Customer Creation, Company Building

6 Strategies to gain customer insights

Data Detective, Journalist, Scientist, Impersonator, Anthropologist, Co creator

What equation to use to compare two company's liquidity measures?

Debt-to-Equity Ratio = Total Liability / Shareholders Equity

What are Porter's 3 generic strategies

Differentiation: creating something that is perceived industry wide as being unique. Overall Cost Leadership: offering a combination of cost benefits industry wide. Focus: targets a particular buyer group, segment of the product line, or geographic market with differentiation, cost leadership, or both

Integrated Suite of Tools

Environment map Business Model Canvas Value Proposition Canvas

3 Rewards of Entrepreneurship

Growth Reward: personal growth Income Reward Flexibility Reward: structure life in way that suites needs

Six types of stakeholders

Influencers (informal: groups whose opinions count/decision makers listen to), Recommenders (formal), Economic Buyers (controls budget and makes purchase), Decision Makers (responsible for choice of product), End Users (ultimate beneficiaries), Saboteurs (obstruct searching, evaluating and purchasing process)

What is the significance of the panic of 1873?

It illustrated how asset bubbles and irrational exuberance can lead to recession. Railroads were a promising technology but banks and companies had over-invested in them

whats the life time value rule for SAAS

Life time value > 3 * customer acquisition cost

What are 4 ways to keep customers?

Loyalty programs Customer satisfaction surveys Product updates Check-in programs

What are the West Coast Angel's 7Ps

Pitch People Product Pain Players Projections Proposition

7 Risks of Entrepreneurship

Market Risks Legal/Regulatory Risks Financial Risks People Risks Systematic Risks Competitive Risks Technology & Operations Risks

3 types of FIT

On paper (problem solution): have evidence that your customers care about certain jobs/pains/gains, designed a VP that addresses In the market (product market): have evidence that your products and services are creating customer value In the bank (business model fit): your value proposition can be profitable and scalable into business model

What are pros and cons of convertible notes?

Pros Quick and easy w/o negotiation of valuation Cons -Accumulation of interest and maturity that comes before seed function could bankrupt a start up -Puts a massive debt on the start-up balance sheet that could make it unattractive for bank loans

What are four ways to grow customers?

Referrals Cross-sell up-sell Un-bundling

What are Steve Blank's two categories of customer development

Search Execution

Entrepreneurship Definiton

The pursuit of opportunity without regard for resources currently controlled

2 types of Revenue streams in a business model

Transaction, Recurring

12 Basic accounting concepts: going concern

Unless evidence, those preparing and auditing financial statements assume that entity will continue operation to forseeable future

How is problem solution fit defined?

When customers get excited about your value proposition

Strategy is a firm's answer to two fundamental questions:

Where to compete How to compete

business pitch

a presentation that can be used to communicate business model to investors

12 Basic accounting concepts: Business entity

accountant's area of interest; separate and distinct from owners

12 Basic accounting concepts: reliability of evidence

accountants recording events should rely on objective, verifiable, documentary evidence

Advantages and Disadvantages of Sole Proprietorship

advantages: secrecy, unique tax advantage, no share of profit, freedom in action and control, simple to organize, operate, dissolve disadvantage: limited capital, difficulty obtaining credit, inadequate management, unlimited liability, limited legally

High Growth phases: expansion

aggressive growth, establish privately held company

Benefits of crowdfunding

alleviate capital crunch validate business idea refine product or service through feedback market validation/ accurate picture of performance marketing - providing backers with product to promote

shareholder equity

amount of funds owners have provided and their claims on the assets of a firm

pains

anything that annoys your customer/ prevents them from getting job done

liquidity measurements - long term

assets - liabilities = owners equity

Six Forces shaping industry competition

bargaining power of suppliers, intensity of rivalry, new entrants, bargaining power of buyers, substitutes, complements

accelerators

bootcamp intensive coaching/networking

structure of venture capital firm

money raised from limited partners like pension funds, endowments and wealthy individuals run by professional investors (VCs) new ventures attract VC firms if investments are larger than founders can obtain through angels, bootstrapping, bank loans. chance of very high return

How to calculate a customer's lifetime value with a subscription model?

monthly subscription rate * gross margin / churn rate

BMC: key partnerships

network of suppliers and partnerships to make business model work

insurgents

new entrants

3 patentability test

novelty, nonobviousness, usefulness

12 Basic accounting concepts: consistency

once an entity has decided on one accounting method, should continue unless sound reason to change

elevator pitch

one paragraph of new business/opportunity - to capture interest of someone unfamiliar w your idea

5 functions of formulating business plan

opportunity to test ideas and determine if viable business opportunities exist foundation for debating and analyzing key assumption, developing financial forecasts and designing early experiments Baseline to clarify future milestones as entrepreneur builds minimal viable product offering engaging with market clear statement of metrics to test assumptions and measure performance approach to communicating with others about the business while raising money, assembling team, attracting suppliers/customers/partners

expenses

outflow of asset

What is working capital a short hand for

A firm's ability to pay debts

What is a convertible note?

A loan typically issued to the start-up before it is valued in its seed round. The loan converts to equity during the seed round

A product that is truly minimal because it does not exist yet is called a _________ _________

A product that is truly minimal because it does not exit yet is called a smoke test

What equation to use to assess a firm's solvency?

Assets - debt = owners equity

Fundamental accounting equation

Assets = Liabilities + Stockholder Equity

12 Basic accounting concepts: monetary unit

accounting is a measurement process dealing with events in monetary terms

12 Basic accounting concepts: materiality

accounting standards apply only to material items

advantages and disadvantages of partnership

ad: easy to form, division of mgmt and labor, ideas/skills/plans of more than one person, raise more capital, obtain financial resources dis: limited, unliited liability, responsible for partner, incompatibility possibility

12 Basic accounting concepts: conservatism

added weight given to choice that leads to lowest asset or highest liability

partnership

business w 2+ owners

BMC: revenue stream

cash a company generates from each segment

industry

consists of sellers that offer products similar and substitutional

High growth vs low growth venture model

high growth, longer and steeper cash flow decline, later break even, slower growing revenue, extreme exponential growth low growth, smaller cash negative, sooner break even, shallow and even revenue growth

BMC: channels

how communicate with customer segment to deliver VP

gain creators

how product service creates customer gains

pain relievers

how your product services alleviate customer pains

High Growth phases: seed

identify opp and develop business model

BMC: key resources

important assets required to make business model work

BMC: key activities

important things company must do to make business model work

just do it ! (approach)

improvisational, adapting to feedback

12 Basic accounting concepts: matching

income or profit reported on a financial statement is result of matching of related costs and revenues in a period

types of equity crowdfunding

investor led- securities, revenue, profit sharing - profits accessible to accredited investors entrepreneur led- equity, bondlike, shares, securities, revenue, profit sharing- profits accessible to all investors

Four components of environment map

key trends, market forces, macro economic forces, industry forces

LLC

limited liability company

Key advantage of corporation

limited liability for shareholders

4 types of business plans

mini business plan (external): summary of essential components of new venture strategy, go to market and operating plans and how those translate to financial forecasts traditional business plan (external): contain detailed discussion of strategy, go to market, operating plans and how they become financial forecasts go to market (internal): unmet needs of early customers, product, service or solution that can be developed to address needs and value proposition operating plan (internal): define key activities and milessones that must be accomplished as founders develop, produce deliver first offering

crowdfunding

outsourcing of an organizational function to a strategically defined network of actors in the form of a platform open call

4 common types of intellectual property

patents: protection of commercial/industrial products (20y) trade secrets: ideas, information, routines used in one's business/not generally known/source of competitive advantage (indefinite) trademark: word, name, symbol, phrase, design used to identify/differentiate product (indefinite or until abandoned or generic) copyright: protects creative works fixed expression (author + 70y)

High Growth phases: 2nd round

penetrate initial markets, show ability to generate revenue

angel investors

people who invest own money in startups (business leaders, entrepreneurs, wealthy) motivated by economic returns and want to work with budding entrepreneurs

Operational Effectiveness

performing the activities of creating, producing, selling and delivering a product better than rivals

12 Basic accounting concepts: accounting period

periodically test readings of progress, breaks flow of business activities into a series of reporting periods

Sole propietorship

person who undertakes a business without any of the formalities associated w other forms of organization. individual = business for taxes/legal

six major factors in choosing a business form

personal liability of business owner taxation complexity and organizational costs control of business continuity of business ability to raise capital

High Growth phases: work out

plan for turnaround (troubled)

previous investor ownership

pre money amount/post money valuation

pre money valuation post money valuation link

pre money value = post money value - investment

venture capitalist

professional investors at firms who invest in new ventures using funds from limited partners such as pension funds, endowments and wealthy - angel investors invest personal money

Red oceans, blue oceans defintion

red oceans are all existing industries/known market blue oceans are all nonexisting industries/unknown market

Four Actions Framework

reduce, create, raise, eliminate allows company to systematically explore how to reconstruct buyer value

BMC: customer relationship

relationship between company and customer

build it and tey will come

relies on founder's vision, engineering dominated team delivers product

12 Basic accounting concepts: disclosure

reports should disclose enough information that they will not mislead careful readers who are reasonably well informed

Resource based view

resources are what the company has, capability is what company does w it ownership of resources is source of advantage market demand, scarcity, appropriability

Equity sources

revenue earned and expenses incurred result in profit or loss - go to dividends to pay shareholders who contribute funds or they are retained. contributed capital and retained earnings make up owner's equity

accrual accounting

revenues and expenses recorded when earned, not when money is received/paid

cash accounting

revenues when cash received/expenses when cash paid

S corp vs C corp

s corp has tax status of partnership (paid on personal level), protection from legal liability is same as corporation, *must have one class of stock and less than 75 stockholders c corp, firm does not get deduction for dividends paid and earnings are taxed twice

minimal viable product

smallest subset of features/activities needed to complete a build measure learn cycle and test business model hypothesis