NVM U4 PDF - BBA I - Stages of Growth in a New Venture

COURSE MATERIAL Program : BBA (I) Semester : IST SEMESTER Course : New Venture Management Course Code : B24MBS161 Unit. No. : IV Unit. Name. : STARTUP SURVIVAL AND GROWTH, PLANNING FOR HARVEST AND EXIT Stages of growth in a new venture 1. Pre-seed stage In...

COURSE MATERIAL Program : BBA (I) Semester : IST SEMESTER Course : New Venture Management Course Code : B24MBS161 Unit. No. : IV Unit. Name. : STARTUP SURVIVAL AND GROWTH, PLANNING FOR HARVEST AND EXIT Stages of growth in a new venture 1. Pre-seed stage In the pre-seed stage, a business is an idea or concept that has yet to be put into action. It's a development phase where you seek feedback from others to gauge the possibility of making the business idea a reality. In this stage, you conduct market research and define your target audience to learn whether there's a demand for the product or service. You may ask questions such as the following:  What specific problem or pain point does the product solve?  Which customers might use this product or service?  What features might consumers want in the product?  Do similar products already exist in the marketplace? If similar products are present, identify areas where you can differentiate the product to distinguish the startup from its competitors. At this point in the business process, the founders often provide their own funding and work with a small team to develop the startup. 2. Seed stage The seed stage is when members of the startup approach investors for funding support. They develop a "seed," or a business they hope to grow. In this stage, you may create a minimum viable product (MVP), which is a simplified, early version of a product you can demonstrate to investors. Potential investment sources can include the following:  Angel investors  Incubators  Public aid, such as crowdfunding campaigns  Grants During this stage, you may develop a business plan, mission statement and goals. Some startups establish advisory boards during the seed stage so experienced advisers can provide  COURSE MATERIAL Program : BBA (I) Semester : IST SEMESTER Course : New Venture Management Course Code : B24MBS161 Unit. No. : IV Unit. Name. : STARTUP SURVIVAL AND GROWTH, PLANNING FOR HARVEST AND EXIT guidance and credibility to the business. This stage is also when you create a timeline and assess whether you have the resources and expertise to deliver the product or service. 3. Startup stage The startup stage, also known as the early stage, occurs after you gather research and secure initial funding so you can launch the business. In this step, you may release the MVP to a small group of customers and collect feedback about ways you can continue working to meet their needs. Depending on the business, you may also seek to gain venture capital financing, also known as Series A funding, from private equity firms, banks or other venture capitalists.During the startup stage, you may work on development components, such as putting a team together. A startup company also does frequent product testing and tries to increase its customer base. 4. Growth stage During the growth stage, a startup has reached the level of having a consistent customer base and a steady source of income. You may seek larger Series B and C investments from venture capitalists to scale the company. In the growth phase, you also may hire more team members to manage the increased workload. Startups in this stage focus on continuous improvement to adapt or improve their products to meet customer needs. 5. Established stage The established stage is when a startup company becomes a thriving business. In this phase, a loyal customer base forms and cash flow often becomes more predictable. Once a company reaches an established status, it may be easier to gain financial resources and hire top talent. As a startup team member, you can remain alert and continue to find ways to grow the customer base, which can help the business move to the next stage. 6. Expansion stage In the expansion stage, a business experiences growth in new markets and distribution channels. During this stage, you may seek new venture and profit options. For example, you might decide to offer a new product or service or extend the business into a new geographic market. You can consider the long-term goals of the organization to determine the best ways to expand.  COURSE MATERIAL Program : BBA (I) Semester : IST SEMESTER Course : New Venture Management Course Code : B24MBS161 Unit. No. : IV Unit. Name. : STARTUP SURVIVAL AND GROWTH, PLANNING FOR HARVEST AND EXIT 7. Maturity stage The maturity stage, also known as the late stage, is when a business reaches a consistent revenue over a sustained period with returning loyal customers. By this point, the business owner or founder usually becomes less involved in the company's day-to-day operations as a management team takes over those responsibilities. In this stage, the business may have a strong presence in the market and a clearly defined brand image. Companies may also invest in talent development and retention strategies to achieve sustained success. 8. Merger and acquisition stage Sometimes known as the exit phase, the last stage is optional and usually involves either a merger or an acquisition. An acquisition occurs when another company offers to buy the business to gain control. A startup also may merge with another company to combine operation efforts and resources.Both actions serve as a way to create shareholder value and expand a company's reach. While not all startups arrive at this stage, mergers and acquisitions can help companies that experience rapid or increased growth beyond their initial capabilities. You can work to ensure a successful merger or acquisition by developing a transition plan and seeking advice from financial or industry experts. Growing with the market Market growth is the rise in the demand for a product or a service in the market. Usually, market growth happens when a company is in its expansion phase. Companies try to increase the product’s value, promote features, and sometimes offer attractive pricing to increase sales. Market growth is the increase in size, value, or volume over time, reflecting how well an economy, industry, or business is progressing and growing. An expanding market is a positive sign for an economy as it suggests the economic landscape is improving. More money flows into businesses, leading to increased income and employment for those involved. Growing within the Industry A growth industry is characterized by huge profits, market demand surge, soaring sales figures, and inundation of investments. All companies that are part of the industry exhibit a  COURSE MATERIAL Program : BBA (I) Semester : IST SEMESTER Course : New Venture Management Course Code : B24MBS161 Unit. No. : IV Unit. Name. : STARTUP SURVIVAL AND GROWTH, PLANNING FOR HARVEST AND EXIT higher growth rate than their peers. They hold up against the competition and thrive in the future. Therefore, being part of such an industry or making any investment in it would most likely yield positive results. venture life patterns The four stages of the venture lifecycle in order are Establish Venture, Build Product, Market Launch and Customer Success. These represent the 4 major milestones in the life of a venture. 1. Establish Venture This first phase represents the stage where the venture may not even be formally conceived of or it may just be a concept. This stage takes the venture from concept to an actual reality of people working towards the goals and aspirations established for the venture. Ideation stage Validation Fundraising stage Establish Venture phase 2. Build Product This stage represents the “heavy lifting” portion of the venture’s lifecycle. It’s where the team takes the kernel of an idea and transforms it into something that customers can see, touch, feel and interact with. If this stage is executed successfully, it sets the venture up for success. Failure here could force the team to pivot or could spell failure for the venture. Specification stage Development of the product verification or validation of the product Delivery component 3. Market Launch  COURSE MATERIAL Program : BBA (I) Semester : IST SEMESTER Course : New Venture Management Course Code : B24MBS161 Unit. No. : IV Unit. Name. : STARTUP SURVIVAL AND GROWTH, PLANNING FOR HARVEST AND EXIT This is the stage that often gets the most attention and visibility – because this is the stage when the rest of the world typically gets to see and interact with your product. This is the stage where it is taken out and showcased to the world at large. dentify the target market Market the product Pursue launch phase 4. Customer Success This is the final phase in the venture lifecycle. It may seem odd that this is last because this is the entire reason that the venture was founded and created its products and decided to take them to market. Rest assured that this is the proper order and this critical step that has been considered since from Day 1 when we were establishing our venture, while we were building the product and during the marketing phase. When customers use your products and enjoy them or become more successful (save money, time or materials), they will recommend you and help you build your reputation in the marketplace. Deploy the product Support the customer Service Cross/Upselling Reasons for new venture failures 1. Not Investigating the Market So you've always wanted to open a real estate agency, and you finally have the means to do so, but your desire to open the agency blinds you to the fact that the economy is in a down housing market and the area where you want to work in is already saturated with agencies, making it very difficult to break in. This is a mistake that will result in failure from the start. You have to find an opening or unmet need within a market and then fill it rather than try  COURSE MATERIAL Program : BBA (I) Semester : IST SEMESTER Course : New Venture Management Course Code : B24MBS161 Unit. No. : IV Unit. Name. : STARTUP SURVIVAL AND GROWTH, PLANNING FOR HARVEST AND EXIT and push your product or service in. It's a lot easier to satisfy a need rather than create one and convince people that they should spend money on it. 2. Business Plan Problems A solid and realistic business plan is the basis of a successful business. In the plan, you will outline achievable goals for your business, how your business can meet those goals, and possible problems and solutions. The plan will figure out if there's a need for the business through research and surveys; it will figure out the costs and inputs needed for the business, and it will outline strategies and timelines that should be implemented and met. 3. Too Little Financing If you have started a company and things aren't working out, and you have little capital and a struggling business, you're not in a good position to ask for another loan. If you're realistic at the beginning, you can plan to start with enough money that will last you to the point where your business is up and running and cash is actually flowing in. 4. Bad Location, Internet Presence, and Marketing A bad location is self-explanatory if your business relies on location for foot traffic. Just as dangerous, however, is a poor Internet presence. These days, your location on the internet and your social media strength can be just as important as your company's physical location in a shopping district. An online presence will let people know that they can give you their business, so if the need is already there, the availability and visibility of your business is the next important step. 5. Remaining Rigid Once you've done the planning, established your business, and gained a customer base, don't become complacent. The need that you're fulfilling may not always be there. Monitor the market and know when you may need to alter your business plan. Being on top of key trends will allow you lots of time to adjust your strategy so that you can remain successful. One must only look at the music industry or Blockbuster video to know that successful industries can undergo huge changes. 6. Expanding Too Fast  COURSE MATERIAL Program : BBA (I) Semester : IST SEMESTER Course : New Venture Management Course Code : B24MBS161 Unit. No. : IV Unit. Name. : STARTUP SURVIVAL AND GROWTH, PLANNING FOR HARVEST AND EXIT Now that your business is established and successful, it's time to expand, but you must treat the expansion like you're starting all over again. If you're expanding the reach of your business, make sure that you understand the areas and markets into which you'll now be reaching. If you're expanding the scope and focus of your business, make sure you understand your new products, service and intended consumer as much as you do with your current successful business. Scaling Ventures Scaling refers to spreading excellence within a venture as it grows (organically or through acquisition) from a new (and often small) organization to an established, large organization. “accelerating growth with confidence,” meaning that the resources that you put in should yield great results that are predictable and measurable. scaling a venture can be challenging—it can be difficult to grow a business rapidly while maintaining its core values and culture. Preparing for change Businesses must constantly evolve and adapt to meet a variety of challenges—from changes in technology, to the rise of new competitors, to a shift in laws, regulations, or underlying economic trends. Failure to do so could lead to stagnation or, worse, failure. change can be either adaptive or transformational:  Adaptive changes are small, gradual, iterative changes that an organization undertakes to evolve its products, processes, workflows, and strategies over time. Hiring a new team member to address increased demand or implementing a new work-from-home policy to attract more qualified job applicants are both examples of adaptive changes.  Transformational changes are larger in scale and scope and often signify a dramatic and, occasionally sudden, departure from the status quo. Launching a new product or business division, or deciding to expand internationally, are examples of transformational change. Leadership succession  COURSE MATERIAL Program : BBA (I) Semester : IST SEMESTER Course : New Venture Management Course Code : B24MBS161 Unit. No. : IV Unit. Name. : STARTUP SURVIVAL AND GROWTH, PLANNING FOR HARVEST AND EXIT In the absence of effective leadership, organizations fall into disorder. But people — even those in top leadership roles — leave organizations all the time. You need a plan to transition one leader out and a new leader in without too much disruption to daily operations. Your leadership succession plan should identify key positions and the individuals who are best suited to fill them. It should outline clear steps for preparing those developing leaders to take on increased responsibilities. Succession planning is an important process for guaranteeing that your organization has a pipeline of emerging leaders who can step into management and executive roles. A leadership succession plan prepares the next generation by providing them with opportunities to shadow today’s leaders and learn from their experiences. Support for growth and sustainability of the venture Sustainable growth is a business growth strategy that takes into account the environmental, social, and economic impacts of the business. It aims to ensure that the business operates in a way that protects the environment and the people it serves, while also considering the availability of natural resources and potential for future growth. Calculate a Sustainable Growth Rate When it comes to achieving sustainable growth, one of the most important things to consider is the rate of growth. This is the rate at which a business needs to grow in order to remain viable. The rate of growth is determined by the amount of resources available and the demand for the products and services the business offers. In order to calculate the rate of sustainable growth, businesses need to consider the following factors:  The current market size: Understanding the current market size is essential for sustainable growth. It involves analyzing the total number of customers, competitors, and money spent in the market. By understanding your current market size, you can identify opportunities for growth and optimize your business operations to capture a larger share of the market.  COURSE MATERIAL Program : BBA (I) Semester : IST SEMESTER Course : New Venture Management Course Code : B24MBS161 Unit. No. : IV Unit. Name. : STARTUP SURVIVAL AND GROWTH, PLANNING FOR HARVEST AND EXIT  The potential market size: Assessing the potential market size is crucial for developing a sustainable growth strategy. It involves analyzing the total number of potential customers, potential competitors, and potential money that could be spent in the market. By understanding your potential market size, you can identify new markets to expand into and plan for future growth.  The resources available: The resources available to your business are a critical factor in achieving sustainable growth. This includes the amount of money, labor, materials, and other resources that you have at your disposal. By understanding your available resources, you can plan for growth that is sustainable and realistic, without overextending your business.  The demand for the business's products and services: The demand for your business's products and services is a crucial factor in achieving sustainable growth. It involves analyzing the number of customers, competitors, and money spent in the market. By understanding the demand for your products and services, you can optimize your business operations to meet customer needs and stay ahead of the competition. This can help you attract new customers, retain existing ones, and drive sustainable growth. Once these factors have been taken into account, businesses can calculate their rate of sustainable growth by dividing the potential market size by the resources available. This will give them an idea of how much growth they need to achieve in order to remain viable. Strategies for Achieving Sustainable Growth Once businesses have identified their rate of sustainable growth, they need to create strategies for achieving that growth. Here are some strategies businesses can use to achieve sustainable growth:  Focus on customer needs: One of the most effective ways to achieve sustainable growth is by understanding your customers' needs and creating products or services that meet those needs. By focusing on your customers, you can identify opportunities for growth and create products or services that are in demand. This can help you build customer loyalty and attract new customers to your business.  COURSE MATERIAL Program : BBA (I) Semester : IST SEMESTER Course : New Venture Management Course Code : B24MBS161 Unit. No. : IV Unit. Name. : STARTUP SURVIVAL AND GROWTH, PLANNING FOR HARVEST AND EXIT  Invest in research and development: Research and development (R&D) can help you create innovative products and services that are sustainable and efficient. By investing in R&D, you can stay ahead of the competition and create new revenue streams for your business. This can also help you reduce your environmental impact and improve your social responsibility.  Invest in technology: Technology can help you reduce your operating costs, improve your efficiency, and minimize your environmental impact. By investing in technology, you can automate processes, reduce waste, and optimize your supply chain. This can help you improve your bottom line while also promoting sustainability.  Invest in people: Your employees are a crucial part of your business's success. By investing in your employees, you can create a better work environment, attract and retain talent, and promote sustainability. This can involve offering training and development programs, creating a culture of sustainability, and recognizing and rewarding employee contributions to sustainability initiatives.  Embrace sustainability as part of your brand: When sustainability is a core value of your business, it can become a unique selling point that sets you apart from competitors. By marketing your business as environmentally conscious and socially responsible, you can attract customers who share your values and are willing to pay a premium for sustainable products and services.  Collaborate with suppliers and partners: Sustainable growth isn't just about what happens within your business - it's also about the impact of your supply chain and partnerships. Work with suppliers who share your sustainability goals and seek out partnerships that can help you reduce waste, improve efficiency, and promote sustainable practices throughout your industry.  Adopt a circular economy approach: Rather than relying on a linear "take-make- waste" model of production, consider adopting a circular economy approach that emphasizes reducing waste and maximizing the use of resources. This might involve designing products that can be easily disassembled and recycled, implementing closed-loop production processes, or finding ways to reuse or repurpose waste materials.  COURSE MATERIAL Program : BBA (I) Semester : IST SEMESTER Course : New Venture Management Course Code : B24MBS161 Unit. No. : IV Unit. Name. : STARTUP SURVIVAL AND GROWTH, PLANNING FOR HARVEST AND EXIT  Foster a culture of innovation: Encourage your employees to think creatively and come up with new ideas for sustainable products, services, and processes. Create opportunities for brainstorming and collaboration, and recognize and reward employees who come up with innovative solutions to sustainability challenges.  Engage with stakeholders: Sustainability is a complex issue that involves a range of stakeholders, including customers, employees, investors, and community members. Engage with these stakeholders to understand their perspectives on sustainability and to build support for your sustainability initiatives. By listening to feedback and incorporating stakeholder input into your sustainability strategy, you can create a more inclusive and effective approach to sustainable growth. Dealing with Failure: Bankruptcy Venture-backed startups famously aim for “exit.” On the path to building great companies, entrepreneurs raise rounds of venture financing and assemble a team to develop an innovative product or service that can grow fast.1 Success for startups is often framed as reaching a liquidity event, or exit, that provides financial returns and rewards to the investors, founders, and employees. There are two main ways to do this: go public or sell the company. Exit Strategies Business exit strategy The existing business must have a certain strategy, the same way a strategy is devised for formulating a business. Without such a strategy, the enterprise may suffer greater losses or incur more liabilities than required. A business exit strategy must be devised at the same time a plan is formulated for its formation. This might seem counterproductive but rather helps build the business in a certain direction. Venture Capitalists very often insist on an exit strategy to be included in a business plan before making any investment. Choosing an optimal business exit strategy may depend upon various factors such as;  The amount of control the owners want to retain in the business.  Whether the owners want the business to be run in the same or in a certain way.  If or not the owner wants to make sure the legacy of the business remains intact.  COURSE MATERIAL Program : BBA (I) Semester : IST SEMESTER Course : New Venture Management Course Code : B24MBS161 Unit. No. : IV Unit. Name. : STARTUP SURVIVAL AND GROWTH, PLANNING FOR HARVEST AND EXIT  Conditions in the market.  Nature of business.  The scale of operations.  The interest of shareholders, members, partners or founders of a business. Types of exit strategies Mergers Merging a business with another provides for various advantages because of economies of scale. It also increases the value of the business. This way the owner does not lose complete control over the business. If the owner wishes to sever ties with a business this may not be the best option. Acquisition In this scenario, a company is bought over by another. The advantage of this method is that the selling company gets to name its price and hence have better bargaining power. The more time the company has to bargain the more advantage it possesses and less time narrows its options. If a company’s objective from the very start is to get itself acquired, it shouldn’t deal with products so niche or specialised that getting acquired becomes a hurdle. This is not suitable when owners or members want to retain at least some degree of control. Selling the business – Selling to a friendly buyer may be more beneficial than selling to an unknown buyer. These friendly buyers include family, friends or colleagues. This way less due diligence is required on both sides and leads to less legal cost for everyone involved. Although, this may eventually lead to dysfunction and strained relationships between the owner and friendly buyers. Cashing out but staying in-being acquired- This is when the management of a company buys over an organisation or a particular department. This is suitable for a business owner of a private company who wants to retire. The management is well acquainted with the business, which leads to a smooth and trustworthy transfer of ownership. Public companies  COURSE MATERIAL Program : BBA (I) Semester : IST SEMESTER Course : New Venture Management Course Code : B24MBS161 Unit. No. : IV Unit. Name. : STARTUP SURVIVAL AND GROWTH, PLANNING FOR HARVEST AND EXIT may use this strategy to sell a non-core department to the management. There are certain drawbacks associated with this exit such as;  The management may not be ready or competent to take up responsibilities of the ownership.  The owner may have to sell at a lower price than an external party. The management may actively sabotage the value of a company Going Public (IPO) – An Initial public offering means a company is offering its shares for sale to the public. This is commonly referred to as ‘going public’. This way a company can raise a lot more capital and pay off its debts. This is ideal for venture capitalists as they sell their share in the company once it goes public. The owner can also exit the business or give up the majority of his control by selling all or most of the shares respectively. IPO’S don’t take place very often in comparison to the number of start-ups as there is a high cost associated with it. In India the process of issuing an IPO is as follows;  The hiring of an underwriter or investment bank.  Registration for IPO.  Verification by Securities and Exchange Board of India.  Making an application to the stock exchange.  Creating a buzz by Roadshows.  Pricing of IPO.  Allotment of shares. The abovementioned is a costly and time-consuming affair not available or feasible for small businesses. Although many companies have had great success utilising this method. Liquidation In this scenario, the business is shut down permanently. The assets of the company are sold and the proceeds from this is distributed to the creditors first and then to the investors. This can be said to be the easiest and fastest way to exit a market. Liquidation is the least rewarding way to exit as market value, business relationships, customers and all  COURSE MATERIAL Program : BBA (I) Semester : IST SEMESTER Course : New Venture Management Course Code : B24MBS161 Unit. No. : IV Unit. Name. : STARTUP SURVIVAL AND GROWTH, PLANNING FOR HARVEST AND EXIT other invaluable assets are lost forever. An entity may even file bankruptcy under the Insolvency and Bankruptcy Code, 2016. This is the last resort when there is no proper exit plan. Bankruptcy has a huge stigma attached to it. Exit plans must be properly planned with the help of professionals. This may add to cost but avoids future chaos and larger cost. By exiting intelligently one can maximise financial return for shareholders and investors. The business exit strategy should be treated as important as a plan for the formulation of the business.