The document discusses building an organization for growth and outlines the entrepreneurial stages of a startup. It describes setting up a chief executive officer and board of directors to oversee management, strategic planning, major investments, policy, compliance, and financing. A board of advisors is also recommended to provide support through advice and networking. The stages include generating an idea, confirming viability, preparing a business plan, hiring a management team, seeking seed capital, additional capital, product launch, working capital raises, and potential merger or IPO. Risks include lack of realism, leaks, lack of funding or capital, competition, running out of money, poor market acceptance, and counteroffers.

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