1.What are various sources of equity investment?

a. super angels – emerging group of investors that sit between conventional private angel investors and the venture         capitalists.

b. public stock – selling shares of the company

c. private equity – venture capital, leverage buyout, growth capital, distressed or special situation, mezzanine capital

3. What guidelines should entrepreneurs follow when they are selecting a venture capitalist?

a. Scrutinize your business with a critical eye

b. Beef up management

c. Keep a high profile so the VCs will visit

d. target the search

e. keep a lookout

f. investigate possible venture partners

5. What are the difference between a single-hit and a home-run business?

Single hit – no sustainable product / service / business model

Home run – sustainable business that can run long time

6. What are the four key factors that a banker seeks before providing a corporate loan?

a. character – which includes such traits as talent, reliability and honesty

b. cash flow – to cover debt service must be available throughout the term of obligation

c. collateral – to support at least part of the loan should the company be unable to meet its obligations

d. contribution – by the entrepreneur towards the funding requirement

 

There are many ways to fund your company at an early-stage.

1. Self-funding
2. Moonlighting and consulting
3. Bootstrapping
4. Family and Friends / Angels
5. Micro-Equity and Micro-Loans
6. Personally secured bank loans
7. Factoring and supplier financing
8. Government programs

Virtual company is a company that has no offices, very few employees loaded with associated costs and benefits, no communication costs, low legal costs and so forth. A virtual company will use providers like Skype for video conferencing, BaseCamp for project tea and document management, ADP for payroll and tax management, online basic legal documents for protection, and Salesforce.com for sales tracking.

Bootstrapping is a type of self-funding often applied in a small business, can reduce costs from the current operation and overhead. It is usually overlooked as a source to business owners. The process of analyzing the operation to save and improve efficiencies will also allow the entrepreneur to learn more about the company.

1. no or low rent
2. bartering for goods
3. trading intellectual property rights
4. renting or leasing equipment
5. used equipment
6. access to expensive equipment
7. suppliers’ and customers’ help
8. cooperative purchases
9. outsourcing
10. credit cards
11. contingent litigation

It is important for closely held companies and early stage high-growth companies seeking equity investors because it is reserve most of ownership to the starters themselves.

There are private lenders that provide funds for operations using purchase orders as security for the loan and we called this by factoring of purchase order.

Suppliers can give you a line of credit, in exchange for getting your purchase orders to help you providing working capital.

 

There are at least three financial measurements should be prepared to measure company performance.

1. The balance sheet
2. The income statement
3. The statement of cash flows

In order to prepare an annual financial budget, there are 11 major categories and steps.

1. sales
2. cost of goods sold
3. gross profit
4. operating expenses
5. operating profit/loss
6. other income and expenses
7. pretax income
8. income taxes
9. net income
10. EBIT
11. EBITDA

Primary driver of the social entrepreneur is to build a better society. Global media brings everything in front of us including all the major challenges that human beings are facing. We try to be part of the solution for issues such as underprivileged in the developed world, global warming, energy demands, wealth gaps, famine, pollution and so on. These issues drive us to become a social entrepreneur.

Green and clean tech should be considered as part of social entrepreneur movement. They are aiming for solving major issues such as pollution, global warming and resource conservation. These echoes with the primary driver of the social entrepreneur.

There are a few negatives about being a nonprofit.

1. Lack of sustainability
2. Lack of initiative
3. Lack of growth opportunity

Stakeholders view the social venture differently from a traditional venture because markets do not work as well for social entrepreneurs. It is hard to value social entrepreneur since it is driven by the impact of the mission rather than by wealth creation.

There are also some major challenges for a social venture to grow,

1. How to retain employees
2. How to value their efforts
3. How to stay on track with their initial mission plan

On the other hand, we can also see challenges and opportunities existed at the same time. Social ventures have opportunities that traditional ventures don’t have such as people who believe in the social mission of the venture tend to be willing to pay a higher price for products and services, employees who believe in the social mission will be more willing to work over time and put in extra effort.

 

 

 

There are three most important factors to consider before choosing form of ownership for your company,

1. Company Size – how big you want to grow your company
2. Tax Consideration – avoid unnecessary cost
3. Risk and Return – how much risk you want to take and how much return you expect to get also help you to determine your company form of ownership

Advantages of a Sole Proprietorship

1. Profit Incentive
2. Total Decision-Making Authority
3. No Special Legal Restrictions
4. Easy to Discontinue

Disadvantages of a Sole Proprietorship

1. Unlimited Personal Liability
2. Limited Skills and Capabilities of the Sole Owner
3. Limited Access to Capital
4. Lack of Continuity for the Business

A corporation is a separate legal entity apart from its owners and may engage in business, issue contracts, sue and be sued and pay taxes. The Owners of a corporation hold stock in the corporation. Each share of stock represents a percentage of ownership. The actual business of the corporation is conducted by the directors and officers of the corporation.

Steps to incorporate a business,

1. select a local agent
2. select the corporate name and check on the availability
3. prepare the Certificate of Incorporation

Even though LLC and S-corp are similar in many ways, but they still have few differences between each other.

1. LLC is easy to form and maintain without extensive records
2. LLC tends to have a very small number of owners
3. LLC can not take the company public
4. Restrictions on transfer of ownership
5. LLC may need to pay double tax like C-corp

 

Business plans fail for thousands of reasons when you test them in the real world. However, when you really look at them and try to summarize those reasons, there are probably only few main reasons that why they failed.

-You don’t understand your own products/services/team enough.

In this scenario, you will most likely end up with an unclear business plan or plan that doesn’t have focus. There is no way for your investors to understand your products/services if you don’t make it clear enough that the majority will be able to understand. You will also end up with a bad team or unclear role of your team players. This is also fatal for most of the start-up companies.

-You don’t understand your customer segmentation in the market.

In this case, you will overestimate or underestimate your target market size which will either come up with an over optimistic financial projection that no investor will believe or an unattractive financial projection that no investor will put in their money.

-You don’t understand your competitors.

In this scenario, you will have a inaccurate forecast of your future sales and cash flow which will directly harm the trust of your investors and your team.

 

There are many ways to describe business models. One of my favorite from the book is that “A business model is a description of how your company intends to create value in the marketplace. It includes that unique combination of products, services, image, and distribution that your company carries forward. It also includes the underlying organization of people, and the operational infrastructure that they use to accomplish their work.” This description is in plain and easy to understand language yet very thorough and insightful. It carries out the full concept of business model.

The five component model and the business model canvas are both very useful tools for entrepreneurs to think about their business models. They both help start-ups to get a cleaner picture of all the components and touch down on very important points such as market segment, customers, value and strategy.

Five component model is highly condensed and each of component consists lot of questions to ask and to make clear. In the other hand, the business model canvas already help us to accelerate the process by asking questions and all we need to do is to answer those questions.

Greif Packaging changes their business focus from a commodity supplier of metal drums to a value-added service provider of “trip leasing” company. They listen carefully to their customers and provide full-service that other companies didn’t realized and capture the extra value. The extra value comes from helping their key customers to solve their problems. They take over the problems that their customers don’ t want to deal with at all and gain a big competitive advantage on this.

There differences between Franchising and Licensing,

1. Franchising – Franchiser will help to support and train Franchisee and its employees / Licensing – Licenser will not provide that
2. F – It is governed by securities law / L – It is governed by contract law
3. F – Franchiser have control over Franchisee / L – Licenser have no control of Licensee

Three similarities between Franchising and Licensing,

1. both grant receivers certain rights
2. both require royalty payments
3. both are exclusive intellectual property

Innovation is one of the most important key for a successful business. It is important because it may brings many competitive advantages as following,

1. Build a brand new market that no one to compete yet

2. Compete with other businesses in a new way

3. Mobilize a business and make it easier to access by other potential customers

4.  Increase productivity tremendously

5. Attract capital to help business to grow

It becomes more and more important nowadays because the internet is changing the entire world. The world is becoming more and more flat, so people that across the ocean can come in to your hometown to compete with you easily without you noticing that. The flat world requires that your businesses have to have more competitive advantages to survive.

Dell was successful because it well solves points of pain compares to many other similar companies. They keenly noticed what the market really wants instead of what they thought the market wants at that time and help their clients to solve their problems by providing the customized low-cost but fully functional computer to corporates and small businesses. They hit the points of pain and win the game.

 

 

I like this question because I never compare the meaning behind these two terms. Entrepreneur and small business have many similar characteristics, yet they are still different.

Here is list of characteristics that help us to see the differences between them,

1. Risk – Small business tends to have known and established product and services which means less risk, Entrepreneur tends to have higher risk product and services because they are brand new and not established before

2. Return – Higher risk means higher return, entrepreneur tends to attract venture capital and expect to have massive return, small business usually starts within family and friends and expect to have certain growth and return

3. Innovation – Entrepreneur tends to sell more innovative products or services, small business tends to sell products and services that already exist in the market

4. Way of problem solving – small business sells things that you need, entrepreneur sells things that you want

If I start another company, I won’t expect to be in full control, I would definitely choose to delegate my work and duty to people that I trust. A wonderful team makes a company perfect instead of one person.

The most important growth issues entrepreneurial companies will face are these two,

1. Productivity – A company has to be willing to keep making big changes in order to increase their productivity, and it is not easy at all to make these changes

2. Management – Managers determine whether the company will grow and grow in the right way

In general, entrepreneurs sell innovative products and services, face unknown risk and aim for rapid growth and huge return, they sell things that you want in the near future or now that didn’t have a strong present in the market yet and take the world to next level.