1. What are various sources of equity investment?

• Public stock: Buying/selling stocks among publicly traded companies (NYSE/NASDAQ)
• Private equity:
• Venture capital- equity investments made for launch or early expansion of business
• Leverage buyout- strategy of making equity investments as part of transaction in which the company gains business assets from current share holders
• Growth Capital- refers to the equity investments in mature companies looking for capital to expand operations, enter new markets, or finance a major acquisition without change of control of the business
• Distressed/Special situations- investments in equity or debt securities of a distressed company or company where value can be unlocked resulting from a one time oppotunity
• Mezzanine capital- equity securities that often represent the most junior portion of a companies capital structure that is senior to the companies common equity

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

1. scrutinize your business with a critical eye- can the business give returns the VCs demands?
2. Beef up management- hire the right people
3. Keep a high profile so the VCs will visit
4. Target the search- look for firms that specialize in industry and size of investment
5. Keep a lookout- look for smaller VC firms
6. investigate possible venture partners- figure out needs

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

• A home-run business is basically a business that invests more and more capital over a long period (7 or 8 years) in hopes of high returns. This usually yields poor results and can hurt the investor and business owner.
• Whereas a single-hit business seeks a more capital efficient way doing things. Theyll turn to virtual businesses and receive higher returns on early stage funding, building the essential assets needed within 2 to 3 years.

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

-The 4 Cs of lending:

• Character- talent, reliability and honesty
• Cash Flow- to cover debt, service must be available throughout term of obligation
• Collateral- to support at least part of the loan should the company be unable to meet its obligations
• Contribution- contributions by the entrepreneur towards the funding requirements

1. What sources of funding are available to entrepreneurs at the early stages of the company?

• Self-Funding: use personal resources to launch venture
• Moonlighting & part time consulting: founder is working a full time job to support self and business
• Bootstraping: being cost conscious (example; no/low rent, renting, used equipment, outsourcing)
• Family & Friends: not as worried about quick profits as professional investors are
• Micro-equity and Micro-loans: trade small ownership for substanable cash and connections to loaners network of entrepreneurs
• Bank loans: Borrow money, payed back with interest
• Factoring & supplier funding: Receive funds from a private lender, you secure those funds using purchase orders as security loans. Charge high interest.

2. what are “virtual” companies? What tools help them function? Why are they of interest to an entrepreneur?

• A virtual company is one that has no offices, no communication costs, low legal costs and so forth. They use providers such as Skype for video conferencing, Basecamp for team projects, and other sophisticated, free or low pay, tools to help function. Theyre a good resource to entrepreneurs without taking on long term liabilities.

3. Describe seven techniques for bootstraping that you could use if you started a company.

• No or Low Rent
• Cooperative Purchases
• Outsourcing
• Bartering for Goods and Services
• Renting or Leasing Equipment
• Used Equipment
• Trading Intellectual Property Rights

4. Why is bootstraping important for (a) closely held companies and (b) early stage, high-growth companies seeking equity investors?

• (a) can reduce costs from operations and overhead allowing the entrepreneur to become more proficient with their companies costs
• (b) by becoming more efficient and cost conscious the entrepreneur will be put in a stronger position to qualify for additional fundings from investors

5. What is meant by factoring of purchase orders?

• Using the purchase orders from customer to secure funding from private lenders. They receive the money from the customer and you get whats remaining after fees and interest has been applied.

6. How can suppliers help in providing working capital?

• Suppliers help because they give you a line of credit for your purchase orders. The mini case example showed that the company had a 150 day pay cycle allowing them to receive payments from customers before paying the supplier. They were able to use the suppliers cash to fund the company essentially.

1.  What financial measurements should be prepared to measure company procedures?

There are 3 methods of measuring financial performance:

• Measuring sales volume
• Measuring profits
• Measuring cash generated

2. What are the categories and steps in preparing a financial budget?

• The 11 categories to preparing a financial budget are: sales, cost of goods sold, gross profit, operating expenses, operating profits/loss, other income and expenses, pretax income, income taxes, net income, EBIT, EBITDA.

4. Describe the break even technique in the decision-making model to determine profit and loss.

• It a mathematical formula used to help determine whether a certain volume of output will result in profit or loss. Break-even occurs when the total revenue is equal to the total costs. P(x) = F + V(x)

6. Why is building a corporate culture to match a companys mission important?

• Its important because companies that do build a corporate culture to match a companys mission perform on a much higher scale and are often times much more successful. The book refers to Michael Dell as an example. He succeeded where others did not because he was able to lead his organization on a mission where everyone was involved and clear concise goals were established.

7. Select six leadership attributes that you feel are the most important when building a strong culture. Why?

• Freedom:  Youre not forcing too much control over the individual/ suffocating them
• Empowerment: Lets the employee know we can trust in their skills to handle issues
• Honesty: An honest and open environment builds confidence in the work environment
• Support: Should know that their ideas will never go unnoticed/ unsupported
• Alignment: Having clear goals makes it easier foe the employee to follow the same goals
• Teams: Should never feel as if they have to accomplish a difficult task(s) on their own

8. Name three important factors that you must take into account when hiring key people.

• Matching Values
• Check references
• Hire professional recruiter for key positions

1.  Name three factors that impact how a new technological innovation fits existing markets conditions.

• Must follow appropriate government regulations
• Enters more easily if it is compatible with existing products and standards
• Adheres to its position in the hype cycle

3. Name two factors that impact the “market window of opportunity”

•  Knowing where you are on the hype cycle as you promote your innovation
• Experimenting with early adopters as you polish your marketing plan, it allows for testing of the market and planning ahead

5. Name a product that is currently being used by early adopters only?

• The Oculus Rift, its projects virtual reality gaming

1. What is the primary driver of the social entrepreneur?-The primary driver of the social entrepreneur is social need. They are driven to make the world a better place and addressing social issues.
2. Should green or cleantech ventures be classified as social enterprises? If so ,why?-I do believe that they should be classified as social enterprises simply because Draytons definition of a social entrepreneur are those individuals who use innovative solutions to solves societies most pressing social problems, which exactly what green/cleantech ventures strive to accomplish.
3.  What are some of the negatives of forming the social venture as a nonprofit?-Complicated tax and corporate governance issues, inability for founders to participate financially, difficult to sustain over time, inability to attract equal investments, difficult to attract top talent.
4. Why do stakeholders view the social venture differently from a traditional venture? -Social ventures tend to have greater stakeholder issues and challenges than a traditional venture. The emotional components are heightened and everything feels more intense. External stakeholders place a stronger scrutiny on the venture asking more questions seeing that the venture provides accurate information. Internal ventures look at growth and the challenges social ventures are faced with such as hiring and communication.
5. What are some of the growth challenges of a social venture?-One of the biggest growth issue for a social venture are employees. Employees who are on the same page as the social venture are driven by a social mission and considered “followers” rather than employees. They are emotionally committed to a very strong degree. This makes it really easy for those followers to feel betrayed if the venture were to do something out of character or “stray” off the mission. Also it will be a challenge to keep those followers motivated through out the course of the venture. As a social entrepreneur, the biggest problem you’ll be asking yourself here is whether you should hire a regular employee who isnt as committed to the businesses goal or hire a follower who believes in the cause.

• Differences between Social Entrepreneurship, Corporate Social Responsibility and Philanthropy.-Corporate social responsibility mainly focuses on following and adhering to social norms within a business. There is no formal responsibility. Philanthropy is different in the sense that it is just charity work and is done out of the goodness of ones own self. A social entrepreneur draws upon business techniques to find solutions to social problems. It uses the profits as a means of tackling issues in society in hopes of changing for the better.
• Differences between Social entrepreneurship and Business Entrepreneurship.-Both fulfill a need in the market and seek to earn a sustainable amount of profit. However, social entrepreneurs measures their performance on the positive impact its had on society whereas a business entrepreneur is solely focuses on revenue.

My venture idea is to open up a fitness center/gym around my neighborhood. In todays society youll find that people tend to place a lot of time and effort into staying fit and being healthy. We aspire to have “summer bodies”, look like our favorite celebrities, be active in our daily lives and be the best that we can be. So why not give them a place where those needs can be met?

So here are a some issues gym goers usually run into (based on secondary and primary market research); Convenience, affordability and quality. I believe that there is no primed time to workout and a gym should be open for most hours of the week. The equipment should be state of the art and broken machines will be periodically replaced for quality assurance. My competitions around me are(results based off of ReferenceUSA); Golds Gym, Planet Fitness, Richies Gym and although it is quite some distance away, LA Fitness. Each one of these gyms come across one or more of the issues stated earlier. These competitors take away a segment of my target market which are those who only wish to life weights. I will use niche marketing concepts to counteract this dilemma by addressing the different needs of the market and not focus on just that one entity. For example I plan on offering classes such as Zumba, yoga, fitness classes, etc. Also there will be basketball courts, trainers and a smoothie bar available.

I am offering an alternative to someone who wants to do more than just lift weights. My target customer is anyone that is just trying to get fit, no matter their age. This business would be able to sustain itself because people place an emphasis on staying fit. Its scalability and profits would go hand in hand as the popularity of the business grows and gaining a steady stream of loyal customers.

1.  What are the factors in deciding what form of ownership is best suited for the potential business?

-The factors that determine what form of ownership is best suited for the potential business are first identifying the legal structure in regards to liability, law and attracting capital. Also you want to decide on the businesses long/short term needs and take into consideration tax payments. You might want to go over how much capital is needed for this business and if there will be any continuity.

2.Briefly describe the advantages and disadvantages of a sole proprietorship and partnership?

-The advantages of a sole proprietorship include: the owner makes all the call, the business can be terminated at any time due to a single ownership, least regulated form of ownership and it has a profit incentive meaning after all debts are paid, all profits go straight to the owner.
The disadvantages of a sole proprietorship are as follows: there can be a lack of skill in certain areas due to there only being one person and most of all, the owner is liable for all debts and creditors can go after personal assets because of this.

-The advantages of a partnership are: they are easy to establish, your partner(s) may compliment each others lacking skill, more flexibility, and they are not subject to federal taxation.
The disadvantages of a partnership include: unlimited liability to one partner usually being the general partner, restrictions on raising capital, and the potential for conflict between partners.

3.Explain the corporate form of ownership and how a business is incorporated.

-A corporate form of ownership is a separate legal entity apart from its owner(s) and may engage in business, sue or be sued, issue contracts and pay taxes. Here the stock holders are the owners. The three primary sections of a corporation are its stock holders, board of directors and the officers.
The incorporation of a business varies from state to state. However generally speaking the easiest route involves you requesting forms and information from the local secretary of state, obtaining an agent for the business, selecting the corporate name (You have 30 days to this part), and preparing a certificate of incorporation with filing fees and your first annual charge.

4.List the differences between the S-Corp. and the limited liability company.

-The differences between the two are as follows: an S-corp doesnt have to pay double taxation and is taxed like a partnership, and has restrictions on ownership. Whereas a LLC can any number of owners, is not owned by the stock holders, easy to form/establish and contributes and distributes property tax free.

After reading this chapter and getting a better insight on the different forms of ownership I believe I might go with a partnership in regards to opening my own local gym.

A business plan could fail for one of many reasons ranging from lack of information such as not conducting or including any primary research, the executive summary is unclear, or being heavily dependent on intellectual property as the only means to retain customers. Also a business plan should not be too long (over 25 pages) and must be able to keep the investors interested. Most importantly, the business plan should show that you have a full understanding of the market you are about to enter. Your market analysis section of the business plan must show research based on primary and secondary sources. In a article published by John Boitnott, “Brutal Lessons From 4 Failed Startups”, he gives a list of companies that had great potential for profit, but ended up failing. One of those companies were “Pay By Touch” whose goal was accomplish exactly as the name stated and to me that seemed like a really great idea. Unfortunately the founder did not conduct a thorough market investigation. Pay by touch was something that people could live without due to the fact that they were already used to credit/debit cards. There was no need for pay by touch and the founder ended up creating a “solution to a non-existent problem”. Without proper planning and information on the target market, your business plan will surely fail before ever taking off.

http://www.entrepreneur.com/article/235028

1. WHAT DEFINITION OF BUSINESS MODEL DO YOU FIND MOST USEFUL AND WHY?

I actually find both versions of the business model very useful. The first model gives you the steps needed to make sure your product/ service will survive in the market. It allows you to identify the competition so you can create a business strategy that will hopefully give you a competitive edge. The second model is just as useful in a sense that it’s asking questions that make you think deeply about what your business will be about before it even starts. Making sure you have a good sense of what your targets and goals are before you jump right into it.

2. WHAT ARE THE SIMILARITIES AND DIFFERENCES BETWEEN THE TWO TOOLS FOR DESIGNING BUSINESS MODELS?

Some similarities are that they both require the owner to really think about what their goals are for the business. They ask you questions regarding the competition making sure you come in to the fight with a plan.

The differences I noticed were that the first model was more broad whereas the second model asked very personal and in depth questions. Business model 2 really wanted you to know your business and what it’s going to be about, meaning it wanted you to know your goals and what’s special to your business.

3. WHY WAS GREIF PACKAGING, DESCRIBED IN CHAPTER 2, ABLE TO CAPTURE MORE OF THE VALUE IN THE SUPPLY CHAIN? WHERE DID THE EXRA VALUE COME FROM, AND WERE THERE OTHERS WHO LOST THE VALUE THEY WERE SELLING?

They were able to capture more of the supply chain and bring in extra value because they adhered to their customers points of pain. The customers didn’t want to go through the struggle of buying the drums and then having to dispose of the chemicals themselves, Grief Packaging recognized this problem and came up with a solution to fix it, giving them a competitive edge over the competition.

6. NAME THREE SIMILARITIES AND THREE DIFFERENCES BETWEEN A FRANCHISE AND A LICENSE.

Similarities: (a) Both are required to be very specific (b) The licensors and franchisor receive an income generated from the franchisee/licensee (c) Both can issue intellectual property right

Differences: (a) The licensee has more freedom when compared to the franchisee, they have less limitation placed on them (b) A licensee costs much less than a franchisee start up (c) A franchisee must continue to pay royalties to the franchisor as long as that business is running.

1. Why is innovation important and how is it changing?

The book states that “competition is becoming brutal” and “the internet has changed the rules of business”. I agree with these statements because if you lack the ability to see into the future then your business will perish. Technology is constantly evolving and being adapted into different businesses making the means of adhering to a customers need much more convenient.  Take Netflix for example, they were able to incorporate the convenience of the internet with DVD rentals making it so the customer wouldn’t have to worry about making multiple trips to the DVD store just to rent a movie. They were innovative and responded to customer needs.

9. Why do you think Dell was successful when other companies trying the same model failed?

Dell succeeded where everyone else failed because it was the “way” these products were sold and manufactured that set them apart from the competition. Dell used a Made-to-Order approach meaning that they specifically built the computer to the customers demands. It was ideally made by the customer, for the customer.