*Session 1 – Understanding Uncertainty* (Entrepreneurial thinking starts)

Pursuit of opportunity disregarding the resources under control: 1. Creating something new with limited resources, 2. Discovery of opportunities and subsequent creation of new economic activity | Entrepreneurship is a field of
business that seeks to understand how opportunities to create future goods and services are discovered, evaluated, and exploited. CREATIVE DESTRUCTION - Established ventures will be threatened by newcomers (e.g., Uber,
Lyft vs. taxis), New ways to build ventures (new technology), Process of industrial mutation that incessantly revolutionizes the economic
structure from within, destroying the old one, and creating a new one. DEVELOPING AN ENTREPRENEURIAL MINDSET AND TAKING ACTION – Venn diagram with Opportunity, Person and Processes. EMA in center. Idea b/w
Person and opportunity, Lean canvas b/w opportunity and process, Effectuation b/w Person and Process. EVOLUTION OF ENTREPRENEURSHIP traits based -> process based -> method based. ENTREPRENEURSHIP AS A PROCESS
Core to this approach is the development of a business plan. Involves linear process for preparation and prediction. Entrepreneurship can be taught. REALITY CHECK: ENTREPRENEURSHIP AS A PROCESS The entrepreneurial
process loops; often skips a stage or two in the lifecycle. Discovering an attractive opportunity may not happen in the first attempt. Assessing opportunities may be iterative and involve reshaping, reassessment, or even abandoning
them. Gathering resources never ends, nor do the challenges of managing growth. Entrepreneur may not exit after harvesting the value (remains on the board) ENTREPRENEURSHIP AS A METHOD Core to this approach is a
portfolio of techniques and skills to enable thinking and acting entrepreneurially. Examples include tools (e.g., Lean Canvas), ways of thinking (Effectuation versus Causation), and rubrics (Rich vs King tradeoffs in fundraising).
“Using, applying, and acting” as opposed to “understanding, knowing, and talking”. The “method” can be applied to any level of organization. PROCESS VS. METHOD. Process -> Known inputs and outputs, Steps, Predictive, Linear,
Precision, Tested. Method -> Body of skills or techniques, Toolkit, Creative, Iterative, Experimentation, Practiced. ‘Entrepreneurship as a method’ approach most suitable for decision- making under uncertainty. UNCERTAINTY
Domain of entrepreneurship lies where decision making under uncertainty is high and resource constraints are high. RISK AND UNCERTAINTY Entrepreneurs operate in domain of Knightian Uncertainty where future distribution
doesn’t exist or is unknowable, type of probability is unclassifiable instances, Method to deal is Effectuation. Risk -> Known distribution of future, A priori type of probability, Analysis is method to deal. Uncertainty -> Unknown
distribution of future, statistical type of probability, estimation is method to deal.
ENTREPRENEURIAL MANAGERS Driven by perception of opportunity than resources at hand. Commit to those opportunities often very quickly and for short time frames. Stage their commitment with minimal exposure at each
stage. Use resources only episodically (often renting instead of buying). Tend to organize with minimal hierarchy and along informal networks. Focus compensation on value creation. Administrative managers do the opposite! ||
Entrepreneurship as a field seeks to understand how opportunities can be discovered (or created), evaluated, and exploited. Managing the incipient stage (zero to one) requires encountering uncertainty – applies to new ventures
and large organizations.
This summary description of entrepreneurial behavior can be further refined by examining six critical dimensions of business practice. These six dimensions are the following: strategic orientation, the commitment to opportunity,
the resource commitment process, the concept of control over resources, the concept of management, and compensation policy. At one extreme is the “promoter” who feels confident of his or her ability to seize opportunity
regardless of the resources under current control. At the opposite extreme is the “trustee” who emphasizes the efficient utilization of existing resources.

*Session 2 – Navigating Uncertainty*

Causal Reasoning A way of reasoning in most functional areas of business (marketing, finance, HRM, etc.). Begins with predetermined goal and a given set of means. Seeks to identify the optimal way to achieve the given goal.
Managerial thinking. Causal reasoning may not yield the best outcome in a situation of uncertainty. Causal logic is predictive- to the extent you can predict the future, you can control it. We can control the outcome by: Setting
clear goals, Making accurate predictions, Avoiding or protecting against risks. Effectuation It begins with a given set of means and allows goals to emerge contingently over time from the varied imagination and diverse aspirations
of founders and the people they interact with. Where to start? Risky situation (causation) -> Set a goal. Goals determine action. Uncertain situation (Effectuation) -> Assess your means, who you are, what you know, whom you
know. Navigating Uncertainty: Make an inventory of your means, revisit your goals considering this inventory, and experiment with possibilities. Risk, return, and resources Risky situation (Causation) -> Calculate expected return,
pursue opportunities that can provide the highest risk-adjusted return. Uncertain situation (Effectuation) -> Affordable Loss: pursue interesting opportunities without investing more resources than you can afford to lose (limit
downside potential). Navigating Uncertainty: Failure is part of the process in dealing with uncertainty. Setting an affordable loss allows you to ‘design’ failure and experiment. Attitude towards others Risky situation (Causation) -
> Perform competitive analysis: Market exists, competitive positioning against rivals. Uncertain situation (Effectuation) -> Form partnerships: Market is co-created with partners and is a result of your actions. Navigating Uncertainty:
Form partnerships to co-create the opportunity that neither of you could have done alone. Partners bring complementary skills and have common values. Handling surprises Risky situation (Causation) -> Avoid surprises. Careful
planning and focus on specific targets to avoid contingencies. Uncertain situation (Effectuation) -> Leverage surprises. Surprises trigger imaginative rethinking of possibilities and transformation of targets. Navigating Uncertainty:
Surprises can offer new opportunities and trigger innovation. Important to nurture positive surprises. Attitude toward the future Risky situation (Causation) -> Predictive: Future is a reliable continuation of the past. Uncertain
situation (Effectuation) -> Design and control for a ‘desirable future’. Navigating Uncertainty: Future is a product of our action. So, it can be controlled, at least partially, through creative cooperation. Causal vs Effectual Causal ->
To the extent we can predict the future, we can control it. So, plan. Effectual -> To the extent we can control the future, we don’t need to predict it. So, co-create. The Effectual Logic 5 principles -> Affordable loss, World view,
Means, Co-creation partnership, Leverage contingencies. Prediction(Y) vs Control(X) graph -> Causal Logic/Pick (TL), Visionary Logic/Persist(TR), Evolutionary Logic/Adapt(BL), Effectual Logic/Co-create(BR). Left side is Positioning
and right is Shaping. Causal vs Effectual Reasoning Headers -> View of the future, Where to start, Basis for action, Attitude towards risk return and resources, Attitude towards others, Attitude toward the unexpected, Underlying
logic. Causal -> Future can be reliably predicted, With given goals and with readily available means, Should: Focus on optimal scenarios and reaching for present ideals, Calculate expected return, Competitive, Avoid surprises, To
the extent we can predict the future we can control it. Effectual -> Future cannot be predicted due to uncertainty, Subject to resource constraints: Who I am What I know Whom I know, Can/Could: Focus on doing what is doable
(with what you have) and then pushing it, Set affordable loss (you do not lose more than you can afford to), Co-operational/Co-creational, ‘Leverage’ surprises and other contingencies as sources of opportunities, To the extent
we can control the future we do not need to predict it. More differences Headers -> Dependent on, competencies employed, context of relevance, nature of unknown, outcomes. Causal -> Effect dependent, excellent at exploiting
knowledge, more ubiquitous in nature & more useful in static linear and independent environments, focus on predictable aspects of uncertain future, Market share in existing market through competitive strategies. Effectual ->
Actor dependent, Excellent at exploiting contingencies, More ubiquitous in human action & explicit assumption of dynamic non-linear and ecological environments, focus on controllable aspects of unpredictable future, new
markets created through alliances and cooperative strategies. || Causal and effectual thinking are not mutually exclusive but complementary. Effectual entrepreneurs have a guiding north star.
*Session 3 – Idea and Opportunity*
New Venture typologies – 3x3 graph. Y axis (top to bottom) -> Radical product/service innovation, Incremental product/service innovation, Existing product or service. X axis (left to right) -> Existing market, Incrementally new
market, Radically new market. Values (TL to BR row by row) -> Invention/radical innovation, (empty), New-to-the-world business, Incremental product/service innovation, Increasing risk, (empty), Copycat, Market expansion,
Market paradigm shift. FINDING AN IDEA Spotting a gap in the market where customers' needs are not fully met: Existing market, incremental innovation, Lower risk if estimating market demand is possible. Developing a radically
new market or product: Unproven market (uncertain), New product requires a deep understanding of new technology, New market requires understanding of customer needs and market potential. IDEA DISCOVERY Starts with
a venn diagram of Expertise, Motivation and Creative thinking with creativity in center. Idea discovery skills - Associating: Connect seemingly unrelated questions problems or ideas, Questioning: Ask questions that challenge
status quo, Observing: Scrutinize common phenomena, Networking: Cultivate a network with diverse perspectives and experiences, Experimenting: Reduce uncertainty with “learn by doing”. SOURCES OF NEW IDEAS Recognizing
trends / patterns before others and acting on them. At the intersection of markets, industries, and emerging technologies (e.g., ride hailing apps). Listening to customers but informing the market about new approaches (e.g.,
iPhone). Other sources - R&D, Social and demographic (consumers), technology change, existing products and services, Policies and regulation. IDEA GENERATION TECHNIQUES Brainstorming: Don't put on your evaluating hat,
Painstorming: Identify a list of problems you or those around you face and that you think are interesting to be solved, Hobby storming: Think about your hobbies or passions and use that as the source of your business idea,
Whacky ideas. BRAINSTORMING Group method of generating ideas. Brainstorming works well when: No negative comments on each others’ ideas, Freewheeling – the wilder the idea the better it gets, Quantity of ideas is desired,
Working together – improve or build over other’s ideas. PAINSTORMING Talk to people about potential problems they have and that you could solve. Observe people, situation, transactions, etc. Identify a list of potential problems
that you can and are interested to solve. IDEA GENERATION MYTHS Good Ideas usually involve high technology. External constraints kill ideas. Ideas are scarce. Brilliant people create brilliant ideas. Brilliant ideas lead to
success/fame/money. These are all myths. ARE IDEAS AND OPPORTUNITIES THE SAME? Idea -> Originates by seeing patterns that suggest a promising solution to a compelling market need – one that customers may not have
identified. Opportunity -> Take the idea, craft a business model that identifies a strategy for targeting a market segment with a solution to attract customers, partners, investors, key employees, and other resources needed to
enter and gain traction in the market creating value for all stakeholders. OPPORTUNITY RECOGNITION & SHAPING PROCESS 1. Sensing and perceiving an unmet market need, or a new technology or capability that could meet a
need that has yet to be identified. 2. Discovering the fit between market needs and the resources and capabilities available to the entrepreneur. 3. Creating a product/service/hybrid “solution” that can be delivered to a specific
market to address a specific need while generating value for all stakeholders. OPPORTUNITY IDENTIFICATION MATRIX Y axis (top to bottom) -> High discontentment, Low discontentment. X axis (left to right) -> Low criticality,
High criticality. Values (TL to BR row by row) -> Good potential for success, highest potential for success, not for now, challenges in innovation. ASSESSING OPPORTUNITIES Y axis (top to bottom) -> Market, Personal. X axis (left to
right) -> Feasibility, Value. Values (TL to BR row by row) -> Is it doable? Technical and Market feasibility, Is it worth doing? Financial feasibility, Can I do it? What will it take and whom do I need?, Do I want to do it? What turns me
on about this and why I want to do it? ENTREPRENEURIAL ACTION AND OPPORTUNITY Idea to Action to Opportunity to Viable Venture. IDEA = ANYTHING +YOU, OPPORTUNITY = IDEA + ACTION, ACTION = Function of MONE Y
PRODUCTS PARTNERS CLIENTS, VIABLE VENTURE = OPPORTUNITY + COMMITMENT. || Idea evaluation is subjective and error-prone. Ideate passionately, Evaluate dispassionately; Beware of confirmation bias. Evaluate ideas
based on: Is there a market?, Is there a sufficient profit potential and durability?, Is it doable – technically and personally? Moreover can I and do I want to?

*Session 4 – Lean Canvas/Planning a Venture* (Value Creation starts)

Business Plan 1. Evaluate the competitive landscape 2. Analyze data about the market and the consumer 3. Make predictions about market potential, expected growth rate, etc 4. Establish a strategic plan 5. Set specific milestones,
goals, and objectives 6. Devise a detailed implementation plan.
Business Plan and the Analytical Approach Analyze -> Decide -> Act. The analytical approach works well in stable and predictable environments where one can identify trends. So, what works in an uncertain environment? The
Test and Learn Approach (TLA) Cycle of Build, Launch, Evaluate and Adapt. This approach works under conditions of rapid change, uncertainty, and ambiguity. You cannot predict under uncertainty. You must learn by doing. Think
big but start small Launch small experiments, Prototype rapidly and inexpensively, Tolerate failures and learn quickly from them, Invest increasingly after testing and learning. Disciplined Prototyping 1. Test and Learn Approach
is not random trial and error 2. Effective prototyping begins with some analysis that informs your prototype and let’s you start testing 3. TLA necessitates the willingness to walk away from initial ideas and plans 4. Prototyping is
effective when: We avoid the sunk cost trap and continue to invest, We adapt quickly when we fail (affordable loss). Why do we resist prototyping? 1. We hate to fail 2. We fall in love with our initial idea 3. We worry about
opportunity costs 4. We obsess over first mover advantage. Principles of the Lean Method 1. Document your Plan A (Lean Canvas) 2. Identify the riskiest parts of your plan (Hypotheses) 3. Systematically test your plan (Build-
Measure-Learn Loop) Lean Method vs. Traditional approach Headers -> Strategy, New product development, Engineering, Financial Reporting, Failure, Speed. Lean -> Business model and hypothesis-driven, Customer
development and test hypotheses, Agile iterative development, Customer acquisition cost and lifetime customer value and churn, Expected which we fix by iterating and pivoting, Rapid. Traditional -> Business plan and
implementation-driven, Product management and linear process, Agile or waterfall, Income statement and balance sheet and cash flow statement, Failure is an exception and to be avoided, Measured. Lean Canvas. 1 – Customers
and Problems Identify the customer segment(s) you want to serve. Separate lean canvas for each customer segment. Identify 3 problems that your potential customers face. 2 - Unique Value Proposition Derive the UVP from
the #1 problem you are trying to solve. Target early adopters. Focus on relevancy: Explain how your product solves customers’ problems or improves their situation. Consider quantified value: Deliver specific benefits. Communicate
differentiation: Tell the ideal customer why they should buy from you and not from your rivals. Pick your words carefully. Try to answer what, who and why. 3 – Solution For each of the three problems outlined, articulate:
Capability or feature that solves the problem. Solution in the initial stages are just hypotheses. 4 – Channels The “path” to your customers: How can you reach them? Inbound versus Outbound. Direct versus Automated. Direct
versus Indirect. Referrals are important, but so is retention. 5 – Revenue Streams and Cost Structure (empty) 6 – Key Metrics Choose metrics that’ll tell you if your startup is progressing. This is likely to differ from (1) business to
business and (2) startup stage. 7 – Unfair advantage It is any critical aspect of your business that is difficult to imitate. Difficult to articulate upfront. Emerges over time as the business matures. Could be patents, exclusive
partnerships, logistics. Lean Method Pitfalls 1. Lean principles of ‘learning, continuous improvement, and waste reduction’ may lead to incremental innovation rather than radically new products and ventures. 2. Experimentation
to get customer feedback assumes the customer knows better. 3. Mechanically filling out the Lean Canvas does not help theorize on how value may be created || Test and Learn Approach (TLA) to plan under uncertainty. Lean
Canvas helps map different aspects of the opportunity and venture. Lean Canvas exercise can help identify testable hypotheses and perform iterations of the venture.

*Session 5 – Customer Discovery and Development*

Customer Discovery Customer discovery involves: Understanding customer pain points, Defining and prioritizing your customer personas, Interviewing your potential customers, Lo-fi testing – simple low-cost testing. Why engage
in customer discovery? Technological uncertainty, new markets, etc. Survey against known benchmarks futile. Resource constraints make extensive market research difficult to accomplish. Customer Discovery A process for
turning our intuitions and enthusiasm into market-driven facts that can be used to corroborate, pivot, or abandon an initial business model. The process: 1. Involves developing coherent falsifiable hypotheses 2. Is an efficient
means to investigate these hypotheses Customer Discovery Process Customer discovery process begins with hypotheses for: 1. Customer Problem and Product (Informs ‘value proposition’ of the venture, To verify if a market
could exist AND whether the product should be built) 2. Demand Creation and Buying Process (Informs ‘go-to-market’ component of the business model, To understand how potential customers will find and buy your product)
Customer Problem and Product Hypotheses (1) Products vs Problems. Avoid marketing myopia - mistake of defining a business by product features rather than by customer benefits. Customer development process and product
development process run in parallel. Customer Problem and Product Hypotheses (2) Benefits versus Status Quo. Customers evaluate new products relative to a reference point – perceived gains & losses. Perceived losses have
greater impact than perceived gains – loss aversion. Customers are biased towards status quo which makes understanding status quo critical. New products incur switching costs that increase perceived losses. Entrepreneurs
overvalue their offerings/solutions. Customer Problem and Product Hypotheses (3) Early adopters versus Mainstream customers. Identify early adopters who find solution valuable than status quo. Early adopters are important
to survive past the early stage. Early adopters are customers who: 1. have a problem and understand that they have a problem 2. are actively looking for solutions 3. have cobbled together an interim solution 4. can pay for the
solution. Demand Creation and Buying Process Hypotheses Purchase activity: Awareness -> Trial -> Repeat. Assessed value of product/solution differs based on the customers roles (Initiators, Gatekeepers, Influencers, Deciders,
Purchasers, Users) Principles for Customer Interviews (1) Customer interviews most suited for early-stage hypothesis testing. Abstract everything by a level, do not assume anything. If potential customers start talking about your
problem or solution before you ask them about it specifically, you can be more confident you are on the right track. Principles for Customer Interviews (2) Have two - three qualifying questions to assess whether the people you
are talking to could be your customer. Often people think you are trying to sell. So, ask for advice or feedback. Don’t pitch your idea at first, it will lead to biased responses. Testing the solution would mean that you are right about
solving a worthwhile problem. Get them to be a partner in the process and not a buyer. Principles for Customer Interviews (3) Ask open ended questions instead of a ‘yes’ or ‘no’ question. Talk less, listen more. Ask if you can
record the interview. Principles for Customer Interviews (4) When in doubt dig deeper: Ask why or how, Ask them to tell a story about a time they experienced the problem you are solving, Be quiet and wait for them to fill the
silence with more of that information you need. If you hear something important, repeat it to clarify. Close the interview: Paraphrase and Summarize, “so based on our conversation, it sounds like x is really hard for you, but y is
not”. Typical Product Development Process Concept -> Product Development -> Alpha/beta test -> Launch. No customers in this traditional process. Customer Development Process A companion to product development process.
Customer discovery -> Customer Validation -> Customer creation -> Company building. Customer Discovery vs. Validation Customer Discovery -> 1. Who are your customers? 2. Is the problem you are trying to solve important
for them? 3. Are there enough of them? What is the TAM? Customer Validation -> 1. Can you reach these customers? 2. Is your product/service perceived as being valuable? 3. Can you fulfil the demand? 4. How much are
customers willing to pay? Customer Validation tools Technique -> Surveys, Letters of Intent, Usability Tests, Market trials, Split Tests (A/B testing) and conjoint analysis, Net Promoter
Score (overall customer satisfaction). Benefits -> Low cost and easy to implement, Increase commitment of potential customers, Determine problems with product design, Validate demand and refine product features, Identify
key product/marketing variables, Avoid premature scaling (investing before validating). Limitations -> Hard to write objective questions and get representative sample, Not legally binding and one-off purchases, Does not capture
customer needs or purchase propensity, Define relevant market and manage information, Diligence in experiment design and sample sizes, Customers’ status quo biases. Usage -> Gather initial information and not for validation,
Early concept stage, Early prototype stage, MVP stage, Evaluate choices of specific variables, Post launch || Customer Discovery helps use resources judiciously and make iterative investments under uncertainty. Customer
Discovery involves developing falsifiable hypotheses and testing them with early adopters. Customer Discovery and Validation are intertwined and iterative.
*Session 6 – Venture Creation and Development*
|| Problem-solution fit does NOT NECESSARILY imply product- market fit. Product-market fit does NOT NECESSARILY imply profitability. Venture creation and development is an iterative process. Metrics matter – acquisition can
get attention/funding, but ultimately growth and retention are vital.

*Session 7 – Hypothesis-driven entrepreneurship*

Successful BML Execution (Build, Measure, Loop) 1. Identify the right hypotheses for the venture 2. Identify the key indicators / metrics 3. Put some mechanisms in place to measure the key metrics (customer insights team plus
the link to product development) 4. Discuss the conversion funnel that helps to turn prospects into loyal customers (it often gives you the proxies you need to validate your hypotheses) 5. See that planning and action loops go in
opposite direction. Key takeaways from RTR (1) Process of going from idea to viable business: Fast frugal tests and quick pivots. Identifying the right hypotheses and testing them is vital. “Minimum Viable Product” is necessary
to test an assumption. MVP could be constrained in: 1. Product functionality: limited geographically (whole country versus one neighborhood) or technologically (iOS &/or android) 2. Operational capability 3. Just a smoke test:
“A test that gauges the demand for a product that does not yet exist” Key takeaways from RTR (2) Execution thumb rules: 1. Beta and launch versions should be separated by sufficient time 2. Keep product launch and marketing
launch separated. Unfair advantage can be a niche with highly efficient operations. Invest significant money (and time) in customer acquisition, operational infrastructure, and scaling only after business model has been validated.
Hypotheses & Testing. Identifying Hypotheses. All value propositions, radical new ideas, business models, etc. have elements of “leap of faith”. Types of Hypotheses 1. Value and 2. Growth. Testability of Hypotheses It should
be testable. Examples of untestable hypotheses: Our company’s product will trigger word-of-mouth marketing, Customers will use our product regularly. Examples of better-formulated hypotheses: Each instance of product
sold/downloaded will result in 5 referrals, Customers will use the product two times a week for a duration of 15 min or more. Hypothesis Testing: False positives and false negatives False positives can be mitigated through
credible commitments. False negatives can be tricky and go/no-go decision will depend on the extent of resources required to make the next iteration and entrepreneur’s confidence. Minimum Viable Product (MVP) The smallest
set of activities needed to rigorously disprove a hypothesis. MVP can be a product, service, pitch etc. MVP facilitates an iterative process allowing you to improve its design and reduce the probability to have false negative results
later. How to test hypotheses? Customer interviews, Focus groups, Surveys, Market trials, Letters of intent/pre-ordering, Split tests, Usability tests. Limits of Hypothesis-driven Entrepreneurship Boundary conditions of MVP
testing: 1. Long product development cycles 2. Vulnerability of idea theft 3. Reputation risk with less developed MVP 4. Impermissible costs to experimentation. Cognitive biases: 1. Optimism bias 2. Planning fallacy 3. Confirmation
bias 4. Sunk cost fallacy.
*Session 8 – GATHERING RESOURCES: FOUNDING TEAM, INVESTORS, AND EMPLOYEES/Matching skills, - ideas and resources*
TRADE-OFFS IN GATHERING RESOURCES 1. Diversity versus homogeneity when assembling a team 2. Giving up control versus attracting talent and investors 3. Getting the right combination of skills for the task at hand 4. Getting
needed funding (not too much, not too little) without giving up too much stake. DIVERSITY Startups have Exploratory or Exploitative strategies. Exploratory: Radical innovation and new ideas. Exploitative: Smaller improvements
and fast execution. Match strategy to employee diversity like background, skills and job history. Exploratory startups best served by diversity as more diverse teams are better at solving hard problems. Exploitative startups slowed
down by diversity as less diverse teams tend to act and agree more quickly. RICH VERSUS KING Rich: Maximize return by hiring high-end employees, delegating authority, and taking on investment. King: Maintain control and give
up little equity, making it harder to get talent and raise money. SKILLS Getting the right mix of skills is hard, but important. Talent differences can have large implications in many positions at startups. Important to hire the best
employees early on. Early choices about hiring have long-term effects. Top hires help attract other top hires. FUNDING This involves complex trade-offs. Funders get control and equity in return for investments. Important to
balance immediate needs for funds with the desire to get the best terms possible. Funders can provide more than money: The right funders can provide prestige, access to resources, and networks. Negotiation determines value
and nature of deals. At an early stage, valuation is more art than science, funders look at the team, market, product, pitch and other factors. || Entrepreneurial context is complex and involves decision-making under uncertainty.
Some key decisions and trade-offs include: 1. Diversity of skills, backgrounds, perspectives works best in an environment where the task is exploratory. Homogeneous teams tend to perform better, faster when the task is
exploitative. 2. “Rich” versus “King” approaches reflect different preferences regarding control. 3. Assembling the right set of skills/people is crucial though a less visible and quantifiable aspect of a startup 4. Funding should be
need-based (not too much, and not too little). Funding and valuation is a matter of negotiation and norms.

*Session 9 – Equity*
Why should we care about Equity? Most high-growth ventures grow through equity partnerships. New ventures often fail because relationships among founding partners and equity partners become conflicted and impossible
to repair. Paradox of equity: You need to share equity to grow but not knowing how increases probability of the venture failing / breaking up. What is equity? Control/Decision Rights, Compensation, Profit sharing, Ownership.
Decision Rights Equity can be used to allocate decision rights, but it need not be. Examples: 1. 30% equity with veto rights on how assets of the firm will be liquidated or who funds the venture 2. Right to fire the CEO, seats on
the board with voting rights on strategic and operational issues 3. Drag-along-rights: Investors can force others to co-sell 4. Right-of-first-refusal: Founders can refuse and buy at the same price as a third party 5. Redemption
rights: Investors force the repurchase of shares. Compensation Equity can be used as compensation, but it need not be. Examples: 1. Idea (especially when patents or copyrights or an identification of a clear opportunity) 2. Time
a person has spent in working on the venture, opportunity cost 3. Amount of money (s)he has put in (capital) 4. Personal network 5. Prior entrepreneurial experience (7-9% premium). These could be compensated with deferred
payments of licensing fees, salary, interest payments for deferred salary, non-voting shares. Profit Sharing Equity can be used for profit sharing, but it need not be. You can split equity unequally (say 70- 30) but divide profits
equally or in a varying manner depending on performance or milestones. Ownership Equity consists of residual claims – claims that have not already been predicted/spelled out. Ownership is NOT to use, enjoy, and destroy at
will. Ownership is to nurture and grow the venture. Equity sharing should consider the best interest of the venture. Equity is an instrument that deals with the uncertainties of ownership. Equity is like joker in a deck of cards –
know the game and use it. Equity Split Approaches 1. Equal split -> Benefits: Partners feel valued equally, strengthen relationship -> Drawbacks: Overvalue past and undervalue future. 2. Transactional approach (Weighted value
to assets) -> Benefits: Agreement on what contributions to value -> Drawbacks: Tricky to assign value to intangibles as contributions are dynamic. Equity Split Timing Early split -> 1. Negotiation before stakes get really high 2.
Ability to attract new key players 3. Best when cofounders have worked together before being on a venture and knowing each other’s value/contribution. 4. Downsides: Misallocation, anchoring effect. Late Split -> 1. Learning
more about venture: No point fighting over a non-existent pie 2. Gives a chance to figure out each cofounder’s value/contribution 3. Best for rookies who are confident of their skills and can take the extra time to prove their
value to the venture 4. Downsides: Adding uncertainty. Static vs Dynamic Splits Milestone or time-based vesting: Founders get equity based on milestones. Equity of non-vested founders goes back to others. Avoiding Pitfalls in
Equity Sharing 1. Spend sufficient time upfront to discuss equity splits 2. Give an opportunity to all founders to share their views, plans, and reservations/qualifications 3. Defer the conversation until there is a time when you
have more clarity...but not too long. 4. Discuss how you will resolve a conflict situation 5. Design a flexible equity contract. Vesting founder shares over a period may be preferable. Tensions in Founding Teams (3Rs) Pyramid of
Relationships, Roles and Rewards with Team dimensions in center. Finally 1. Irrespective of the equity split, run the partnership as though everyone is equal and has real “emotional” ownership in th e firm. 2. Negotiate all three
details(compensation, decision rights and profit sharing)plus equity carefully and arrive at a mechanism to handle disagreement. 3. How you negotiate can leave your co-founders feeling cautious or a deep understanding and
respect for each other. 4. Mutual trust and relationships need to be carefully managed in founding teams.
*Session 10 – Venture Financing*
FINANCING ENTREPRENEURIAL VENTURES A venture’s financing needs depend on: Profitability, Asset Intensity, Pace of Growth. FINANCING AVENUES Bootstrapping, Debt Investors and Equity Investors. ENTREPRENEURIAL
FINANCING FRAMEWORK Y axes (top to down) -> Capital required to reach +ve cash flow High to Low. X axes (left to right) -> Novelty of business or tech Low to High. Values (TL to BR row by row) -> 1. Capital-Intensive, Proven
Technologies eg: Commercial banks; project finance; strategic investors 2. Capital-Intensive,New Technologies. Eg: Hard to fund without government support. 3. Small Businesses eg: Personal credit; bank loans. 4. New Technologies
eg: Angel investors; venture capital. EQUITY INVESTORS Private Equity is an asset class composed of funds which purchase stakes in companies that are not publicly traded. Angel investors, VC funds and Strategic Investors. ANGEL
INVESTORS What type of ventures do they invest in? -> Too small to get the attention of VC firms, Limited revenue potential at maturity to interest VC firms, Too risky for bank loans and VC appetites, $10-$15 mn revenue potential
in 5 years. VENTURE CAPITAL Venture Capital is an asset class (within Private Equity) focused on investing in small early-stage companies with high growth potential. HOW VCs RAISE MONEY? They have Limited Partners or
General Partners. Limited Partners eg: PPFs, university endowments, family offices, sovereign funds, corporations, insurance companies etc. General Partners take 2-3% annual fees and 15-25% of capital gains, rest go with limited
partners. TYPICAL VC FUND FINANCIAL STRUCTURE 1. LPs invest 95-98% of the fund; GPs invest 2-5% 2. Fund Life: 7 to 10 years 3. Capital: Fully returned to the LPs at the end of the fund life before profit can be shared 4. Profits:
80% to the LPs, 20% to the GPs 5. GPs’ Financial Incentive structure include 2% annual management fees and an individual VC firm shares the total GP profit share: “Carried Interest” (aka Carry). TYPICAL VC INVESTMENT PROCESS
OVERVIEW Deal sourcing -> Deal screening -> Deal Evaluation/Due diligence -> Deal structuring -> Valuation -> Contracting -> Post funding -> Exit. HIERARCHY OF VC FUNDS 1. Angel and Seed investors – Fund size: 0-$50M,
Cheque size: 0-$1M 2. Early-stage investors – Fund size: $50M-$300M, Cheque size: $1-$10M 3. Mega investors (growth-stage) – Fund size: $300M+, Cheque size: $10M-$50M INVESTMENT STAGES 1. Angel / F&F: $0 - $100K
funding, 1-3 team size, Goal - Build functional prototype (MVP). Small scale customer testing. ”Someone is using it”, $100K-$2M valuation. 2. Seed: $100K - $1M funding, 2-10 teams size, Goal - Add Product features – Beta Launch
Find the “Product – Problem” fit. Multiple customers already using product Test customer revenues. “Many people using it, and paying for it”, $2 - $10M valuation. Series A: $1 - $5M funding, 10-25 team size, Goal - Find “Product-
Market” Fit: scalable biz model BetaàFull Production in say 12 – 18 mths. Multiple customers are buying/paying. “Many people paying; Possible to make a lot of money”, $10 - $20M valuation. Series B: $4 - $12M, 25+ team size,
Goal - Focus on Scale! E.g., get to $10M ARR (for a B2B Comp), $20M+ valuation. POWER LAW 80% returns from 20% companies. WHAT ARE VCS LOOKING FOR? Passionate, driven entrepreneurs. Serving an unmet need in a
large, growing market. With a differentiated solution. With early measurable ‘traction’ (i.e., customer validation). Can this company get to ~$100M in revenues in 5-7 years? FINANCING IMPLICATIONS OF BUSINESS DECISIONS
1. Financing options influence location decisions for startups: Investors prefer local opportunities 2. Ventures can be cleverly designed to reduce financing requirements 3. Changes in risk & uncertainty may jeopardize financing
4. Past financing decisions have implications for subsequent business decisions 5. Partnerships can shape a venture’s financing requirements 6. Business decisions that reduce uncertainty unlock financing options. MECHANISMS
Ways to reduce information asymmetries: Due diligence, Repeated relationships, Monitoring/information rights. Ways to align incentives: Entrepreneur compensation linked to value of VC’s stake, Vesting of entrepreneur’s stake,
Key-person agreements, Ability to fire managers. Ways for VCs to control decision making: Seat on board of directors, Covenants limiting entrepreneur’s ability to use capital, Involvement in operations, Super-majority rights.
Ways for VCs to protect financial downside: Equity stake senior to that of entrepreneur, Abandonment option through staged investments across rounds, Forcing exit through decision-making control, Convertible debt.
TERMINOLOGY & METRICS 1. Market Cap = Total number of shares*price per share 2. Price per share = equity value/number of shares 3. Total Enterprise value (TEV) = equity + debt – cash 4. Pre money value + New money
invested = Post money value. Traditional Metrics don’t work: P/E–seldom available since most venture investments are in companies that are not profitable, TEV/EBITDA – EBITDA may be negative. TEV/Revenue – Useful if
company has revenues. Ensure cost structures are comparable. WHAT ARE VC’S CONTROL PROVISIONS? Prohibits company from taking drastic actions – liquidating, dissolving, or selling. Prohibits company from issuing shares
that are senior to existing preferred holders’ securities. Prohibiting increase in size of board and thereby diluting VC’s power. Are these terms fair for founders to accept? Yes, because these are extreme case scenarios. VCs are
paying against a much higher valuation than founders. VCs interest may not be aligned with founders. WHAT ABOUT VESTING? Vesting – Founders should give up 80% of the shares they own for a specified number of years and
earn the shares back each year within those years. Vesting is aimed at: 1. Solving the issue of a co-founder abandoning the venture whilst continuing to hold the shares. 2. In such a case , they lose the unvested stock. 3. Unvested
stock can be used to hire new employees/ co-founders. 4. Voting rights for founders can be independent of vesting clause. INDIAN STARTUP ECOSYSTEM. DOUBLE LOOP Opportunities -> Entrepreneurial Activity -> Opportunities
-> Framework Conditions -> Opportunities. INDIA’S COMPETITIVE ADVANTAGE – HUMAN RESOURCES? Wide variance in quality of people coming out of the educational institutions. Professional and business skills relatively
weak when compared to technical skills. ‘Trainable’ workforce rather than ‘ready to deploy’ workforce. Risk averse behavior keeps people away from startups and unbranded companies (though this is changing slowly)
GOVERNMENT SUPPORT 1. Startup India was launched by GoI in 2016 2. India is 3rd largest startup hub in the world with about 31945 startups recognized by DPITT under Startup India initiative. 3. New initiatives such as
compliance regime based on self-certification aimed at boosting startup ecosystem 4. GoI also launched mobile app and web portal to interact with regulatory agencies 5. Establishment of Fund-of-Funds for startups, Seed fund
grants, and other schemes. Indian startup ecosystem is quite strong on the important pillars – Markets, Human Capital and Finance. CROWDFUNDING These platforms connect those who seek capital to fund an innovative idea,
a social cause or life plans with prospective capital providers. Crowdfunding can serve to validate feasibility of idea and understand market potential. Crowdfunded ventures are more likely to get funded by VCs and raise more
funds in subsequent funding rounds. INTERESTS Entrepreneur: Get outside capital, Maximize financial gains from equity stake, Retain control & minimize constraints on behavior and decision making, Build reputation, Get outside
expertise, Build successful firm. VC: Solving sorting problem in selecting best entrepreneurial firm, Minimize agency costs/problems, Maximize financial returns, Maintain option to abandon, Be able to influence/force
entrepreneur, Maintain Reputation. SOURCES OF NEGOTIATING POWER E->Deep expertise in hot specialty, Great track record, Solid team, Can keep VC from investing in later rounds, VC wants to lay ground for productive working
relationship, VC’s reputational constraints, BATNAs. VC-> Providing capital, Adding credibility to entrepreneur, send signal to other potential VCs, Adding value through expertise and contacts, Entrepreneur’s reputational
constraints, Imbalance between supply and demand, BATNAs
*Session 12 – Generating Resources (Bootstrapping)*
PERILS OF EXTERNAL VENTURE FINANCING VC is a poor fit for many ventures For eg VCs require businesses to have a certain growth/size potential and they have a medium-long term view, Money from outside investors comes
with strings attached, False sense of security leading to complacency and lack of control, Diminished flexibility to adopt the ‘try it- fix it’ (remember Lean Method!) approach required in new ventures, Conflicts between investors
and promoter managers can be debilitating A PERVASIVE MYTH OF ENTREPRENEURSHIP To be successful, an entrepreneur needs to be able to attract venture capital, Only 5% of entrepreneurial funding is through venture capital
(Source: Kauffman foundation), More than 80% of Fortune 500 high-growth companies were bootstrapped by the founders’ own resources BOOTSTRAPPING Bootstrapping is a collection of methods used to minimize the outside
debt and equity financing needed from banks and investors This includes a combination of methods to: 1. reduce overall capital requirements 2. improve cash flows 3. take advantage of personal networks and sources of finances,
Small and young firms have trouble raising money due to liability of newness and liability of smallness Conventional Venture Creation Process B Plan/Strategy -> Funding -> Product -> Sales New Venture Creation Process Sales
-> Product -> Funding -> Strategy/B Plan THUMB RULES FOR BOOTSTRAPPING 1. Get operational quickly 2. Look for quick break even and cash generating projects 3. Offer high value products or services that can sustain personal
selling 4. Keep growth in check 5. Focus on the customer not on VC/external finance 6. Focus on cash before profits, market share or anything else 7. Convert the fixed costs into variable costs as much as possible, thereby reducing
upfront costs and allowing your business to pay for itself 8. Leverage social capital BOOTSTRAPPING METHODS Customer-related methods, Owner-related financing and resources, Joint utilization of resources with other firms,
Delaying payment. Customer related are used to improve cash flow from customers like 1. Advanced payments by creating incentives 2. Charging interest on overdue invoices 3. Ceasing relations with late-paying customers.
Owner related like 1. Savings 2. Loans by owner or from family. Joint Utilization like 1. Sharing employees(CFO) 2. Assets 3. Business space(Startup Village) 4. Coordinating purchases with other firms to take advantage of economies
of scale. Delaying payments like 1. Paying late (with permission) 2. Negotiating longer credit periods 3. Leasing than purchasing PRACTICAL TIPS FOR BOOTSTRAPPING 1. Do not buy new what you can buy used 2. Do not buy
used what you can lease 3. Do not lease what you can borrow 4. Do not borrow when you can barter 5. Do not barter when you can beg 6. Do not beg when you can scavenge 7. Do not scavenge what you can get for free 8. Do
not take for free what someone else will pay you for 9. Do not take payment for something that people will bid for (create an auction) LIMITS TO BOOTSTRAPPING 1. Ideal for hustle and niche ventures 2. Revolutionary ventures
can’t be completely bootstrapped 3. Speculative ventures are even more difficult to bootstrap 4. Ventures outside the promoter’s knowledge domain are difficult to bootstrap 5. Ventures that require some critical assets to be
deployed even before testing out the business concept can’t be bootstrapped || Opportunities can be created. You don’t have to own resources to control them. You can gain extraordinary commitment and rapid ability to
execute by giving people an incentive – stake in success. There is a great deal to be gained by making the pie bigger for everyone rather than fighting over the size of your own piece.

*Session 13 – Social Entrepreneurship* Slide 21 remaining

SOME SOLUTIONS TO SOCIAL ISSUES Government - Inefficiencies, slow, bureaucratic, prone to corruption. Nonprofit Orgs - Dependent on donations (uncertain, demand far exceeds supply), “Compassion fatigue”, Raising money
takes time and energy. Multilateral Institutions (e.g., World Bank) Conservative, slow, under-funded, unreliable, Success is measured by: GDP (might not help the poor) or Volume of loans negotiated (not measuring impact), Work
exclusively with the government. Corporate Social Responsibility (CSR) “As long as it can be done without sacrificing PROFITS”. CASE FOR SOCIAL ENTREPRENEURSHIP 1. Entrepreneurship is empowering. Wealth creation, access
to opportunities, innovation to tackle problems. 2. Enterprises geared towards bridging the inequalities are the need of the hour 3. Organizations that create new models for the provision of products and services that cater to
basic human needs that remain unsatisfied by current economic or social institutions TYPES OF ENTREPRENEURSHIP Table Headers: Definition, Wealth Distribution, Predominant organizational form, Primary goal, Product,
Tensions, Examples. Conventional – An agent who enables or enacts a vision based on new ideas in order to create successful innovations, Shareholder, Profit, Economic, Create and/or distribute consumer product or service,
Growth vs Survival, Business service providers or software developers. Institutional – An agent who can mobilize resources to influence or change institutional rules in order to support or destroy an existing institution or to
establish a new one, Shareholder and/or stakeholder, Profit, Institutional reform or development, Establish legitimacy, Resistance to change, Edison or Kodak or Apple. Cultural – An individual who identifies an opportunity and
acts upon it in order to create social or cultural or economic value, Shareholder and/or stakeholder value, Non-profit or Profit, Cultural diffusion/enlightenment, Establish new norms and values, Commercialization vs culture
(authenticity), Museums or folk art festivals or symphony orchestras. Social – An actor who applies business principles to solving social problems, Shareholder and/or stakeholder, Non-profit or Profit, Social change or well-being,
Promote ideology or social change, Economic sustainability vs Social mission, Aravind eye clinic or Greyston bakery or Rugmark ORIGIN OF THE IDEA OF SOCIAL ENTERPRISES 1. Born of a weariness with charity and the not-for-
profit model 2. Born of a belief that new innovative solutions were needed to solve entrenched social issues 3. This is also aligned with a broader movement gaining momentum in contemporary market economies, demanding
a more ethical and socially inclusive capitalism 4. Born of a belief that challenges cannot be addressed unless the business produced significant returns SOCIAL ENTREPRENEURSHIP Social Entrepreneurship involves - Recognizing
and pursuing opportunities to create social value, Crafting innovative approaches to addressing critical social needs. Social entrepreneurship is the use of start-up companies and other entrepreneurs to develop, fund, and
implement solutions to social, cultural, or environmental issues. Primary goal of social entrepreneurship is adding social value. Could be for-profits, cooperatives, or not-for-profits. Look at the poor as consumers and not
beneficiaries. Social enterprises focus on the ‘triple bottom line’. Triple bottom line is People, Planet and Prosperity. EMERGING MODELS FOR EQUITABLE GROWTH Traditional Enterprise - Problem needs to be solved by
government and NGOs. CSR - We have some responsibility towards society. Let’s look good. Social Enterprise - It’s our problem. We need to solve it. Shared Value - It’s an opportunity to do well by doing good. DIFFERENT TYPES
OF SOCIAL BUSINESSES 1. For-profits: Unlike traditional firms, here the surpluses are reinvested for social objectives of the business. 2. Cooperative: A cooperative (also known as co-operative, co-op, or coop) is “an autonomous
association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise” 3. Producer Organization: A Producer
Organization (PO) is a legal entity formed by primary producers (e.g., farmers, milk producers, fishermen, weavers, rural artisans, craftsmen). A PO can be a producer company, a cooperative society, or any other legal form which
allows to share profits/benefits among the members 4. Section 8 Company: Not-for-profit company that promotes research, social welfare, religion, charity, commerce, art, science, sports, education, and the protection of the
environment (NSRCEL is one such entity) UNDERLYING ASSUMPTIONS OF LINEAR VS CIRCULAR ECONOMY Linear - Planet has infinite resources, Valuable resources cannot be extracted from waste. Circular - Easy to reuse/recycle,
Value of resources does not deplete. VALUE CREATION IN CIRCULAR ECONOMY The power of …the inner circle, …circling longer, …cascaded use across industries, …pure/non-toxic/easier to separate inputs and designs. CORRIDOR
PRINCIPLE Establishing of a venture enables the entrepreneur to see other opportunities that they could not see or take advantage of until they started their initial venture. Enter the corridor to see other doors because unless
you enter the corridor (commit through starting up), you won’t see other open and closed doors (opportunities) in the corridor. One vs. multiple ventures - Entrepreneurs create multiple ventures to lengthen their entrepreneurial
careers. Where to start - Start one venture at least to see other venture opportunities. DIFFERENT BUSINESS MODELS & THEIR CHARCTERISTICS 1.CLASSICAL MODEL OF CHARITABLE ORGANIZATION 2.HYBRID 3.CLASSICAL MODEL
OF THE BUSINESS FIRM. Primary objective – 1. Social betterment 2.Mixed objectives 3.Economic value creation. Method of operations- 1.Affiliative relationships, Non-pecuniary rewards 2. Relational contracting, Mixed rewards
3. Impersonal exchange Arms-length bargaining. Funding/capital sources – 1.Philanthropy/Grants, etc. 2.Below market rate debt and equity 3. Capital market rate equity and debt. Work force motivation – 1.Volunteers with
high commitment to social mission 2. Mixture of volunteers, professionals and paid staff 3.Paid employees with contractual commitment and focus on financial rewards. Consumer contributions – 1.Beneficiaries not required to
pay anything 2.Partial fees 3. Consumers pay full cost (including return to capital. Governance/control – 1.Mission-constrained, self perpetuating board, Stewardship responsibilities 2.Membership governed democracy-based 3.
Board elected by owners, Grounded in property rights, Fiduciary responsibilities. Strengths – 1. Creates social benefits where markets have failed, Builds a sense of community, Provides outlet for affiliative motivations 3.Not
reliant on goodwill, Builds individual responsibility, Subject to strong capital and consumer market discipline. Weaknesses- 1. Depends heavily on goodwill, Difficult performance assessment, Potential inefficiencies, Relies on
markets with complex, heterogeneous motivations, Can create dependency 3. Impersonal, often uninspiring, Markets can fail with social goods, Low degrees of loyalty and common cause. HYBRID SOCIAL ENTERPRISE
Organizations that combine enterprise with embedded social purpose. Pursue dual mission of financial sustainability and social purpose. Pros: creation of a subsidiary may protect the non-profit status of a charitable organization
from the liabilities of its for-profit subsidiary and the subsidiary can be sold easily. Cons: Difficult for the non-profit to diversify its income when for-profit part is the primary source, There may also be more overheads (we have
two orgs here), Assets with the non-profit are ‘locked in’ and cannot be transferred/sold easily. WHY IS THIS IMPORTANT? BLURRING ORGANIZATIONAL BOUNDARIES Triangle with NGO, Firms and Government at sides. NGO-
Firm edge has ‘CSR, Shared value Social enterprises’. Firm-Govt edge has ‘Public Private Partnerships’. Govt-NGO edge has ‘Govt NGO partnerships’. SOCIAL ENTREPRENEURS ARE CHANGE AGENTS Adopt a mission to create and
sustain social value (not just private value). Recognize and relentlessly pursue new opportunities to serve that mission. Engage in a process of continuous innovation, adaptation, and learning. Act boldly without being limited by
resources currently in hand. Exhibit a heightened sense of accountability to the constituencies served and for the outcomes created.

*Session 14 – Corporate Entrepreneurship*

SOURCES OF COMPETITIVE ADVANTAGE OF A FIRM ‘How do we achieve Competitive Advantage?’ has two arrows to 1. Where should we compete? 2. How should we compete?. Where has arrow to Corporate Strategy + lboal
Strategy. How has arrow to Business Strategy + Functional Strategy. DISRUPTIVE VS SUSTAINING INNOVATION 1. Incumbents improving along a trajectory of sustaining innovation 2. Sustaining innovation overshoots customer
needs 3. Disruptive innovation to which incumbents have ability to respond 4. Incumbents are disrupted and flounder MARKET UNCERTAINTY VS INNOVATION Market Uncertainty (y axes top - High bottom - Low). Innovation (x
axes – Left Sustaining – Right Disruptive). Values (TL to BR row by row) – 1. Product fit to market needs uncertain, 2. New customers. Long gestation period. Lower revenue targets, 3. Business as usual. Focus on present customers.
4. New customers. Lower revenue targets. AMBIDEXTRITY IN FIRMS Strategic management of firms mostly involves exploitation of already identified opportunities. But for a firm to be relevant and competitive exploration of
new opportunities is vital. A firm should be ambidextrous – balance exploration and exploitation – to have sustainable competitive advantage and growth. Corporate Entrepreneurship can aid ambidexterity in firms. CORPORATE
ENTREPRENEURSHIP What is corporate entrepreneurship? - Entrepreneurial activity within a mature firm i.e., attempts to create products, enter markets, or introduce process innovations that are new to the firm. Why should
large corporations be entrepreneurial? - To counter the gale of creative destruction, To find new growth opportunities. FORMS OF CORPORATE ENTREPRENEURSHIP (Tree structure) 0. Corporate Entrepreneurship 1. Corporate
Venturing 2. Internal Corporate Venturing 3. New business owned by firm 2. External Corporate Venturing 3. Investments in ventures outside the firm – 1. Strategic Entrepreneurship 2. Strategic Renewal 3. Adoption of new
strategy 2. Sustained regeneration 3. Introduction of new products 2. Domain redefinition 3. Reconfiguration of existing products and markets 2. Organizational rejuvenation 3. Internal innovation for strategy improvement 2.
Business model reconstruction 3. Redesign of existing business model WHAT DOES IT MEAN FOR YOU ? Entering a rapidly changing business world. Being entrepreneurial even as an employee in a large firm across fields and
industries. Developing an entrepreneurial mindset is imperative. STANDALONE VS CORPORATE VENTURES Tables Headers: Initial conditions, Nature of opportunities, Approach to research and planning, Resource mobilization,
Critical Success factors. Standalone Ventures: Lack of breakthrough ideas or technology Unavailability of funding, Low investment High uncertainty Low likely profit, Largely based on intuition and personal knowledge & Rapid
experimentation, Resources scarce & Liabilities of newness and smallness & Bootstrapping strategies, Entrepreneur’s tenacity & Ability to experiment and converge rapidly on an opportunity. Corporate Ventures: Broad
technology/market base Munificent resources, High investment Low uncertainty High profit potential, Systematic search Strategic needs Shareholders’ expectations and sustainability of earnings, Resources available but difficult
to access High margin & High growth projections to secure resources, Top management support & Break away from old lens|| Corporate Entrepreneurship vital for firm growth and competitive advantage and hence important
for you. Corporate ventures different from standalone ventures on multiple dimensions. A fine balancing act is needed to manage core businesses (exploitation) while exploring new growth drivers (exploration). Corporate
Entrepreneurship comes with challenges that can be overcome with horizontal structure and incentive alignment.

*Session 15 – Corporate Entrepreneurship: CE Models* Slide 11 remaining

CORPORATE ENTREPRENURSHIP CHALLENGES Strategic, Incentives and Organizational, Decision Making. CE STRATEGIC CHALLENGES 1. Focus on near-term margins 2. Size of business 3. Cyclicality 4. New businesses but old
lenses. Potential Resolution – Outside hires, Inorganic growth, Three horizon framework. THREE HORIZONS FRAMEWORK Horizon 1 – Defend the core businesses Horizon 2 – Build emerging businesses Horizon 3 – Create viable
options. Time and Profits both increasing as horizon changes from 1 to 3. CE INCETIVES AND ORGANIZATIONAL CHALLENGES 1. Risk and failure avoidance 2. Organization design dilemma 3. Emphasis on organizational harmony.
Potential Resolution - Leeway for ‘well-intentioned failure’, Bottom-up entrepreneurship - Disciplined empowerment, Differentiated hierarchy, Insulation of entrepreneurial efforts. CE DECISION MAKING CHALLENGES 1. Rigid
application of financial metrics and performance measures 2. Reliance on traditional market research 3. Linear stage-gate processes. Potential Resolution – Metrics to align with the horizon of the project – type of innovation
market maturity, Make little & sell little, Bootstrap, Limited and staged investments. CE MODELS OR STRATEGIES 2x2 matrix. Left to Right ‘Origin’ – Internal and External. Top to Bottom – ‘Structure’ – Integrated and Autonomous.
Values (TL to BR row by row) – Intrapreneurship, Mergers and acquisition, Internal Corporate Ventures, Entrepreneurial Partnerships & CVCs. CE PROCESS Idea or Market opportunity -> CE Business Model to make the opportunity
viable -> Organizational form / Corporate Entrepreneurship form. Flow Chart – 1. Organizational Characteristics – Management Support, Work Discretion, Rewards/Reinforcement, Time Availability, Organizational Boundaries 2.
Precipitating Event 3. Individual Characteristics – Risk Taking Propensity, Desire for propensity, Need for achievement, Goal Orientation, Internal Locus of Control 4. Decision to act intrapreneurially 5.Business Feasibility Planning
6.Resource Availability 7. Idea Implementation 8. Ability to overcome barriers. Links – 1-2, 2-1, 2-3, 3-2, 1-4, 2-4, 3-4, 4-5, 5-6, 5-7, 5-8 WHAT IS A BUSINESS MODEL? Conception of how strategies should work together as a whole
to enable the company to achieve competitive advantage. Business Model deals with how a company: 1. selects, acquires and keeps its customers 2. defines and differentiates its product offerings 3. creates value for its customers
4. produces goods or services and delivers to the market 5. increases productivity and lowers costs 6. organizes its resources and activities 7. achieves and sustains high profitability and growth. CORPORATE VENTURING:
INCUBATION PROCESS Model for new business could be: within existing business (eg: Titan) or Separate Business (eg: Alphabet). Choice depends on: Distance from core business, Capability match, Position in the three-horizon
framework. CORPORATE VENTURING: EXIT PROCESS 1. Low growth, low margin businesses: pivot or spin-off or terminate or franchise 2. High growth, high margin businesses with fit: Internalize or keep in incubation. NEW AGE
CE MODEL: CROWDSOURCING - WHAT IS CROWDSOURCING? Problem-solving by diverse uncoordinated crowds of people. Crowdsourcing as a corporate innovation tool: 1. Diversity in ideas 2. Provides access to resources
outside firm boundaries 3. Ability to evaluate and select solutions from competing ones 4. Faster time to market. TYPES OF CROWDSOURCING Table Headers: Contests, Collaborative communities, Complementors, Labor Markets.
Purpose: High value solutions to complex problems, Aggregate large number of diverse contributions, Innovation over core product, Match talent to discrete tasks. Challenges: Generalized problems, Lack of control and
cohesiveness, Balance access vs control, Problem identification and manage labor pool. Best Use: Technical and creative design problems, Wikis or OSS or support communities, Apps or content mashups, Repetitive and established
tasks. ORGANIZATIONAL CHALLENGES TO ADOPTING CROWDSOURCING STRATEGY 1. Input -> i. Problem identification and decomposition ii. Problem generalization. 2. Process -> i. Manage the crowd ii. Scalability issues. 3.
Output -> i. Absorbing solution into existing systems ii. Consensus in choice of solution. WHAT IS OPEN INNOVATION? Open innovation is a distributed innovation process based on purposively managed knowledge flows across
organizational boundaries. A process for sharing knowledge and ideas with other organizations. Open innovation can be of two kinds: 1. Inbound – opening a firm’s innovation processes to external contribution 2. Outbound –
external actors use a firm’s innovation. || Entrepreneurship is critical for mature companies, but poses challenges. Conscious planning and design of organizational structures and processes can overcome challenges. Place multiple
bets (context of uncertainty) -> Like in conventional entrepreneurship, arriving at a viable business model in CE also takes time, continuous experimentation and pivots. CE requires processes for generation, evaluation, incubation,
and exit. New age models of CE combine internal and external origins.
A fine balancing act is needed to manage core businesses (exploitation) while exploring new growth drivers (exploration). Corporate Entrepreneurship can aid ambidexterity in firms. Corporate Entrepreneurship vital for innovation,
firm growth, and competitive advantage. Internal Venturing - arriving at a viable business model in CE also takes time, continuous experimentation, and pivots. Corporate ventures take time and pivots to arrive at the right
business model, just like new ventures. Exploration can stop when some new businesses demonstrate high growth potential and that’s when these businesses become the top priority for managerial attention and resource
allocation.

*Session 16 - Corporate Entrepreneurship: Corporate Venture Capital* (focusing on 4th cell of CE model matrix)
CORPORATE VENTURE CAPITAL 1. Equity investments of large corporations in startups. Eg: Large corporations play VC. 2. Partnerships of large corporations with startups go beyond equity investments. Eg: i. Incubation/Acceleration
- structured programs provide space, platforms, mentorship. ii. Corporate accelerator/incubator partnerships – partnership with external parties who run the accelerator/incubator – example, NSRCEL Goldman Sachs, Mphasis
etc. iii. Co-creation / alliances - Strategic partnerships (licensing, marketing, technology) iv. Challenges, hackathons, and so on. DUAL PERSPECTIVES Corporation Perspective: Purpose of CVC be it strategic and/or financial, Structure
of CVC, Engagement mechanisms. Startup Perspective: Why raise funds from a CVC, be it strategic or financial?, Risks and Benefits, Alternatives like VC or bootstrap etc. PURPOSES OF CVC INVESTMENTS 2x2 matrix. Left to Right
‘Corporate investment objective’ – Strategic and Financial. Top to Bottom – ‘Link to operational capability’– tight and loose. Values (TL to BR row by row) – Driving: Advances strategy of current business, Emergent: Allows
exploration of potential new businesses, Enabling: Complements strategy of current business, Passive: Provides financial returns only (not best for CVC investments). STRUCTURE OF CVC 1. Internal CVC group 2. Captive funds –
similar to an internal CVC group but operates as a separate legal entity (e.g., Unilever’s Physics Ventures) 3. Third party managed funds (e.g., Inventages, an independent VC managed Nestle Life Ventures) 4. Multi-corporate
funds. Independent of corporate parent. Allows mid-sized companies to pool in and invest. BLENDED INTERNAL AND EXTERNAL VENTURES 1. Spin-along approach - Integrates elements of spin-in and spin-out strategies E.g.,
Cisco allows employees to spin-out, invest in them and acquire them. 2. Innovation Centers - Internal R&D, CVC startups/spin-outs work in close collaboration E.g., Chemical/Pharma companies with long development cycles
often use this model. CVC VS VC Table Headers: Incentive Intensity, Financial discipline on downside, Monitoring, Discovering alternative business models, Time Horizon, Scale of capital invested, Coordination of complementarities,
Retention of group learning. CVC values: Weaker, Weaker, Internal, Constrained, Indefinite, Potentially large, Extensive, Strong. VC values: Strong, Strong, External in addition to GPs, Unconstrained, Tied to fund length, Smaller,
Limited, Weak KEY CHALLENGES OF CVC 1. For Corporations i. Lack of well-defined or shifting missions ii. Conflicting agenda/priorities of startups and other investors iii. Inadequate compensation schemes that motivate managers
correctly 2. For Startups i. Risk of imitation of technology/product ii. Insufficient corporate commitment iii. Corporations’ processes complex and time-consuming and thus slow decision making iv. Not welcome by other VCs.
OVERCOMING CVC CHALLENGES 1. Corporations should align CVC goals with corporate objectives 2. Streamlined decision-making processes (Recall similar arguments in the P&G and Titan cases on internal venturing) 3. Provide
CVC executives powerful incentives that are not tied to corporate performance 4. Create robust knowledge transfer channels between startups and corporate. WHEN SHOULD NEW VENTURES ACCEPT CVC INVESTMENTS? 1.
CVCs can deliver strategic benefits to new ventures – i. Access to market, scaling technology (e.g., real data for a new AI tool), etc. ii. Requirements for large scale investments iii. Strong complementarities exist. 2. New ventures’
business model and long-term objectives align with the corporate – i. New ventures can learn from same or similar business models ii. Intention to get acquired by the corporation || Understanding CVC involves a dual perspective
– corporations and startups. For corporations CVCs are a quick and asset light way to experiment and innovate as CVCs may differ based on investment objective and operational capabilities. For startups CVCs can bring strategic
benefits in addition to financial ones. CVCs are successful when corporations deliver strategic benefits to new ventures that are aligned with the corporate objectives and business model. CVCs and VCs differ on multiple dimensions.
New ventures should assess fit.

*Session 18 - Corporate Entrepreneurship: Intrapreneurship* (focusing on 1st and 3rd cells of CE model matrix)
INTRAPRENEURSHIP Intrapreneurship is the use of entrepreneurial mindset and management techniques within established companies to foster innovation. Intrapreneur – one who develops new business / innovation. He leads
and guides the venture team. He is answerable to the top management. He is focal point of the entire venture. CHALLENGES FACED BY INTRAPRENEURS 1. Lack of legitimacy and credibility (in the initial stages) i. Resource
consumption rather than resource generation ii. Somebody else in the firm is paying for your existence 2. Resistance and inertia i. Lack of information and significance 3. Resource starvation i. Competition for resources from
mainstream activities ii. Pressure to use resources efficient iii. Pressure to establish economic viability. CHALLENGES IN INTRAPRENEURSHIP 1. Resources are available in plenty, but accessing resources is difficult 2. High level of
skill and knowledge, but limited incentives to take risks 3. Viability of the venture is a necessary, but not sufficient condition to pursue further 4. Strategic fit, timing, significant and predictable returns are important PRINCIPLES
OF EMA APPLY TO INTRAPRENEURS TOO 1. Start with available resources (means); redeploy slack resources for pilots 2. Build partnerships rather than top-down incentives to pilot new opportunities 3. Build your business case
on customer insights; seek approval for affordable loss 4. Pilot, Experiment, pivot – Lean Method (e.g. Cisco case). ROLE OF THE INTRAPRENEUR Partner development in India - Global suppliers’ capability building, Risk-and-
reward revenue sharing model. Funding and alignment with global process and leveraging talent pool. From Intrapreneur traits – Innovative, Resourceful, Persistence, Persuasiveness to Tactics – Frequency, Variety, Individualized
consideration to Champion success || Process of Idea generation and conversion to revenue streams within established businesses not very different from new ventures. Intrapreneurship is vital for established companies.
Established companies leverage intrapreneurship to tap into emerging trends and technologies. Intrapreneurship important for you to climb the corporate ladder. CE strategies often involve a mix of more than one type.
WHY BE AN INTRAPRENEUR 1. Large corporations are awash with ideas that are often not actioned 2. Intrapreneurs bring innovation to the firm but also “craft their own jobs” in addition to achieving high growth. Make your job
more meaningful by aligning with your interests and values. 3. Intrapreneurs excel at: i. Taking dormant ideas to execution which brings vision and resilience ii. Proactively take the initiative to bring change iii. Building partnerships
and camaraderie that enhances job satisfaction. 4. In short, intrapreneurs are more engaged and productive. WHAT DOES IT MEAN FOR YOU? Entering a rapidly changing business world. Being entrepreneurial even as an employee
in a large firm – Across fields and industries. Developing an entrepreneurial mindset is imperative.