Chapter 4
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Transcript

  • 1. Creating a Winning E-Business Second Edition Getting Your E-Business Off The Ground Chapter 4
  • 2. Learning Objectives
    • Describe the financing issues associated with an e-business startup
    • Discuss the role of informal investors in an e-business startup
    • Identify issues important to venture capital investors
  • 3. Learning Objectives (continued)
    • Pitch your e-business idea to investors
    • Discuss the advantages and disadvantages of business incubators
  • 4. Startup Financing
    • Bootstrapping
      • Self-funding
      • Finding unique and inventive ways to acquire resources without borrowing money
    • Informal investors
      • Friends
      • Family members
      • Angel investors
  • 5. Startup Financing (continued)
    • Friends and family members
      • Know and trust entrepreneur
      • Stand by during tough times
      • Invest in entrepreneur rather than business idea
      • Downside is potential risk to relationships
        • Business misunderstandings
        • Business failure
  • 6. Startup Financing (continued)
    • Angel investors
      • Individuals with money and time who enjoy the excitement of early-stage investing
      • Not averse to taking risks
      • Primarily interested in business idea
      • Angel investment club members
        • Accredited investors with minimum net worth of $1M or annual income of $200,000 or household income of $300,000 over the last two years
  • 7. Startup Financing (continued)
  • 8. Startup Financing (continued)
  • 9. Startup Financing (continued)
    • Venture capitalist investors (VCs)
      • Professional investment company
      • Provide funds for startup businesses in exchange for equity position
      • Raise funds from endowments, insurance companies, and pension funds
  • 10. Startup Financing (continued)
    • Venture capitalist investors (VCs) (continued)
      • Take many forms
        • Traditional partnerships
        • Government-sponsored investment companies
        • Corporate funding programs by high-tech companies
  • 11. Startup Financing (continued)
  • 12. Startup Financing (continued)
  • 13. Startup Financing (continued)
    • Venture capitalist investors (VCs) (continued)
      • E-business startup VC funding examples
        • Draper Fisher Jurvetson (DFJ) and Hotmail
        • Kleiner Perkins Caufield & Byers and Google
        • Small Business Investment Companies (SBIC) and America Online
  • 14. Pitching Your E-Business To Investors
    • First meeting with investors is a sales meeting
    • Bring a pitch document
      • Short marketing document based on Executive Summary portion of business plan
        • Highlights market need
        • Shows how startup meets that need
        • Indicates potential profits
        • Shows how management team can make it happen
  • 15. Pitching Your E-Business To Investors (continued)
    • Learn as much as possible about potential investors before the pitch meeting
    • Be prepared for investor questions about
      • Business idea
      • Target market
      • Competitors
      • Critical marketplace issues
    • Do not fake answers; if you don’t know, simply say so and move on
  • 16. Pitching Your E-Business To Investors (continued)
    • During the pitch meeting
      • Be on time
      • Be prepared
      • Be enthusiastic
      • Bring all necessary equipment and documents
      • Differentiate yourself and management team from your competitors
      • Create the feeling that your e-business idea is a viable, exciting investor opportunity
  • 17. Business Incubators
    • Nurture startup businesses
      • Offer development, administrative, and support services
        • Office space
        • Telecommunication hookups
        • Reception and conference room facilities
        • Computer networks
        • Advisory services
        • Access to potential investors
  • 18. Business Incubators (continued)
    • Non-profit organizations or commercial businesses
      • Offer a quick “leg up” for entrepreneurs needing administrative and support services
      • Provide access to knowledgeable professionals, advisors, potential investors
      • Cost to entrepreneur
        • Fees for services
        • Loss of equity
  • 19. Business Incubators (continued)
    • Advantages
      • “One-stop solution” for many startup problems
      • Easy access to professional advice
      • Venue for interacting with other startups
    • Disadvantages
      • May be hefty fees for services
      • Giving up share of ownership equity to others
  • 20. Business Incubators (continued)
    • Non-profit business incubators
      • Generally cooperative venture between a university and local community
      • Examples
        • Austin Technology Incubator (ATI)
        • Advanced Technology Development Center (ATDC)
        • Houston Technology Center
        • Illinois Technology Enterprise Center (ITEC)
        • Women’s Technology Cluster (WTC)
  • 21. Business Incubators (continued)
  • 22. Business Incubators (continued)
  • 23. Business Incubators (continued)
  • 24. Business Incubators (continued)
  • 25. Business Incubators (continued)
  • 26. Business Incubators (continued)
  • 27. Business Incubators (continued)
    • Commercial business incubators
      • Businesses that provide incubation services for a fee and usually a large equity position
      • Examples
        • Batavia Industrial Center (BIC)
        • Idealab
        • eCompanies
  • 28. Business Incubators (continued)
  • 29. Business Incubators (continued)
    • Self-incubation
      • Participating in a members-only group of entrepreneurs
        • Share practical experience
        • Access to contacts
        • Sell or barter products and services with members
      • Example
        • Starve Ups
  • 30. Chapter Summary
    • An entrepreneur should expect to invest personal funds in a startup
    • Informal investors include friends and family members and angel investors
    • Angel investor – A wealthy individual who enjoys investing in startups
    • Venture capitalist – A professional investor
  • 31. Chapter Summary (continued)
    • Meeting with investors
      • First meeting is a “pitch” or sales meeting
      • Use a carefully prepared pitch document
      • Anticipate questions
      • Be on time, be prepared, and be enthusiastic
    • Pitch document – A brief sales document based on the Executive Summary portion of the business plan
  • 32. Chapter Summary (continued)
    • Non-profit and commercial business incubators offer access to resources in exchange for fees and an equity position
    • Self-incubation offers access to some resources without paying fees or giving up equity