New-Venture Team Formation

New-Venture Team

• A new-venture team comprises the founders, key employees, and advisors, transitioning an idea into a fully operational firm.
• This team typically forms gradually as the new firm can afford more employees.
• The team includes boards of directors and advisors, and other professionals depended on for direction.

Liability of Newness

• New ventures are highly susceptible to failure.
• High failure rate can be attributed to the liability of newness, which arises from the people involved struggling to adapt to new roles and the firm lacking a proven history.
• Talented and experienced management can overcome these challenges.

Creating a New-Venture Team

• A well-developed business plan, stemming from the business model, requires suitable leadership and personnel.
• A founder's approach to building a new-venture team is seen as an indicator to potential investors, partners, and employees.
• Assembling a robust team impresses potential stakeholders.

Elements of a New-Venture Team

• They include the founder(s), management team, key employees, board of directors, advisors, lenders, investors, and other professionals.

Mistakes When Assembling a New Venture Team

• Placing unqualified friends or family members in management roles is a mistake.
• Believing previous success in other industries automatically translates is a mistake.
• Presenting a "one-person team" without plans to expand the team is a mistake.
• Hiring top managers without offering them ownership can be problematic.
• Failure to disclose skill or competency gaps is a mistake.
• Vague plans for addressing those gaps.

Founder or Founders of a Venture

• Founder’s characteristics and initial decisions significantly shape the new-venture team.
• Studies show that 50%-70% of ventures are started by more than one person.

Size of the Founding Team

• Teams can contribute more talent, resources, and ideas.
• Psychological support from cofounders is a crucial factor.
• Disagreements among members regarding work habits, risk tolerance, and business ideas can arise.
• Teams that have collaborated previously have an advantage.
• Heterogeneous teams with diverse abilities and experiences can be valuable.
• A founding team can be too big, which may lead to communication problems and conflict.
• Two to three founders may be ideal.

Preferred Attributes of the Founder(s)

• Start-ups by a team can provide better resources, viewpoints, and positive attributes.
• Higher education contributes to entrepreneurial skills.
• Prior entrepreneurial experience familiarizes the founder with the entrepreneurial process.
• Relevant industry experience provides better knowledge of professional experience.
• Broad social and professional networks give access to know-how, capital, and customer referrals.

Management Team and Key Employees

• Startups vary in how quickly they need to add personnel.
• Founders might work alone or hire immediately, with time playing a factor.
• A skills profile charts key skills needed and existing gaps in a new firm.

Sources of Labor for New Ventures

• Full or part-time employee refers to a person who works for a business, in person or remotely, utilizing the business's tools and equipment and according to company policy.
• An intern is someone who works for a business as an apprentice or trainee to gain experience.
• A freelancer is self-employed, work on own time with their tools, and performs services for clients.
• A virtual assistant is a freelancer who provides administrative, technical, or creative assistance to clients remotely.

Board of Directors

• Corporations legally require a board of directors.
• Boards are panels elected by shareholders to oversee management.
• A board includes inside directors who are also officers of the firm and outside directors who are not employed by the firm.
• Boards are responsible for appointing officers, declaring dividends, and overseeing affairs.
• Boards meet 3–4 times a year and are paid in company stock versus a cash honorarium.
• A board provides guidance and support to firm managers, along with legitimacy.
• Credible members bring recognition.
• Investors and board members help new ventures get access and arrange funding.

Role of Professional Advisors

• Comprised of a Board of Advisors, Lender and Investors, and Other Professionals.

Board of Advisors

• They consist of a panel of experts who offer counsel and support to the firm's managers regularly.
• No legal liability for the company is held by the board of advisors, which offers non-binding advise.
• Can be used for general purposes or to address a specific need.
• Individuals are likely to serve on the company's advisory board because it requires less time and there is no liability involved.
• Members of advisory boards give guidance and creditability to the firm.
• It shouldn't be created just to boast; if advisors do not play a role in growth, they will become disillusioned.
• When one is deciding the board of advisors, look for members that can complement and be compatible in terms of experience/expertise.
• When calling to invite board members to serve, a company should fully spell out accessibility rules when it comes to confidential information.

Lenders and Investors

• They have invested interests in the companies they finance, and become involved.
• Lenders and investors help new firms by giving guidance and advice.
• They are the natural source of financial oversight in a firm.
• They help identify and recruit management personnel.
• They provide insight into an industry and markets.
• They help fine-tune the business model.
• They serve as a sounding board for new ideas.
• They offer introductions into additional sources of capital.
• They are able to recruit customers and help to arrange partnerships.
• They serve on the director or advisory board.
• They provide a sense of calm during emotional experiences.

Other Professionals

• Other professionals include attorneys, accountants, and business consultant.
• Business consultants give expert advice.
• Consultants are either paid or available for free/reduced rates via non-profit/government agency.

Internal Growth Strategies

• Entail efforts within the company such as: new product development, product-related strategies, and international expansion.
• A business depends on its own core competencies, expertise, business practices, and staff.
• Growth achieved within is organic because it doesn't need outside support.

Internal and External Strategies

• Internal growth strategies include: new product development, other product related strategies, and international expansion.
• External Growth includes: mergers/acquisitions, licensing, strategic alliances/joint venture, and franchising.

Advantages and Disadvantages of Internal Growth Strategies

• Some Advantages: incremental/even-paced growth, control, preservation of organizational culture, internal entrepreneurship, and firm promotion from within.
• Some Disadvantages: slow growth, development for needing resources, investment in internal growth/difficult in recoup, and additions to industry capacity.

New Product Development

• It increases firm service and is a necessity for competitive advantages.
• Average product life cycles in software firms can be very short.

Keys to Effective Product and Service Development

• Identify a need and satisfy customers if possible.
• Develop products that add value.
• Maintain satisfactory quality and pricing.
• Specifically a target market you want to focus on.
• Conduct feasibility analysis on an ongoing basis.

Reasons Products Fail

• Product doesn't deliver/solve intended purpose.
• Wrong market was identified.
• Product is expensive/provides little value to customers
• Business case is flawed.
• Marketing entry was delayed.
• Marketing plan was poor.

Additional Internal Product-Growth Strategies

• Improves current product/service, often a business can improve its revenue by simply improving an already existing system.
• Increase market penetration, increase marketing efforts/increase more production numbers.
• Make more variations of a particular product to appeal to customers.
• Geographic expansion, growth in locations additional to the ones already in play.

International Expansion

• Common for entrepreneurial firms.
• International new is when ventures that seek competitive advantages by selling their product/services in multiple countries.
• Vast potential, but a complex process of growth.
• Foreign-Market Entry Strategies include: exporting, joint ventures, and licensing.
• Exporting is shipping a product to a foreign market.
• Joint venture involves being owned independently by two more more firms.
• Licensing describes a firm that is given proprietory rights to an other firm to manufacture specified royalties or other payments.
• Franchising is a agreement between a franchisor (company like McDonalds) and a franchisee (the owner of the McDonalds).
• Turnkey Project describes a contractor/facility built in another country and provides personnel that will operate once everything is completed.
• Wholly Owned Subsidiary is when a company manufactures products in a foreign country, which is establishing a permanent presence.

External Growth Strategies

• Includes: Mergers/Acquisitions, Licensing, Strategic Alliances/Joint Ventures, and Franchising.

Emphasizing External Growth Strategies

• Advantanges include: reducing competition, proprietary products/services, access to new product, technical expertise, brand names, economies of skill, and business risk.
• Disadvantages include: incompatibility of top management, clash of corporate cultures, operational problems, increase business complexity, organizational flexibility, and antitrust implications.

Mergers and Aquisitions

• A merger is when a firm combines into one.
• Aquistion is a purchase of a firm by another.
• When aquiring a business, it should expand the product, gives access to distribution channels, and achieve economies of scale.

Process of Completing the Aquisition of Another Firm

• Steps include: schedule meetings with the target firms, evaluate executives, determine how to finance the acquistion, actively negotiate, make and offer depending on if the prior steps were appropriate, noncompete agreements with key firm employees, hire an attorney to prepare, meet all employees to explain the process, move forward when everything is added to the organization.

Licensing

• When a company grants permission to another, it makes the decision for a specific form of intellectual property.
• Most can be trademarked/copywritten.
• Terms are spelled via licensing agreements.
• The licensor is owns what the intellectual property is, the licensee is purchasing to use for their own right.

Licensing Type

• Proprietary controls by utility patent is when technology can be controlled by a licensor.
• Trademark controls in some way are when a brand licensing it can be trademarked or copyrighted.

Benefits of Strategic Alliances and Joint Ventues

• The increase can happen when firms can no longer go at it alone.
• Provides access to specific sources.
• Includes economies of skills.
• Can happen when taking risk and share cost.
• Access to a foreign market.
• Provides leaning.
• Happens fast.
• Neutralizes/Blocks competitors.
• Some Disadvantages: loss of information/complexies, risks, can depend on partners, loss of autonomy, and flexibility/clash.

Startegic Alliances

• Strategic alliance is a partnership between two or more firms for a specific goal.
• Shows boost from patenting/innovation and foreign sales.

Types of Alliances

• Technological alliances refers cooperatiom that is done in R&D,engineering/manufacturing.
• Marketing alliances refers capacity with which a company sells product/services.

Joint Ventures

• Joint venture is formed from firms that pool resources.
• An advantage is obtaining accesss to a larger/faster network through another market.
• Partners can gain scales via production/distribution.
• Help each other with acccess links.