Patterns of Entrepreneurship Management
Contents
Preface
List of Cases and Profiles
iii
x
Chapter 3
The Art of Innovation — Developing Ideas
and Business Opportunities 35
Introduction
PART ONE:
GETTING STARTED AS AN
ENTREPRENEUR
Chapter 1
What Is an Entrepreneur? 3
Introduction 3
Profile: Wayne McVicker— A Typical Entrepreneur 4
An Entrepreneurial Perspective 5
Commonly Shared Entrepreneurial Characteristics 5
35
Profile: Becky Minard and Paul Gisholt —Finding a Point of Pain 36
Why Innovation Is Important 40
1
Definition and Types of Innovation 41
Frameworks for Learning Innovation Skills 43
Finding and Assessing Ideas 48
Converting an Idea into an Opportunity 49
Opportunity: Five Phases to Success 50
Summary 59
Study Questions 60
Types of Entrepreneurs 6 The Need
Exercises 60
Interactive Learning on the Web 60
to Control 7 Entrepreneurship Roller
Appendix: The Bayh-Dole Ad 61
Cooster 9
Additional Resources 61
So Why Become an Entrepreneur? 9
Use the Master-Case to Develop Management Skills 10
Summary 11
Study Questions 11
Exercises 11
Interactive Learning on the Web 12
Appendix: The Master-Case, Neoforma, Inc. 12
Neoforma —A Summary of the Master-Case 13
Additional Resources 17
Chapter 2
The Entrepreneurial Process 21
Introduction 21
Profile: Ted Grâef and Scott Johnson— Getting Started with an
Off-the-Shelf Idea 22
The Spiderweb Model 22
Chapter 4
Introduction
Analyzing the Market,
Customers, and Competition 65
65
Profile: Donn Rappaport —Marketing Visionary in Using Data 66
Formulating o Successful Marketing Plan 67
Preparing the Marketing Analysis and Plan 68
Defining the Market Segmentation 71
Conducting a Competitive Analysis 74
Preparing the Pricing and Sales Strategy 76
Penetrating the Market and Setting Up Sales Channels 78
Summary 80
Study Questions 82
Finding Early Mentors 23
Exercises 82
Interactive Learning on the Web 83
Managing Stress 24
Case Study: Smart Card LLC Marketing Plan 84
The Five-stage Entrepreneurial Process 25
Appendix: Marketing Research Techniques 86
The Growth of Entrepreneurial Companies 29
Additional Resources 89
The Growth Period 29
Summary 30
Study Questions 30
Exercises 30
Interactive Learning on the Web 31
Additional Resources 31
Chapter 5
Writing the Winning Business Plan 91
Introduction 91
Profile: Nikolay Shkolnik — Business Plan Turns a Dream
into Reality
92
The Value of a Business Plan 93
Setting Goals and Objectives 94
Starting the Process to Write the Plan: Five Steps 95
Determining What Type of Business Plan Is Best 97
A Typical Business Plan Format and Content 99
Understanding Why Business Plans Fail
104
Summary 105
Study Questions 107
Exercises 107
Case Study: Surfparks LLC 108
Appendix: The Roadmap Guide for Writing a Business Plan 121
Interactive Learning on the Web 125
Additional Resources 125
Chapter 6
Setting Up the Company 127
Introduction
127
Profile: Ethan Wendle and Malt Chverchko — When to Convert from an
S- to a C-corporation 128
Identifying What Form of Ownership Is Best 129
Forms of Doing Business 129
Sole Proprietorship
129
C-corporation
132
S-corporation
138
Partnership 140
Limited Liability Company
142
Business Start-up Checklist
143
Summary 147
Study Questions 148
Exercises 149
Interactive Learning on the Web 150
PART TWO:
Chapter 7
MONEY SOURCES—FINDING AND
MANAGING FUNDS
151
Bootstrapping and Financing the Closely
Held Company 153
Introduction
153
Profile: James Dyson—Bootstrapping out of Necessity 155
Securing Early-stage Funding 157
Self-funding
157
Family and Friends 161
Using Factoring and Bank Loans as a Source of Cash 161
How to Use Commercial Banks 162
Using Government Sources of Funding 167
Summary 170
Study Questions 171
Exercises 172
Interactive Learning on the Web 172
Appendix: Start-up Entrepreneurs and Business Incubators 172
Additional Resources 176
Chapter 8
Equity Financing for High Growth 181
Introduction 181
Profile: Malt Brezina—Staged Investments 183
Equity Investment Fundamentals 183
Angel Investors
193
"Microequity"—Little Money with a Lot of Mentoring 194
Understanding the Venture Capital Process 195
Guide ta Selecting a Venture Capitalist 198
Private Placements 199
Strategic Partnerships and Corporate Investments 200
Learning How to Value a Business 202
Summary 208
Study Questions 209 Exercises 209
Case Study: CoreTek, Inc. 210
Interactive Learning on the Web 211
Additional Resources 211
Appendix 1: Due Diligence Checklist 214
Appendix 2: Model Venture Capital Term Sheet—Series a Preferred
Stock 219
Chapter 9
Managing the Money 231
Introduction 231
Profile: Alvin Katz—Managing Cash in Tight Situations 232
The Value of the Balance Sheet 233
Review and Analysis of the Balance Sheet 234
The Value of an Incarne Statement 241
How to Use Ratios for Profitability 242
The Value of the Statement of Cash Flows 243
Understanding Footnotes to Financial Statements 244
Preparing Financial Projections 245
Preparing a Cash Flow Forecast 249
Preparing a Breakeven Analysis 252
Analyzing an Investment Decision 254
Taxes and Filing 256
The Stresses of Managing Money 257
Summary 257
Study Questions 258
Exercises 258
Interactive Learning on the Web 259
Additional Resources 259
PART THREE: IMPLEMENTATION
Chapter 10 Discovering Value in Intellectual Property:
The Competitive Edge 263
Introduction 264
Profile: lan Kibblewhite—An Integrated IP Strategy 264
261
The Value of Trademarks 266
The Value of Copyrights 269
The Value of Patents 272
How to Proted Intellectuel Property 278
Getting Started with die Patent Idea 280
What Is Prior Art? 280
Using Search Options 281
Interactive Leorning on the Web 331
Appendix: Legal Document Templates 331
PART FOUR: COMMUNICATING AND EXITING 343
Chapter 13 Communicating the Opportunity 345
Progress from Ides to Patent to Enterprise 285
Introduction 345
The Value of Trade Secrets 286
Profile: Craig Bandes—Matching Presentations to Investors 346
Reverse Engineering 287 Summary 287
Locating Investors 347
Study Questions 288
Preparing a baser 349
Exercises 289
Interactive Learning on the Web 289
The Elevator Pitch 353
Internet IP Source Sites 290 Additional Resources 290
Summary 361
After the Presentation 359
Study Questions 361
Chapter 11 Business Models and the Power of
Information 293
Introduction
293
Profile: Neal DeAngelo—Using Data Collection 294
Definition of Business Models 297
Capturing Value in the Supply Chain 298
Using Databases to Create Value 299
Locking in Customers 300
Licensing and Franchising 301
Outsourcing Resources 307
Models Built around Social Networks 310
Corporate Partnering 311 Summary 312
Study Questions 312
Exercises 312
Interactive Learning on the Web 313
Additionol Resources 314
Chapter 12 Managing the Team 317
Exercises 362
Interactive Leorning on the Web 362
Chapter 14 Scaling and Exiting the Venture 365
Introduction 366
Profile: Alan Trefler—Private to Public Ownership 366
Create an Exit Strategy 366
Selling an Equity Stake to a Partner 367
Implementing the Plan of Action 368
Selling the Business 369
Preparing a Selling Memorandum 370
Searching for Buyers 371
Evaluating Offers 372
Create the Letter of Intent 373
Performing Due Diligence 374
Closing the Deal 375
Merge with Another Business 375
Consider a Public Offering 376
Determining the Benefits of Going Public 376
Introduction
317
Profile: Paul Silvis—Building on Embracing Culture 318
Determining the Disadvantages of Going Public 378
Developing a Strong Corporate Culture 319
Completing the Registration Process 379
Finding and Hiring the Best People 321
Presenting a Road Show 381
Dealing with Firing an Employee 323
The Expenses of Going Public 382
Dealing with a Resignation 325
Delivering Value and Meeting Market Expectations 383
Conflicts of Interest and Business Ethics 325
Summary 383
Legal Issues 327
Study Questions 384
Setting up Stock-Option Agreements 329
Summary 329
Exercises 384
Interactive Learning on the Web 385
Study Questions 330
Additional Resources 385
Managing the IPO Event 379
Exercises 330
Addendum: Three Case Studies Covering the Whole Book 387
Notes 393
Glossary of Terms 403
Index 409