Effectual FundingSaras Sarasvathy

To learn more, visit

www.effectuation.org

saras@virginia.edu

The Fuel that Keeps us Going

• The knowledge that we create together and pass on to each other

• I cannot teach you if I do not learn from you

Task based Workshop

3 Tasks

1.Fill out survey individually

Order categories according

YOUR preferences

CategoriesFor each category, tell us in your own words, what it

would take for YOU AS AN INVESTOR to invest in Estar's venture

5 4 3 2 1

5 4 3 2 1

5 4 3 2 1

5 4 3 2 1

5 4 3 2 1

5 4 3 2 1

5 4 3 2 1

5 4 3 2 1

5 4 3 2 1

5 4 3 2 1

5 4 3 2 1

5 4 3 2 1

5 4 3 2 1

5 4 3 2 1

5 4 3 2 1

How well does the venture fit with your...

(for example: skills, objectives, tastes etc)

Any other things (list in order of

importance)

How important is each of the items you listed?

Here, 5 indicates MOST important and 1 indicates

LEAST important

Type of venture (for example: tech, non-

tech, product, service etc)

Market potential (for example: large, growing, specialized,

niche etc)Tasks you want

completed before investment

Task based Workshop

3 Tasks

1.Fill out survey individually

Have you returned your filled out survey?

Please get your labels and stick them on your shirt or

dress

Task based Workshop

3 Tasks

1.Fill out survey individually

Have you returned your filled out survey?

2. Engage in first funding exercise

A = INVESTORB = ENTREPRENEUR

Task based Workshop

3 Tasks

1.Fill out survey individually

Have you returned your filled out survey?

2. Engage in first funding exercise

Fill out responses and hand them in

3. Engage in second funding exercise

A = ENTREPRENEURB = INVESTOR

Task based Workshop

3 Tasks

1.Fill out survey individually

Have you returned your filled out survey?

2. Engage in first funding exercise

Fill out responses and hand them in

3. Engage in second funding exercise

Then fill out responses and hand them in

Workshop Debrief

Myths About Startup Funding

• Of over 500,000 employer firms that get started in the US, how many get VC funding?– less than 1000

• If you do get VC funding, there is a 50% chance you will not be the CEO of your venture the next year

• Most Inc 500 firms get no outside funding• About 2/3rd firms that go public, get no VC funding• So, HOW do startups get funding?

If not formal investors, who funds startups?

Before we tackle this question, let us consider the fact that

YOU DON’T NEED MONEYYOU NEED WHAT MONEY CAN BUY

If not formal investors, who funds startups?

Maybe the question should be,WHO IS NOT YOUR POTENTIAL INVESTOR?

Bird-in-hand

Crazy Quilt Lemonade

Pilot-in-the-plane

Affordable Loss

Start with who you are, what you know and whom you know

Decide up front what you are able and willing to lose

Build a growing network of self-selected stakeholders

Put surprises to work for you – both good and bad

Co-create the future without having to predict it

PRINCIPLES OF EFFECTUATION

Effectual Funding for a Novelist

Bird-in-hand

Crazy Quilt Lemonade

Pilot-in-the-plane

Affordable Loss

‣ You decide what you want to do based on the opportunity you envision

‣ You decide what resources you require to achieve that vision

‣ Then you target those who can best provide the resource

‣ You craft a pitch that will induce them to give you what you want

‣ You decide what you can do based on your means and affordable loss

‣ You ASK anyone who may be interested in helping you co-create the future

‣ You craft a variety of ASKs that allow people to opt in in their own way at their own levels of affordable loss

‣ You are OPEN to reshaping your vision through stakeholder commitments

vs

causal pitch

effectualask

Cocreating the Future

Whatcan I do?

Affordable Loss

Interactwith

other people

Effectual stakeholder commitmen

ts

Who I amWhat I knowWhom I knowBird in hand

Non-predictive control

Co-create

Plan Persist

AdaptLow

High

Low High

PREDICTION

CONTROL

= Non-predictive control

How do you control a future you cannot predict? You co-create it through stakeholder commitments

PlanPersist

Adapt

Art of the Effectual Ask

How do you control a future you cannot predict? You co-create it through stakeholder commitments

Co-create

Plan Persist

Adapt

Low

High

Low High

PREDICTION

CONTROL

You ask them what it would take for them to come on

board

You may or may not know

what they want, but you

don’t care

You estimate what they

want, and you create a quid

pro quo

You try to find out what they want, and try to offer that

Whatcan I do?

Affordable Loss

Interactwith

other people

Effectual stakeholder commitmen

ts

New Means

New Goals

NEW MARKETS

Expanding cycle of co-created resources

Converging cycle of co-created constraints

Who I amWhat I knowWhom I knowBird in hand

Surprise!Lemonade

Who WE areWhat WE knowWhom WE know

Bird in hand

Whatcan WE do?

Affordable Loss

Co-creating the Future

Investing as Asking

• You don’t need money per se to build your venture

• Similarly, you don’t need money in order to invest

Investing as Asking

• You don’t need money per se to build your venture

• Similarly, you don’t need money in order to invest

• Invest your bird-in-hand

Investing as Asking

• You don’t need money per se to build your venture

• Similarly, you don’t need money in order to invest

• Invest your bird-in-hand

• Invest what you can afford to lose

Investing as Asking

• You don’t need money per se to build your venture• Similarly, you don’t need money in order to invest

• Invest your bird-in-hand

• Invest what you can afford to lose

• Become a self-selected stakeholder

The Power of the Ask according to Steve Jobs

Of Wallets and Faces

To learn more, visit

www.effectuation.org

saras@virginia.edu