Entrepreneurship Chap 9

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  • 1. Preparing the Organization for Growth Patterns of Entrepreneurship Chapter 9
  • 2. Building the Management Team Chief Executive Officer Setting Up the Board of Directors • Control over management • Select and compensate (and fire, if required) the Chief Executive Officer • Approve selection, replacement and compensation of senior management • Nominate directors • Advance stockholder’s rights • Review financial performance in detail and keep stockholders informed
  • 3. Board of Directors-Duties and Responsibilities • Participate in preparation and reappraisal of strategic plan • Validate major investments, acquisitions and asset sales • Confirm major policy changes • Approve legal activities • Closely monitor legal, ethical and environmental compliance • Authorize borrowing and new stock issues
  • 4. Setting Up a Board of Advisors Usually consultants, peers, retired executives, or key investors that provide advice and support to the venture. The Board of Advisors differs from the Board of Directors in that it is informal, not an official part of the governance structure and assumes no legal liability. A sense of reality is important in locating advisors. They will act as a sounding board for developing partners, networking, product ideas, and are normally compensated in the form of stock options..
  • 5. The Entrepreneurial Stages Stages Generate Idea Confirm Viability Exit Main focus Secure vision Confirm dream Leave cleanly Elapsed time ----- 2–6 months 1 month Cumulative time ----- Month 6 Month 8 Participants You Friends and founders Founder and lawyer Main risks Lacks realism Leaks Counter-offers or live on savings
  • 6. The Entrepreneurial Stages Stages Prepare Business Plan Hire Mgmt. Team Seed Capital Main focus Write plan Attract talent Money from lead VC Elapsed time 2-6 months 2-9 months 2-12 months Cumulative time Month 14 Month 18 Month 27 Participants Team leaders Friends, media, etc. VC, founders Main risks Not worth funding Leaks; money Can’t attract capital
  • 7. Stages Start Up Additional Capital Required Launch Product Main focus Hire staff; build product Raise more money Secure first customers Elapsed time 6-18 months 2-6 months per round 1-2 years from start Cumulative time Month 30 Years 2-4 24-36 months Major costs Burn rate; money per month Time of top management Marketing; cash Main risks Stiff competition; money issues Lack of focus; run out of money Poor market accept; counter by competitor The Entrepreneurial Stages
  • 8. The Entrepreneurial Stages Stages Raise Working Capital Merge or IPO Main focus Leverage equity Get shares liquid Elapsed time 3 months for each round of money 4-6 months including road shows Cumulative time After 1st quarter profitability IPO end of year 3 Participants CEO, CFO, bankers Lawyers; I-bankers, industry Major costs Time CEO/CFO Fees for everything Major risks Use of equity instead of cheaper loans Bad price/share; business sours