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ENTREPRENEURSHIP AS A PROFESSION Dr. Joachim Behrendt

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Links

2 Entrepreneurship as a Profession

• Steve Jobs Speech:

• http://www.youtube.com/watch?v=UF8uR6Z6KLc

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C:/Users/MediaMarkt/Documents/J.Behrendt Main/Entrepreneurship/Lecture Fall 2011/Steve Jobs' 2005 Stanford Commencement Address - YouTube.flv

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Personality and Entrepreneurship

The Entrepreneurial Process

Early-Stage Funding and Support

3 Entrepreneurship as a Profession 13-Oct-12

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Necessary Characteristics of Entrepreneurs?

• Commitment and determination

• Courage

• Leadership

• Opportunity obsession

• Tolerance of risk, ambiguity, and uncertainty

• Creativity, self-reliance, and adaptability

• Motivation to excel

• ….

(taken from Timmons / Spinelli, New Venture Creation, p.47)

Do you have these characteristics?

Can you be an entrepreneur?


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More Necessary Characteristics?


Taken from: Kuratko, Entrepreneurship – Theory, Process, Practice, p.31

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A More Useful Approach


Source: Stokes / Wilson, Small Business Management, p. 51

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Business Failure Rates


Source: Shane, Ihe Illusions of Entrepre-

neurship, New Haven / London 2008

US study UK studies

Source: Stokes / Wilson, Small Business

Management, p. 87

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Main Reasons for Failure


Source: Kuratko, Entrepreneurship – Theory, Process, Practice, p.2 68

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Creativity and Management Skills


Source: Timmons / Spinelli, New Venture Creation, p. 55

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Overview: Aspects of the Entrepreneurial Process


Source: Volkmann / Tokarski / Grünhagen, Entrepreneurship in a European Perspective, p. 68

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The Seven Sources for Innovative Opportunities

• The Unexpected

• Example: Unexpected success of IBM PC

• The Incongruous

• Examples: Invention of container ships / roll-on-roll-off ships, overnight package delivery

• Process Needs

• Examples: McDonalds, microwave ovens

• Industry and Market Structures

• Examples: Printing industry, ERP software, media industry

• Demographics

• Examples: Health care industry, universities in Turkey

• Changes in Perception

• Examples: Fashion industry, organic food

• New Knowledge

• Examples: Electricity, light bulb, internet, mobile phone, robotics, ...

• Source: Drucker, Innovation and Entrepreneurship, pp.27-117


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Opportunity Screening Process Funnel


Source: Harper, Extraordinary Entrepreneurship,, p.127

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Classification Guidelines for the VOS Indicator


Source: Leach / Melicher, Entrepreneurial Finance, p.55

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Initial New Venture Losses


Source: Timmons, J.A./Spinelli, S., New Venture Creation, p.427

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Lemons and Pearls


Source: Timmons / Spinelli, New Venture Creation, p. 158

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Venture Capitalist Evaluation


Source: Kuratko, D,F., Entrepreneurship – Theory, Process, Practice, p.222

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Financing Life Cycles

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Source: Timmons, J.A./Spinelli, S., New Venture Creation, p.433

Entrepreneurship as a Profession

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Industry Statistics

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Sources: European Business Angel Network (EBAN); NVCA (National Venture Capital Association) Yearbook

2011; Center for Venture Research at the University of New Hampshire


Statistics Trend y-o-y (Europe) Europe USA

Number of networks 400 360

Of which commercial c. 20%

Estimated number of business

angels70k 320k

Total amount invested annually

by angels (est.)€ 3 - 4 bln $22.5 billion

VC investments in seed and

start-up/early stagecirca € 1.6 bln $1.9 bn

EUROPEAN ANGEL MARKET= c. 21.9% OF US ANGEL

MARKET

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Investment Process of Business Angels

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Source: Volkmann, C.K./Tokarski, K.O./Grünhagen, M., Entrepreneurship in a European Perspective, p.300


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Possible Roles of Business Angels

• Passive

• 1-2 times a year.

• You invest with others and receive information on the company like all other shareholders. A shareholder meeting is usually held once a year.

• Active

• Average 0.5-2 days a month alone or as a group.

• Usually as a Board Member or Advisor. When you make the investment you have to decide whether or not you want to be on the Board and negotiate it as a term.

• Very Active

• 1 day a week alone or as a group.

• Usually playing an operational role. Need to discuss upfront if you will be compensated for it and if yes, how much and split of cash and equity.

• Adopted from: GoBeyond, Early Stage Investing, Business Angel Training, September 2012


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The BIC Business Angel Model: Targets

• Support the company in reaching its predefined targets within the next 2 to 3 years

• Making the company ready for its next phase (rapid growth phase)

• Making the company ready for international activities (strategic partnerships, joint ventures, participations, international M&A activities)

• If intended by founders and required by the business, initiate next round of venture financing (usually by Venture Capital / Private Equity Funds)

• Maintain independence of the company

• Accelerating company growth and development

• Within the next 3 years,

• Do everything necessary to reach the defined quantitative and qualitative targets,

• Provide sufficient cash to maintain and accelerate its operations,

• Establish a fully institutionalized and professionalized company, and separating the roles of owners and managers,

• Continuously support all management, frontend and backend activities of the company,

• Set up and establish relevant management and backup business functions without incurring the related cost by providing BIC business support services;

• Set up and integrate the necessary IT environment, represent the company and offer its products and services via Internet on fixed and mobile platforms, and establish a firm presence in the relevant social media by providing nexum IT and digital agency services.


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BIC & Nexum Services

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B2B, B2C, B2E

Content Management Systems

Back Office Application Integration

Analysis, design and Development of Web-based IT Projects

Search Engine Optimization

Epsilon (E-mail marketing service)

Omniture (Web Analysis Service)

Mobile Apps Development

Impleon (Content and Product Management System)

N-Social (Corporate Portal)

N-Signage (digital Broadcasting)

Web Design

Special Projects

Advergames

Content Management

Online Marketing

Mobile Marketing

Social Media

Restructuring for Strategic Growth

Restructuring in the Recession

Accounting and Controlling Solutions

Corporate Performance Management

Treasury Management Systems

Cash and Market Risk Management

Mergers & Acquisitions Support Services

Institutionalizing and Strategic Growth for Family Businesses

ERP Solutions

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General Business Angel Support

• Management

• Participation in board of directors as non-executive director

• Regular (weekly) management meetings with founder and, if required, additional managers

• External Relations

• Organizing of, and participation in relevant meetings with potential strategic partners, for example suppliers, distributors, domestic and international customers

• If required, entrepreneurial associations and co-investing business angels

• Governmental and nongovernmental supportt institutions (e.g. Teknoparks)

• For exit: Venture capital funds, private equity funds, strategic investors

• Organization of necessary external support , for example Tax advisor / auditor, legal counsel, PR agency, online / social media marketing support, HR consultants / HR platforms

• Strategy and Business Model

• Decision on business model(s) and scope of activities

• Initial strategy definition (workshops, interviews / meetings with market participants)

• Breakdown of strategic planning into functional strategy plans, strategic tasks, milestones

• Setup and implementation of a quarterly strategy controlling process

• Setup of budget planning process, definition of initial budget and initial 5-year financial planning

• Definition of profitability measurement system (business units, products / services, customers)

• Setup and implementation of budget controlling and reporting system

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BIC Business Support Services • Business Support Services

• Market and Competitor Research

• Marketing & PR

• Sales Organization and Sales Controlling

• Business Process Analysis and Optimization

• Organizational Structure

• HR Services (Search&Selection, Compensation&Benefits, HR Legal, Job Descriptions & Career Paths)

• External Accounting (Statutory Accounting, IFRS Accounting)

• Financial and Operational Controlling, Repoting Systems

• Treasury Services (Cash Management, Risk Management, Debt / Credit Management, Banking Relations)

• Legal Services, Regulatory Compliance, IP rights


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Nexum Support Services

• Digital Agency Services

• Branding and Corporate Identity

• Design and Development of Online and Offline Marketing Tools

• Online Marketing

• Mobile Marketing

• Social Marketing

• IT Services

• Analysis. Design and Development of Web-based IT Solutions

• Software Selection, Make-or-Buy-Decision Support

• Outsourced T Management

• IT Consultancy

• Content Management Systems

• B2B, B2C, B2E Platform Development

• IT Systems Integration

• Search Engine Optimization

• Web Analytics

• E-mail Marketing

• Mobile and Social Media Application Development

• IT Support Services


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Relevant Conditions

• Participation / shareholding between 20% and 30% targeted

• …. But founders have to stay in business as shareholders and employees during investment period

• Cash injections by J.Behrendt / BIC / nexum, based on 3-year financial planning

• .. But use of cash linked to business planning, including support services BIC / nexum

• Services charges BIC / nexum subsidized, charged with 50% market price

• … But founders have to sign employment contract at 50% market salary level (plus bonus) with noncompetition and nonsolicitation clauses

• Company remains under control of founders despite high additional cash and noncash investments by business angels

• … But certain decisions require unanimous vote on general assembly / board of directors level (“veto rights”)

• Exit or regular dividend payouts earliest after 3 years targeted

• Option 1: Next round venture financing, sale of shares to VC or PE funds

• Option 2: Share buyback by founders (at market values)

• Option 3: J.Behrendt / BIC / nexum remain shareholders but start receiving regular dividends from company

• Dividend should provide market-oriented returns under consideration of venture risk


BIC BEHRENDT INTERNATIONAL CONSULTING Dr. Joachim Behrendt

Phone: +90 212 328 1939 Fax: +90 212 328 1933

www.behrendt.com.tr www.nexum.com.tr http:/twitter.com/joachimbehrendt http://tr.linkedin.com/pub/joachim-behrendt/18/706/a7a

Email: [email protected]

http://www.behrendt.com.tr/

http://www.behrendt.com.tr/

http://www.nexum.com.tr/

http://twitter.com/joachimbehrendt

http://tr.linkedin.com/pub/joachim-behrendt/18/706/a7a

