Business development and entrepreneurship basics

Addressing some of the early questions that entrepreneurs must ask themselves before beginning on their journey: * What are your goals for your enterprise? (Business, nonprofit, social enterprise) * Will your business be focussed on profit? Social benefit? Will it be a consulting practice? A service company? A product company? * What are the different requirements and resources necessary for your selected enterprise model? * What type of financing should you target: equity, debt, grant funding or a combination of all three? This is the lecture that establishes the framework for the rest of the course and gets entrepreneurs on their way! Part of the CIBC Presents Entrepreneurship 101 lecture series:
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  • 1. Slide 1 MaRS Follow or Tweet:#ent101
  • 2. ` Business Development and Entrepreneurship Basics Presented by: Tony Redpath & Allyson Hewitt Vice President, Partner Programs Director, Social Entrepreneurship MaRS Discovery District 7 October 2008 Slide 2 MaRS
  • 3. Slide 3 MaRS
  • 4. Start with the Basics 1) Why do I want to start this business? What is my motivation? 2) What resources do I need? Basement vs. Corporate Office 3) How do I fit into the rest of the world? Is my service/product unique? 4) What is my business model? For profit, non profit, hybrid model Slide 4 MaRS
  • 5. The Organizational Spectrum Non Corporate -profit with Socially Social Traditional Social Traditional Charity Income Activities Responsible Responsibility Corporation Enterprise Business (CSR) Mission Motive Profit-Making Motive Stakeholder Accountability Shareholder Accountability Income invested in Profits redistributed programs or overhead to shareholders Slide 5 MaRS
  • 6. What are the types of organizations? …CONSULTING  Key Characteristics:   Multiple Participants, Diverse focus, Size   Examples –  Hatch Associates  Benefits & Risks of Model   Low Capital Costs & Minimal Input   Liability Insurance; lack of support Slide 6 MaRS
  • 7. Consulting for Social Enterprises   Social Enterprises   Key Characteristics:   Focused on leveraging core asset (tangible, intangible) to provide access to market, advice   Examples –  Sustainability Office @ U of Toronto –  Aperio   Benefits & Risks of Model  Less Reliance on traditional funding  Mission Drift ( Profit and Mission alignment) Slide 7 MaRS
  • 8. What are the types of organizations? … SERVICES Slide 8 MaRS
  • 9. What are the types of organizations? …SERVICES  Key Characteristics:   Specialty business serving existing businesses   Examples  Benefits & Risks of Model   On-line software as a service   Capital Costs can be high: labs services: servers Slide 9 MaRS
  • 10. Service Models for Social Enterprises  Key Characteristics:  Market Intermediary Role to serve target population   Examples  Benefits & Risks of Model   Potential to Scale   Quality Control Slide 10 MaRS
  • 11. What are the types of organizations? …PRODUCTS Slide 11 MaRS
  • 12. What are the types of organizations? …PRODUCTS   Products   Key Characteristics:  Tangible offering ( pharmaceutical compound, medical device, consumer product   Examples   Benefits & Risks of Model   High development costs; market traction   Production costs high: outsource?  Potential for huge scale Slide 12 MaRS
  • 13. What are the types of organizations? …PRODUCTS   Products   Key Characteristics:  Sell a particular product that benefits a disadvantaged group and/or promotes a more ethical form of existing product   Examples: Vision Spring &   Benefits & Risks of Model   Competitive Landscape ( pro v. con)   Potential for huge scale  Production costs can be high Slide 13 MaRS
  • 14. Show me the Money….   Forms of Financing  Debt - borrow from someone, using an asset as security; rate & time period to be negotiated   Equity - sell a piece of your venture to someone in exchange for an investment in the venture   Bootstrap - self-fund and reinvest all profits for growth   Grants – foundations/government funding   Hybrid Models – important to both enterprise types Slide 14 MaRS
  • 15. The Lemonade Stand Example Assume you’re 8 years old and you need $20 to set up a lemonade stand Revenues Debt 50:50 Equity Rain $10 lender loses $10 partner loses $15 entrepreneur gets $0 entrepreneur gets $5 Cloud $30 lender is even partner loses $5 entrepreneur gets $10 entrepreneur gets $15 Sun $50 lender is even partner makes $5 entrepreneur gets $30 entrepreneur gets $25 Slide 15 MaRS
  • 16. Where can I get debt financing?  YOU Slide 16 MaRS
  • 17. Sources of Equity Financing  The 3F’s again – Friends, Family and Fools  Angels (aka high net worth individuals)  Generally like to invest in areas that they have worked in or are comfortable with  Can add valuable hands-on experience    Venture Capital Funds  Different funds invest at different stages in the growth of a company  Slide 17 MaRS
  • 18. Special Financing Sources  Proof of Principle / Idea to Innovation    NRC - IRAP    Foundations:  Trillium Fund -www.  Gates Foundation – Slide 18 MaRS
  • 19. The Financing Life Cycle Public Markets Venture Capital Seed Funds Angels Grants Risk Concept Start-up Growth Expansion Slide 19 MaRS
  • 20. The Financing Life Cycle Public Markets Venture Capital Seed Funds Angels Grants Risk Concept Start-up Growth Expansion Slide 20 MaRS
  • 21. The Financing Life Cycle Risk Grants Concept Start-up Growth Expansion Slide 21 MaRS
  • 22. How do I secure financing/support? Investors/Backers are concerned about Risk associated with any start-up Slide 22 MaRS
  • 23. Risks…..   Technology Risks   Stage of Development (concept  proof of concept  prototype of product)   Product development path (costs and “risks”   Competitive technologies   IP Risks  Nature of the invention  Scope of the invention   IP form: Patent, know-how, software Slide 23 MaRS
  • 24. Risks…..   Market Risks   Market size, dynamics and growth potential   Route to market, access, scalability   USPs of the products or services   Execution Risk  Knowledge of the market, networks  Skills required to move the enterprise through all stages of development  Reputation in the marketplace Slide 24 MaRS
  • 25. Risks for the Social Enterprise   Mission Drift   Balancing a Social and Financial Bottom Line   Execution Risk   Knowledge of the market, networks  Skills required to move the enterprise through all stages of development  Reputation in the marketplace   General Skepticism in the Global Marketplace Slide 25 MaRS
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