different types of entrepreneurship - entrepreneursip 101
DESCRIPTION
This lecture describes different types of business structures. We discuss some of the early questions that an entrepreneur must ask before committing to a business: * Will your business be a for-profit enterprise, a not-for-profit or somewhere in between? * 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?TRANSCRIPT
Entrepreneurship 101!!Presented by Dr. Tony Redpath, Vice President, Partner Programs and Allyson Hewitt, Director, Social Entrepreneurship and Director, SiG@MaRS!!October 2011!
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Pg 3!
Picture with inset white frame & shadow on image!
Memory at Work
¨ Why do I want to start this business?!– What is my motivation!
¨ What resources do I need?!– Basement or corporate office!– Shared spaces/ incubators!
¨ How do I fit into the rest of the world?!– Is my product and/or services unique?!– Have others tried this before?!
¨ What is my business model?!– For profit!– Not-for-profit!– Co-operative!– Hybrid!
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Grant Funded Non-‐Profit (Charity)
RETURN
Social (Charitable) Financial (Commercial)
Tradi;onal Business
Revenue Genera;ng NFP (Social Enterprise)
Social Purpose Business
Target Zone
Social Ventures (B Corps – L3C)
Co-‐opera3ve Structure
Memory at Work
¨ Key Characteristics!– Multiple participants, diverse focus, variable size, leverage core assets to
provide access to market and advice!
¨ Examples!– Hatch Associates/ Professional Consulting Firms!– Aperio/ Venture Deli!
¨ Benefits & Risks of Model!– Low capital costs and minimal input!– Liability insurance, lack of support!
CONSULTING!
Pg 6!
Memory at Work
SERVICES!
Pg 7!
Memory at Work
¨ Key Characteristics!– Speciality business serving existing businesses!
¨ Examples!
¨ Benefits & Risks of Model!– Online software as a service!– Capital costs can be high; labs services, servers!
SERVICES!
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Memory at Work
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Dogood-er P
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hris
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Advise.Convene.Accelerate.
This is John Mighton of JUMP Math.We worked together to take hisinnovative venture to the next level.
Do good better.This is SiG@MaRS.
marsdd.com/sig
Memory at Work
PRODUCTS!
Pg 10!
Memory at Work
¨ Key Characteristics!– Tangible offering (pharmaceutical compound, medical device, consumer
product)!
¨ Examples!
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¨ Benefits & Risks of Model!– High development costs; market traction!– Production costs high, outsource?!– Potential for scale - huge!
PRODUCTS!
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Memory at Work
PRODUCTS!
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Memory at Work
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¨ 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 !!– Fundraising: grants/ foundations/ government
funding/ corporate sponsorship/ members (co-ops)!
Memory at Work
Pg 14!
A quick primer on debt vs equity:!!Debt: - gets paid back first, before any dividends
! get paid !!- secured by asset (the companyʼs, yours)!!+ once the debt is repaid (with interest of ! course), the lender gets nothing else!
!Equity: + never has to be “repaid”!
! - keeps on “paying” forever!! -/+ you now have an investor partner who ! is in this, like you, for the long haul!
The Lemonade Stand Example!Assume you’re 10 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
Memory at Work
Pg 16!
Memory at Work
Pg 17!
¨ The 3Fʼs again – Friends, Family and Fools!– The turkey principle!!
¨ 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!– http://www.angelinvestor.ca/!– http://www.mapleleafangels.com/186103_186104.html!!
¨ Venture Capital Funds!– Different funds invest at different stages in the growth
of a company!– http://www.cvca.ca/!
Memory at Work
Pg 18!
!¨ Proof of Principle / Idea to Innova;on
– www.ResearchNet.com – www.nserc-‐crsng.gc.ca/index_eng.asp
¨ NRC -‐ IRAP – hPp://irap-‐pari.nrc-‐cnrc.gc.ca/main_e.html
¨ Founda;ons: – Ontario Trillium Founda;on -‐ www.trilliumfounda;on.org – Gates Founda;on – www.gatesfounda;on.org
The Financing Life Cycle
Risk
Concept Start-up Growth Expansion
Grants
Venture Capital
Public Markets
Seed Funds
Angels
The Financing Life Cycle
Risk
Concept Start-up Growth Expansion
Grants
Venture Capital
Public Markets
Seed Funds
Angels
The Financing Life Cycle
Risk
Concept Start-up Growth Expansion
Grants
Memory at Work
Pg 22!
Memory at Work
Pg 23!
¨ Technology Risks!– Stage of development!– Proof of concept!– Prototype product!!
¨ Intellectual Property Risks!– Nature of the invention!– Scope of the invention!– IP form: patent, know-how,
software!!
¨ Market Risks!– Market size, dynamics and
growth potential!– Route to market, access,
scalability!– USPs of the products or services !
¨ Execution Risks!– Knowledge of the market,
networks!– Skills required to move the
enterprise through all stages of development!
– Reputation in the marketplace!
Memory at Work
Pg 24!
¨ Mission drift !– Balancing a Social (or Environmental) 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 lack of understanding in the global marketplace!– People understand charity and business but creating a new sector is not
without its challenges – we better have fun while we are doing! !
Tony Redpath – [email protected] and Allyson Hewitt – [email protected]!