Different Types of Entrepreneurship - Entrepreneursip 101

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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?

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Different Types of Entrepreneurship - Entrepreneursip 101

  1. 1. Entrepreneurship 101!!Presented by Dr. Tony Redpath, VicePresident, Partner Programs and AllysonHewitt, Director, Social Entrepreneurshipand Director, SiG@MaRS!!October 2011!
  2. 2. ¨  Insert text for bullet #1!¨  Insert text for bullet #2!¨  Insert text for bullet #3! –  Insert text for sub bullet A! –  Insert text for sub bullet B!¨  Insert text for bullet #4! Picture with inset white frame & shadow on image! Pg 3!
  3. 3. 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! Pg 4!
  4. 4. Target  Zone  Grant  Funded   Revenue             Social   Social  Ventures   Tradi;onal   Non-­‐Profit   Genera;ng  NFP   Purpose   (B  Corps  –  L3C)   Business   (Charity)   (Social  Enterprise)   Business   Co-­‐opera3ve  Structure   Social  (Charitable)   Financial  (Commercial)   RETURN Pg 5!
  5. 5. Memory at Work CONSULTING! ¨  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! Pg 6!
  6. 6. Memory at Work SERVICES! Pg 7!
  7. 7. Memory at Work SERVICES! ¨  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! Pg 8!
  8. 8. Memory at Work Advise. Convene. Accelerate. Do good- er Photo: Chris Chapman This is John Mighton of JUMP Math. We worked together to take his innovative venture to the next level. Do good better. This is SiG@MaRS. marsdd.com/sig Pg 9!
  9. 9. Memory at Work PRODUCTS! Pg 10!
  10. 10. Memory at Work PRODUCTS! ¨  Key Characteristics! –  Tangible offering (pharmaceutical compound, medical device, consumer product)! ¨  Examples! ! ¨  Benefits & Risks of Model! –  High development costs; market traction! –  Production costs high, outsource?! –  Potential for scale - huge! Pg 11!
  11. 11. Memory at Work PRODUCTS! Pg 12!
  12. 12. Memory at Work ¨  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)!   Pg 13!
  13. 13. Memory at Work 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! Pg 14!
  14. 14. 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
  15. 15. Memory at Work Pg 16!
  16. 16. Memory at Work ¨  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/! Pg 17!
  17. 17. Memory at Work ! ¨  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       Pg 18!
  18. 18. The Financing Life Cycle Public Markets Venture Capital Seed Funds Angels Grants Risk Concept Start-up Growth Expansion
  19. 19. The Financing Life Cycle Public Markets Venture Capital Seed Funds Angels Grants Risk Concept Start-up Growth Expansion
  20. 20. The Financing Life Cycle Risk Grants Concept Start-up Growth Expansion
  21. 21. Memory at Work Pg 22!
  22. 22. Memory at Work ¨ Technology Risks! ¨ Market Risks! –  Stage of development! –  Market size, dynamics and –  Proof of concept! growth potential! –  Prototype product! –  Route to market, access, scalability! ! –  USPs  of  the  products  or  services   ¨ Intellectual Property Risks! ! –  Nature of the invention! ¨ Execution Risks! –  Scope of the invention! –  IP form: patent, know-how, –  Knowledge of the market, software! networks! ! –  Skills required to move the enterprise through all stages of development! –  Reputation in the marketplace! Pg 23!
  23. 23. Memory at Work ¨  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! ! Pg 24!
  24. 24. Tony Redpath – tredpath@marsdd.com and Allyson Hewitt – ahewitt@marsdd.com!

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