Chapter 1: Introduction to

Entrepreneurship
GiftZip.com

• Provides a single place for people to search for a gift card.

• Categories based on occasions (wedding, family, sport).
• Offers a variety of options for gift card customers.

Three reasons for GiftZip's success:

1. Gift card market was increasing.

2. Customers were more comfortable buying online.
3. Launching an online business was affordable, backed by positive PR.

Introduction to Entrepreneurship

Entrepreneurship is gaining tremendous interest worldwide, including in the U.S.

Vision 2030: The Vision Themes

The groundbreaking agenda of Vision 2030 is built on three pillars:

1. A vibrant society.
2. A thriving economy.
3. An ambitious nation.

What is Entrepreneurship?

• Academic De nition (Stevenson & Jarillo): Entrepreneurship is the process by which

individuals pursue opportunities without regard to resources they currently control.
• Venture Capitalist De nition (Fred Wilson): Entrepreneurship is the art of turning an idea
into a business.

What Entrepreneurs Do:

• Assemble and integrate resources (money, people, business model, strategy) to transform an
invention into a viable business.
• Requires creativity, drive, and willingness to take risks.
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Corporate Entrepreneurship

• Entrepreneurship at the rm level.

• Firms exist along a continuum from highly conservative to highly entrepreneurial
(Entrepreneurial Intensity).

Why Become an Entrepreneur?

Three primary reasons people become entrepreneurs:

1. Desire to be their own boss.

2. Desire to pursue their own ideas.
3. Financial rewards.

Characteristics of Successful Entrepreneurs

Four Primary Characteristics:

1. Passion for the Business
- Most important characteristic.
- Belief that the business positively in uences people’s lives.
- Examples: PatientsLikeMe, Room to Read.
2. Product/Customer Focus
- Entrepreneurs focus on products and customers.
- Quote: “The computer is the most remarkable tool we’ve ever built... but the most
important thing is to get them in the hands of as many people as possible.” – Steve Jobs.

3. Tenacity Despite Failure

- High failure rate in entrepreneurship, but successful entrepreneurs persevere through
setbacks.
- Examples: Angry Birds (52nd attempt), Zeo.

4. Execution Intelligence
- Ability to transform a solid business idea into a viable business.
- Involves developing a business model, raising money, managing employees.
- Example: Starbucks.
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Common Myths About Entrepreneurs

1. Myth 1: Entrepreneurs Are Born, Not Made

- No one is "born" an entrepreneur; it's in uenced by environment and personal choices.
2. Myth 2: Entrepreneurs Are Gamblers
- Entrepreneurs are moderate risk-takers, but their jobs involve more uncertainty than
traditional roles.

3. Myth 3: Entrepreneurs Are Motivated Primarily by Money

- Money is rarely the primary motivation; pursuing nancial rewards can be distracting.
4. Myth 4: Entrepreneurs Should Be Young and Energetic
- Investors value experience and a track record of success, often favoring older
entrepreneurs.

Types of Start-Up Firms

1. Salary-Substitute Firms
- Provide income similar to conventional jobs (e.g., dry cleaners, retail stores).
2. Lifestyle Firms
- Allow owners to pursue a lifestyle while making a living (e.g., ski instructors, golf pros).
3. Entrepreneurial Firms
- Create new products/services and seize opportunities (e.g., Google, eBay).
Changing Demographics of Entrepreneurs

1. Women Entrepreneurs (USA & Saudi Arabia)

- 8.6 million women-owned businesses in the U.S. (2013).
- Women owned 4% of total registered businesses in Saudi Arabia (2007).
2. Minority Entrepreneurs
- African American, Asian American, and Hispanic-owned businesses grew rapidly
between 2002-2007.

3. Senior Entrepreneurs
- More than 5 million Americans age 55+ run their own businesses.
4. Young Entrepreneurs
- Growing interest in entrepreneurial careers among young people.
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 Impact of Entrepreneurial Firms on Economy and Society

Economic Impact:

• Innovation: Entrepreneurs create new technology and ways of doing business (e.g., iPod).
• Job Creation: Entrepreneurial rms help ght unemployment.

Societal Impact:

• Entrepreneurial rms create products/services that enhance daily life and productivity.
• Example: TOM’S Shoes.

The Entrepreneurial Process

Step 1: Deciding to Become an Entrepreneur

• Motivations: Often driven by a desire to be one’s own boss, pursue personal ideas, and achieve nancial rewards.
• Triggering Events: May include job loss, dissatisfaction with current employment, lifestyle changes, or a passion for a new idea.

Step 2: Developing Successful Business Ideas

• Opportunity Recognition: Identifying potential business opportunities by spotting market gaps or unmet needs.
• Feasibility Analysis: Evaluating the practicality of the idea through market research, competitive analysis, and assessing nancial
viability.
• Business Plan Creation: Crafting a comprehensive plan that outlines the business concept, target market, revenue model, and operational
plan.
• Business Model Design: Developing a model that details how the business will operate, generate revenue, and sustain itself.

Step 3: Moving from an Idea to an Entrepreneurial Firm

• Legal and Ethical Setup: Establishing the legal structure (e.g., sole proprietorship, partnership, LLC) and ensuring compliance with
regulations.
• Financial Preparation: Securing funding through sources such as personal savings, loans, or investors. Managing and budgeting nances
effectively.
• Team Building: Assembling a team with the skills and experience necessary to support the business’s operations and growth.
• Business Launch: Implementing the business plan, starting operations, and introducing the business to the market. This includes
marketing, acquiring initial customers, and re ning products or services based on feedback.

Step 4: Managing and Growing the Entrepreneurial Firm

• Growth Strategies: Exploring opportunities for market expansion, enhancing product/service offerings, and improving operational
ef ciency.
• Scaling Operations: Increasing production, expanding the team, and optimizing business processes to handle growth.
• Monitoring and Adapting: Continuously assessing business performance, adapting strategies as needed, and addressing challenges that
arise.
• Long-term Planning: Developing strategies for sustainable growth, including potential exit strategies or future expansion plans.
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Chapter 2: Recognizing
Opportunities and Generating
Ideas
Benchprep.com:

• Developed an iPhone application for studying.

• Maximize studying time.
• No heavy books.
• Gained 1000 customers in seven countries within two months with a one-time $10 fee.

Reasons for Success:

• Excellent timing (Apps became popular).

• Partnership with McGraw-Hill (valuable test resources).
• Benchprep won the New Venture Challenge.
• Now includes more exams (GMAT, SAT, LSAT, MCAT).
• Provides progress reports to students.
• Accessible from different platforms.

What is an Opportunity?
An opportunity is a favorable set of circumstances that creates a need for a new product, service, or
business.

• The key to opportunity recognition is to identify a product or service that people need and
are willing to buy, not just one that an entrepreneur wants to make and sell.
• An opportunity has four essential qualities:
1. Creates or attracts
2. Is timely
3. Adds value to the end consumer
4. Is durable

Difference between Opportunity and Idea:

• It’s important to understand the difference between an opportunity and an idea.

• Opportunity = Idea + Action
• An idea is a thought, impression, or notion, which may or may not meet the criteria of an
opportunity.
• Many businesses fail not because the entrepreneurs didn’t work hard but because there was
no real opportunity to begin with.
Three Approaches to Identify an Opportunity:

1. Solving a Problem
2. Observing Trends
3. Finding Gaps in the Market

Approach 1: Observing Trends

Trends create opportunities for entrepreneurs to pursue.

• The most important Trends are:

1. Economic forces
2. Social forces
3. Technological advances
4. Political action and regulatory change
• It’s crucial to be aware of changes in these areas as all trends are interconnected.

Trend 1: Economic Forces

• Economic trends help determine areas ripe for new startups and areas startups should
avoid.
• Economic forces affect consumers' disposable income levels.
• Strong economies favor startups offering discretionary/luxury products.
• Weak economies favor startups that help consumers save money (e.g., GasBuddy.com).

Trend 2: Social Forces

• Social trends alter how people and businesses behave, providing opportunities for new
businesses.
• Examples include the growing number of dual-income families, increased use of mobile
devices, and growing interest in health and tness (e.g., Fitbit, PatientsLikeMe).

Trend 3: Technological Advances

• Advances in technology frequently create business opportunities.

• The creation of Apple products, such as the iPod and iPhone, led to accessory industries
(e.g., H2OAudio's waterproof iPod cases).
• Emerging technologies like GPS enable services like Uber and Careem.

Trend 4: Political Action and Regulatory Changes

• Political and regulatory changes provide opportunities for entrepreneurs.

• Environmental laws create opportunities for rms that help companies comply with new
regulations (e.g., Box.net for offsite data storage).

Approach 2: Solving a Problem

• Sometimes identifying opportunities simply involves noticing a problem and nding a way
to solve it.
• These opportunities often come about through chance or intuition.
• Examples:
- Jay Sorensen, a 24-year-old MBA student, saw a problem with hot coffee spills and
invented the paper cup sleeve.
- Wind energy industry.
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Approach 3: Finding Gaps in the Marketplace

• Gaps in the marketplace exist when a product or service is needed by a speci c group but
doesn’t represent a large enough market for mainstream retailers.
• Identifying such gaps often provides opportunities for startups.
• Example:
- Tish Ciravolo saw a gap in the guitar market for female guitarists and founded Daisy
Rock Guitars.
- The gap in the marketplace – making guitars designed for women.
- Daisy Rock Guitars: Guitars for female players.

Characteristics of a Good Business Idea

• Market Gap: Identi ed market gap.

• Competition: Few existing competitors.
• Simplicity: Not easily copied.
• Market Growth: Growing market.
• Margins: High margins.
• Fixed Costs: Low xed costs.
• Funding: Low funding requirements.
• Scalability: Scalable.

Personal Characteristics of an Entrepreneur

1. Prior Experience:
- Having experience in an industry helps to recognize business opportunities and build
valuable contacts.
2. Cognitive Factors:
- Entrepreneurial alertness is the ability to notice things without deliberate searching.
3. Social Networks:
- Larger social networks expose individuals to more opportunities.
- Weak-tie relationships often lead to new business ideas more than strong-tie relationships.
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 Five Steps in the Creative Process

1. Preparation:
- De ne the problem or opportunity.
- Gather information related to the problem.
2. Incubation:
- Let the information and ideas mature subconsciously.
- Allow time for the mind to process the information.
3. Insight:
- Have a moment of clarity or realization.
- Recognize a potential solution or idea.
4. Evaluation:
- Critically assess the feasibility of the idea.
- Consider its potential impact and practicality.
5. Implementation:
- Develop and execute the plan.
- Bring the idea to fruition.

Brainstorming

• Purpose:

- Generate a large number of ideas quickly.

- Encourage creative thinking without immediate judgment.
• Techniques:

- Freewriting: Write continuously without concern for spelling or grammar.

- Mind Mapping: Visualize connections between different ideas.
- Role Storming: Imagine how different people might approach the problem.
- Reverse Brainstorming: Identify ways to cause the problem and then think of solutions.
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