Intro to Entre Midterm Review Notes
The Four Steps to the Epiphany
Be familiar with these concepts/definitions:
The difference between Product Development and Customer Development (know the Customer
Development Model and each of its parts)
Difference Between Product Development and Customer Development
Product Development and Customer Development serve different but complementary roles in
startups and businesses.
Product Development focuses on creating and refining a product based on a predefined vision.
In large companies, this process is market-driven—meaning it starts with an understanding of
customers, competitors, and market needs. Features are developed and refined based on these
known factors.
Customer Development, on the other hand, is about discovering and validating customers
before scaling a business. It acknowledges that in startups, the market and customer base are
often unknown. Rather than assuming demand, Customer Development seeks to find and test the
demand first, making it iterative rather than linear .
In short:
Big companies: The market is known, so product development is based on established customer
needs.
Startups: The market is unknown, so customer development is essential to identify if there’s
demand before finalizing a product .
Customer Development Model and Its Four Steps
The Customer Development Model consists of four iterative steps that help startups find a
viable market before committing to large-scale production and marketing. These steps are:
Customer Discovery – Identifying potential customers and determining whether the problem the
startup aims to solve is actually important to them. The goal is to test hypotheses about customer
needs and market demand .
Customer Validation – Developing and testing a repeatable sales process. If the startup cannot
find enough paying customers at this stage, it must loop back to Customer Discovery and adjust .
Customer Creation – Scaling marketing and sales efforts once a repeatable process has been
found. This step turns early adopters into a larger customer base .
Company Building – Transitioning from a learning-focused startup to an execution-driven
company. At this point, the business moves from an informal, discovery-driven organization to a
structured company focused on growth .
Unlike Product Development, which is typically linear, the Customer Development Model is
designed to be iterative—meaning businesses often cycle back to previous steps as they refine
their understanding of their market .
Entrepreneurship 5th Edition
Chapter 2 – The Entrepreneurial Process
Definition of an Entrepreneur
Timmons Model and its 3 Main Elements
Chapter 5 – Understand your Business Model and Developing your Strategy
Know the Revenue and Cost Models; Understand COGS and revenue/cost drivers (know the
definition of “drivers”)
Appreciate the relationship between COGS and sales
Understand the First Mover Advantage and the elements of the First Mover Myth
Understand outsourcing and its business impact
Know the importance of Values, Selection and Structure in building the organization.
Understand the benchmarking concept
Know when you can test a product
Be familiar with concept, benefits and drawbacks of franchising
Chapter 7 – Building the Founding Team
Know the benefits/drawbacks (if applicable) of teams
Be familiar with the various forms of compensation available to founders and employees; be
familiar with the terms of page 211
Understand the concept of the “extend” team (professional advisors, outside investors, etc.)
Be familiar with issues that can affect the team (such as burnout, family pressure, etc.)
Chapter 9 – Building your Pro Forma Financial Statements
Understand financial statement basics (such as the purpose of an income statement, balance sheet
and cash flow statement)
Know the difference between gross profit and net profit
Understand the elements of the balance sheet-that is-assets, liabilities and owners’ equity; that is
know the definitions of these terms, as well as the components of each. So know the definitions
of receivables, payables, depreciations and inventory, for example.
Basic interrelationships of the financial statements-such as how net income is represented on the
cash flow statement, or how cash at the end of a period appears on the balance sheet.
Chapter 10 – Raising Money for Starting and Growing a Business
You will not be asked to calculate valuations-but you must be familiar with the 4 basic
ways to value a business, and the variables that can affect those valuations. You should
know the elements of the formulae (for example, you should know that for an Earnings
Capitalization Valuations, the Company Value = Net Income/Capitalization Rate. You
could see a question asking you for information about the formula-not to calculate an
Earnings Capitalization Valuation.)
Be familiar with these terms:
Free Cash Flow
P/E (Price/Earnings)
Modified Book Value
Replacement Value
Liquidation Value
Forms of External Financing
Different Types of Angel Investors
Factors Venture Capitalists Consider when Making Investments
Harvesting an investment
Pros and Cons of an IPO
Advantages and Disadvantages of an Acquisition
Chapter 11 – Debt & Others Forms of Financing
Correlation of Types/Levels of Funding and the Age/Maturity/Growth stage of the
organization
Use of Internal Funding Sources
Determining funding needs
Concept and elements of the cash conversion cycle
Negative cash conversion cycle
Working capital and networking capital
Liquidity
Use of Accounts Receivable as working capital
Short-term financing options
Differences between cash flow and profit
Chapter 14 – Social Entrepreneurship
Definition
Types of social mission companies/organization and their characteristics
Business Model Generation
Business Model Canvas
Be Familiar with the BMG definition of a business model
Know how many building blocks there are-and what each one is
Patterns Part 1
Unbundling business models- why do it, what are the types of businesses within a
corporation? Also know the cost structure of these
Business model patterns, such as the Long Tail, Multi-sided platforms (you may be asked
a question which tests your ability to identify these models); you may want to be familiar with
the patterns of each of these.
Patterns Part 2 – Design (Your slides are titled “Business Model Patterns Part 2 and the
subtitles is “Design”
Be familiar with the empathy map (pain and gain in particular)
Understand Ideation – what it is and the process
“Epicenters of Business Model Innovation”
Know what prototyping is