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Which funding source involves raising small amounts of money from a large number of individuals, commonly through the internet?
Which funding source involves raising small amounts of money from a large number of individuals, commonly through the internet?
Which type of funding involves securing financing with a promise to pay back the funds plus a fee?
Which type of funding involves securing financing with a promise to pay back the funds plus a fee?
What stage of funding typically involves family, friends, and self-funding?
What stage of funding typically involves family, friends, and self-funding?
Which type of investor operates from a self-interested perspective and focuses on generating economic returns?
Which type of investor operates from a self-interested perspective and focuses on generating economic returns?
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What should you avoid when projecting financials for your venture?
What should you avoid when projecting financials for your venture?
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Which funding source involves selling equity for an unsecured investment?
Which funding source involves selling equity for an unsecured investment?
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Which type of funding is primarily aimed at strategy enhancement for corporations?
Which type of funding is primarily aimed at strategy enhancement for corporations?
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What is the primary focus of crowdfunding backers when selecting ventures?
What is the primary focus of crowdfunding backers when selecting ventures?
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What is the likely outcome if entrepreneurs do not effectively address their financial projections?
What is the likely outcome if entrepreneurs do not effectively address their financial projections?
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In which funding stage do companies begin to take on tangible characteristics?
In which funding stage do companies begin to take on tangible characteristics?
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What is the significance of 'asset parsimony' in entrepreneurial resource acquisition?
What is the significance of 'asset parsimony' in entrepreneurial resource acquisition?
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How do novel ideas impact a firm's competitiveness?
How do novel ideas impact a firm's competitiveness?
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What is one of the common challenges faced by venture managers regarding resource acquisition?
What is one of the common challenges faced by venture managers regarding resource acquisition?
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Which statement about the evolution of a leader is true based on the content?
Which statement about the evolution of a leader is true based on the content?
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What might a venture experience when introducing a novel idea to the market?
What might a venture experience when introducing a novel idea to the market?
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What does the concept of the 'Valley of Death' typically refer to in entrepreneurial ventures?
What does the concept of the 'Valley of Death' typically refer to in entrepreneurial ventures?
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What does the dimension of Market Newness refer to in the Entrepreneurial Newness Framework?
What does the dimension of Market Newness refer to in the Entrepreneurial Newness Framework?
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Which approach do effective leaders adopt regarding their capabilities?
Which approach do effective leaders adopt regarding their capabilities?
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Which quadrant of the Entrepreneurial Newness Framework represents ventures that introduce innovative technologies to established markets?
Which quadrant of the Entrepreneurial Newness Framework represents ventures that introduce innovative technologies to established markets?
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What is a key characteristic of new ventures based on the entrepreneurial resource acquisition process?
What is a key characteristic of new ventures based on the entrepreneurial resource acquisition process?
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In what type of new venture would entrepreneurs typically face lower risks according to the Entrepreneurial Newness Framework?
In what type of new venture would entrepreneurs typically face lower risks according to the Entrepreneurial Newness Framework?
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What is crucial for entrepreneurs when determining strategies for gaining legitimacy?
What is crucial for entrepreneurs when determining strategies for gaining legitimacy?
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What does the term Technology Newness signify in the context of the Entrepreneurial Newness Framework?
What does the term Technology Newness signify in the context of the Entrepreneurial Newness Framework?
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Which of the following quadrants is characterized by creating new markets with new technologies?
Which of the following quadrants is characterized by creating new markets with new technologies?
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What can understanding the Entrepreneurial Newness Framework help entrepreneurs assess?
What can understanding the Entrepreneurial Newness Framework help entrepreneurs assess?
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What is the least risky option for many startups according to the Entrepreneurial Newness Framework?
What is the least risky option for many startups according to the Entrepreneurial Newness Framework?
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What does the principle of 'asset parsimony' in entrepreneurial resource acquisition emphasize?
What does the principle of 'asset parsimony' in entrepreneurial resource acquisition emphasize?
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What is one common challenge associated with evaluating novel ideas in entrepreneurial ventures?
What is one common challenge associated with evaluating novel ideas in entrepreneurial ventures?
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How do effective leaders typically view their own capabilities?
How do effective leaders typically view their own capabilities?
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What is a critical factor for firms in terms of competitiveness and economic growth?
What is a critical factor for firms in terms of competitiveness and economic growth?
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In the context of entrepreneurial resource acquisition, what does 'legitimation' typically refer to?
In the context of entrepreneurial resource acquisition, what does 'legitimation' typically refer to?
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What impact does high uncertainty have on venture managers during resource acquisition?
What impact does high uncertainty have on venture managers during resource acquisition?
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Which statement best describes the transition process in leadership development?
Which statement best describes the transition process in leadership development?
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Why do entrepreneurs often engage in trial and error during resource acquisition?
Why do entrepreneurs often engage in trial and error during resource acquisition?
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What is a primary characteristic of crowdfunding backers when selecting ventures?
What is a primary characteristic of crowdfunding backers when selecting ventures?
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Which type of funding is typically used when a company is transitioning from intangible aspects to more tangible characteristics?
Which type of funding is typically used when a company is transitioning from intangible aspects to more tangible characteristics?
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What do angel investors primarily seek when they invest in a venture?
What do angel investors primarily seek when they invest in a venture?
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What is the recommendation for entrepreneurs when projecting their financials?
What is the recommendation for entrepreneurs when projecting their financials?
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Which funding stage is characterized primarily by bridge loans and open market offerings?
Which funding stage is characterized primarily by bridge loans and open market offerings?
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How do different audience logics affect the funding process?
How do different audience logics affect the funding process?
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What is often a key obstacle for venture managers in terms of resource acquisition?
What is often a key obstacle for venture managers in terms of resource acquisition?
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Which type of logic do corporate venture capitalists typically follow?
Which type of logic do corporate venture capitalists typically follow?
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What might happen if an entrepreneur fails to address the diversity of their audience?
What might happen if an entrepreneur fails to address the diversity of their audience?
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What is the significance of understanding different audience logics in entrepreneurship?
What is the significance of understanding different audience logics in entrepreneurship?
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What should entrepreneurs consider when selecting strategies for resource acquisition?
What should entrepreneurs consider when selecting strategies for resource acquisition?
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Which quadrant in the Entrepreneurial Newness Framework is least likely to create disruptive initiatives?
Which quadrant in the Entrepreneurial Newness Framework is least likely to create disruptive initiatives?
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What is essential for entrepreneurs seeking to gain legitimacy in a highly novel market?
What is essential for entrepreneurs seeking to gain legitimacy in a highly novel market?
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In the context of entrepreneurship, what does audience diversity affect in terms of resource acquisition?
In the context of entrepreneurship, what does audience diversity affect in terms of resource acquisition?
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Which of the following best describes the risks associated with high technology novelty in a venture?
Which of the following best describes the risks associated with high technology novelty in a venture?
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Which strategy is commonly utilized by ventures characterized by low market newness and high technology newness?
Which strategy is commonly utilized by ventures characterized by low market newness and high technology newness?
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What does the paradox of entrepreneurship often imply regarding new ventures?
What does the paradox of entrepreneurship often imply regarding new ventures?
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In the Entrepreneurial Newness Framework, what characterizes ventures that use existing technologies for new markets?
In the Entrepreneurial Newness Framework, what characterizes ventures that use existing technologies for new markets?
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What is a key consideration for entrepreneurs seeking legitimacy in innovative markets?
What is a key consideration for entrepreneurs seeking legitimacy in innovative markets?
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Which quadrant of the Entrepreneurial Newness Framework faces the highest risk due to novelty?
Which quadrant of the Entrepreneurial Newness Framework faces the highest risk due to novelty?
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In the context of resource acquisition, how does audience diversity impact ventures?
In the context of resource acquisition, how does audience diversity impact ventures?
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What is the role of technology newness in determining resource acquisition strategies?
What is the role of technology newness in determining resource acquisition strategies?
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Which strategy is likely to be utilized by ventures with low market novelty and high technology novelty?
Which strategy is likely to be utilized by ventures with low market novelty and high technology novelty?
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What is a common challenge that startups face related to their financial projections?
What is a common challenge that startups face related to their financial projections?
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What does the paradox of entrepreneurship refer to?
What does the paradox of entrepreneurship refer to?
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What is crucial for a startup to effectively size its market?
What is crucial for a startup to effectively size its market?
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What is a primary principle of asset parsimony in the context of entrepreneurial resource acquisition?
What is a primary principle of asset parsimony in the context of entrepreneurial resource acquisition?
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How do novel ideas generally impact firms during the evaluation stage?
How do novel ideas generally impact firms during the evaluation stage?
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What is a common challenge venture managers face regarding resource acquisition?
What is a common challenge venture managers face regarding resource acquisition?
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What is a critical aspect of leaders evolving over time?
What is a critical aspect of leaders evolving over time?
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What tends to limit a venture's ability to seize opportunities effectively?
What tends to limit a venture's ability to seize opportunities effectively?
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What role does audience diversity play in entrepreneurial resource acquisition?
What role does audience diversity play in entrepreneurial resource acquisition?
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What is a misconception about the capabilities of effective leaders?
What is a misconception about the capabilities of effective leaders?
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During what process do entrepreneurs typically learn to manage risk effectively in their ventures?
During what process do entrepreneurs typically learn to manage risk effectively in their ventures?
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What contributes to the legitimacy of a new venture when engaging with investors?
What contributes to the legitimacy of a new venture when engaging with investors?
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What is a common misconception about financial projections for new ventures?
What is a common misconception about financial projections for new ventures?
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Which of the following strategies is important when addressing audience diversity?
Which of the following strategies is important when addressing audience diversity?
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Which funding stage typically utilizes angel networks and crowdfunding?
Which funding stage typically utilizes angel networks and crowdfunding?
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What defines the 'paradox of entrepreneurship'?
What defines the 'paradox of entrepreneurship'?
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What is a hallmark of effective resource acquisition strategies for new ventures?
What is a hallmark of effective resource acquisition strategies for new ventures?
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Which type of investor prioritizes strategic enhancement in their funding decisions?
Which type of investor prioritizes strategic enhancement in their funding decisions?
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What should entrepreneurs consider when determining their target market size?
What should entrepreneurs consider when determining their target market size?
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What is an essential aspect of bootstrapping in entrepreneurship?
What is an essential aspect of bootstrapping in entrepreneurship?
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Why is understanding audience diversity critical for resource acquisition?
Why is understanding audience diversity critical for resource acquisition?
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Study Notes
Bootstrapping
- Self-financing or borrowing from family or friends
Crowdfunding
- Raising small amounts of money from a large number of people, typically via the internet, in exchange for a discount or early access to a solution
Debt
- Secured financing of a new venture that involves a payback of the funds plus a fee
Equity
- Involves the sale (exchange) of some of the ownership interest in the venture in return for an unsecured investment
Understanding Audience Diversity
- It's important to understand what different audiences value and link your proposition to that
- Different audiences have different logics
Crowdfunding Backers
- Community logic, drawn to ventures that demonstrate commitment to community values and ideology
Government Agencies
- State logic, operate to fulfill government mandates, place value in the prestige and selectivity of government funding for science, see themselves as stewards of government funds
Angel Investors
- Market logic, can be relatively autonomous in their decision making, draw authority from their past entrepreneurial success and the personal wealthy that stems from that, invest for personal economic returns and for the opportunity to participate in entrepreneurial endeavours
Venture Capitalists
- Professional logic, depends on their investment track record as a source of their own legitimacy, operate from a self-interested perspective and invest with a strong focus on generating economic returns, which benefits them and their fund investors
Corporate Venture Capitalists
- Corporate investment logic, the logic of investment is for strategy enhancement, CVC investors look for ventures that offer something to enhance the strategy of the corporation
Pre-Seed Funding
- Family, friends, self-funding
- When the ideas are forming and mostly intangible aspects of the company are present
- Equity is typically split 50/50 between founders (bootstrapping)
Seed Funding
- Angel networks, crowdfunding, bank loans, lines of credit
- When your company is becoming more tangible
- Equity is spread out, but the largest holder is likely the angel investor (early stage)
Seedling Funding
- Similar to Seed Funding, but the rounds repeat
- When the company is starting to grow (growth)
Baby Plant Funding
- Bridge loans, open market offerings, SPAC (special purpose acquisition company), mergers
- When the company is getting stronger and growing (exit)
Projecting Financials
- Try not to project much further than 24 months, investors are less likely to believe a projection for a longer time horizon
- Know that until you start selling, your numbers are just rough estimates!
Entrepreneurial Legitimacy
- The most appropriate strategy to gain legitimacy depends on the degree of technology/market novelty
Option 1
- Least risky option for many startups
Option 4
- Essentially a brand-new startup
Entrepreneurial Newness Framework
- A model that helps categorize new ventures based on two key dimensions: Market Newness and Technology Newness
Market Newness
- How novel or unfamiliar the market is for the venture's products or services
Technology Newness
- How new or innovative the technology or approach used by the venture is
Four Quadrants
- Low Market Newness, Low Technology Newness: Traditional small businesses entering established markets with proven technologies
- High Market Newness, Low Technology Newness: Ventures that use existing technologies to serve new markets or customer segments
- Low Market Newness, High Technology Newness: Ventures that introduce innovative technologies or approaches to established markets
- High Market Newness, High Technology Newness: The most innovative and potentially disruptive ventures, creating new markets with new technologies
Key Take-Aways
- It is rare to see a leader exhibit more than two or three of the 4 core capabilities
- Effective leaders know what their strengths are and do not strive for the myth of the omniscient leader
- The leader we are when we start is not the leader we will become; we evolve and develop as leaders
Resource Acquisition and Legitimation Strategies
- Venture managers rarely possess everything they need to seize an opportunity – they need external resources
- Uncertainty is high, so they don't know the exact resources that will be needed – remember that new ventures are commercial experiments
- Resource acquisition is a process of trial and error driven by 'asset parsimony' = securing the resources to achieve the desired business results at minimum cost
Asset Parsimony
- Securing only the essential resources needed to achieve business goals while minimizing costs
The Evaluation of Novel Ideas
- Novel ideas are critical for firms' competitiveness and economic growth, but many do not reach the implementation stage because they are rejected by the audience who first evaluate them
Novel Idea
- A new, original, or innovative concept that has not been previously explored or implemented
Foundations and Forms of Entrepreneurship
- Bootstrapping — self-financing or borrowing from family or friends.
- Crowdfunding — raising small amounts of money form a large number of people, typically via internet, in exchange for a discount or early access to a solution.
- Debt — secured financing of a new venture that involves a payback of the funds plus a fee.
- Equity — involves the sale [exchange] of some of the ownership interest in the venture in return for an unsecured investment.
Audience Diversity
- Understanding audience diversity is crucial when approaching them.
- Different audiences have different logics and values.
Crowdfunding Backers
- Driven by community logic.
- Value ventures that demonstrate commitment to community values and ideology.
Government Agencies
- Operate with state logic.
- Prioritize government mandates, prestige, and selectivity in funding.
Angel Investors
- Driven by market logic.
- Autonomous in decision making, authority derived from past entrepreneurial success.
- Invest for personal economic returns and participation in entrepreneurial endeavors.
Venture Capitalists
- Drive by professional logic.
- Legitimacy relies on investment track record.
- Invest with a strong focus on generating economic returns for themselves and fund investors.
Corporate Venture Capitalists
- Driven by corporate investment logic.
- Look for ventures that enhance the strategy of the corporation.
Pre-seed Funding
- Family, friends, and self-funding.
- Mostly intangible aspects of the company present during this stage.
- Equity is typically 50/50 between founders (bootstrapping).
Seed Funding
- Angel networks, crowdfunding, bank loans, lines of credit.
- Companies become more tangible.
- Equity is distributed, with the most likely held by the angel investor (early).
Seedling Funding
- Rounds repeat from seed funding.
- Companies are starting to grow.
Baby Plant Funding
- Bridge loans, open market offerings, SPACs, mergers.
- Companies are getting stronger and growing.
Projecting Financials
- Project no further than 24 months, investors are less likely to believe longer projections.
- Until sales start, numbers are rough estimates.
Entrepreneurial Legitimacy
- Strategies for gaining legitimacy depend on the degree of technology/market novelty.
The Entrepreneurial Newness Framework
- Categorizes new ventures based on two key dimensions: Market Newness and Technology Newness.
Market Newness
- Refers to how novel or unfamiliar the market is for the venture's products or services.
Technology Newness
- Considers how new or innovative the technology or approach used by the venture is.
Venture Types
- Low Market Newness, Low Technology Newness: Traditional small businesses entering established markets with proven technologies.
- High Market Newness, Low Technology Newness: Ventures using existing technologies to serve new markets or customer segments.
- Low Market Newness, High Technology Newness: Ventures introducing innovative technologies or approaches to established markets.
- High Market Newness, High Technology Newness: The most innovative and potentially disruptive ventures creating new markets with new technologies.
Entrepreneurial Resource Acquisition
- Venture managers rarely possess all the resources they need to seize an opportunity, they need external resources.
- Uncertainty is high, exact resources needed are unknown.
- Resource acquisition is a process of trial and error driven by "asset parsimony."
Asset Parsimony
- Securing only the essential resources needed to achieve business goals while minimizing costs.
- Helps startups operate efficiently and conserve capital.
Evaluation of Novel Ideas
- Novel ideas are crucial for firm competitiveness and economic growth, but many don't reach implementation due to rejection during the evaluation stage.
- A novel idea is a new, original, or innovative concept that has not been previously explored or implemented.
### Finance for Startups
- Bootstrapping is self-financing or borrowing from family or friends for a new venture.
- Crowdfunding involves raising small amounts from many people, typically online, in exchange for a discount or early access to a product or service.
- Debt financing is a secured loan that requires repayment with interest.
- Equity financing, involves selling ownership in the venture in return for an unsecured investment.
Understanding Audience Needs
- When seeking funding, it is crucial to understand the values and motivations of different audiences.
- Crowdfunding backers are drawn to ventures that align with community values and ideology.
- Government agencies prioritize ventures that fulfill government mandates and demonstrate prestige and selectivity.
- Angel investors are motivated by potential economic returns and the opportunity to participate in entrepreneurial ventures.
- Venture capitalists make decisions based on their investment track record and focus on generating economic returns.
- Corporate venture capitalists seek ventures that enhance the strategic goals of the corporation.
Funding Stages and Key Aspects
- Pre-seed funding is typically raised from family, friends, or self-funding. This stage is characterized by intangible ideas.
- Seed funding typically comes from angel networks, crowdfunding platforms, bank loans, and lines of credit. This stage marks a shift towards tangible aspects of the business.
- Seedling funding involves similar sources as seed funding but is done in multiple rounds as the venture grows.
- Baby Plant funding comes from sources like bridge loans, public offerings, SPACs, and mergers. This stage marks the maturation of the company and potential for more complex funding options.
Financial Projections
- It is generally advisable to project financials for a maximum of 24 months, as investors are less likely to trust longer projections.
- Early financial projections should be viewed as rough estimates until sales begin.
Entrepreneurial Legitimacy
- The most appropriate strategy for gaining legitimacy depends on the degree of market and technology novelty.
- Ventures with low market and technology novelty often face fewer challenges in establishing legitimacy.
- Ventures with high market and technology novelty face greater challenges in gaining legitimacy.
### The Entrepreneurial Newness Framework
- It is crucial for understanding the entrepreneurial newness landscape and identifying the appropriate legitimacy and resource acquisition strategies.
- Low Market Newness, Low Technology Newness: Traditional small businesses in established markets.
- High Market Newness, Low Technology Newness: Ventures using existing technologies to serve new markets.
- Low Market Newness, High Technology Newness: Ventures bringing innovative technologies to established markets.
- High Market Newness, High Technology Newness: Highly innovative ventures creating new markets and technologies.
Entrepreneurial Resource Acquisition
- Venture managers rarely possess all the necessary resources.
- Resource acquisition should be a process of trial and error.
- Asset parsimony, securing essential resources at minimal cost, is crucial for startups.
Evaluating Novel Ideas
- Many novel ideas fail to reach implementation due to rejection by initial evaluators.
- Entrepreneurial teams must effectively pitch and defend their novel ideas to secure necessary resources.
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Description
This quiz explores various funding methods used by startups, including bootstrapping, crowdfunding, debt, and equity. Additionally, it highlights the importance of understanding audience diversity and the different values stakeholders place on ventures. Test your knowledge on how each funding method applies to real-world scenarios.
