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Startup roadmap

Why? How? What?

Prof. János Vecsenyi


Janos.vecsenyi@uni-corvinus.hu
Contents

1. Why do you want to start a business?


2. Idea generation
3. The buinsess concept
4. The viability test
5. Risk management
6. Building your entrepereneurial team
7. Product development
8. Financing and Pitching
9. Business Plan
10. Foundation
11. Lean startup: Accelerating market entry
12. Market launch
13. Closing remarks
14. References

Startup Roadmap © J. Vecsenyi, 2014. 2


Even though you may be a born
entrepreneur, you can still learn about
entrepreneurship.

Even though you may not be a born


entrepreneur, you can still learn to become
one…. If you want.

Even if you don’t want to become an


entrepreneur now, you can still be a good
person.
Startup Roadmap © J. Vecsenyi, 2014. 3
If you want to cook, all you have to do is read
cookbooks and practice cooking.
The same can be said for starting a new
venture.
Having instincts is simply a plus.
INGREDIENTS

Startup Roadmap © J. Vecsenyi, 2014. 4


The driving forces of a new business
Competency, Opportunity
technology driven
driven

Entrepreneurial Market
team opportunity

External / Internal
resources

Source: Timmons (1990) New


venture creation (3rd edition)

Startup Roadmap © J. Vecsenyi, 2014. 5


A startup roadmap

Idea Business Product


Entrepreneurial Company Market
generation concept development & Financing
team formation foundation entry
definition design

Lean
startup

Startup Roadmap © J. Vecsenyi, 2014. 6


Why?
WHY DO YOU WANT TO START A
BUSINESS?
Startup Roadmap © J. Vecsenyi, 2014. 7
Why does anyone want to start a business?

Opportunity Independence Unemployement Fame


It is better to be a job creator than a job seeker

Generation change To become rich To make a living


Startup Roadmap © J. Vecsenyi, 2014. 8
What kind of business would I like to have?
Scalable &
Provides a sellable Temporary
Living Project
A business built on
A business that satisfies innovation based A temporary business to
local needs with typically products for global utilize a relatively short
traditional products and markets with scalablility window of opportunity
provides a moderate and high financing needs. with traditional or
living for its founder and Once turned into a innovative products to
its employees. It has structured company, it gain short term profit as
moderate growth can function without its soon as possible.
potential and cannot founder and can be sold E.g,. selling an invention
operate without its off, like most Innovation or a seasonal service
founder in the long run, Driven Entreprises
like most SMEs. (IDEs). Source: Timmons (2003)
E.g., Pop&Mom’s E.g., Prezi, Solvo, Ustream
Kitchen, T.J. The Indextools
plumber Startup Roadmap © J. Vecsenyi, 2014.
9
What kind of business do we want to create?
SME Entrepreneurship IDE Entrepreneurship
• Initial focus on addressing local markets • Focus on global/regional markets.
only. • The company is based on some sort of
• Innovation is not necessary to SME innovation (tech, business process,
establishment and growth, nor is model) where they can go global or across
competitive advantage . regions.
• “Non-tradable jobs”—jobs that must be • “Tradable jobs”—jobs that do not have to
performed locally (e.g. restaurants, dry be performed locally.
cleaners, and service industry). • More diverse ownership base as the focus
• Most often family businesses or of founders is on high growth and creating
businesses with very little external company market value.
capital. • The company starts by losing money, but if
• People who start them seek to maintain successful will have exponential growth.
control, not to create high growth. The Requires investment.
company typically grows at a linear rate. • When you put money into the company,
• When you put money into the company, the revenue/cash flow/jobs numbers do
the system (revenue, cash flow, jobs, not respond quickly.
etc.) will respond quickly in a positive
Source: Aulet (2013)
manner.

Startup Roadmap © J. Vecsenyi, 2014. 10


Where do your venture want to fit?
High

Gazelles Tigers
entrepreneurship and change
Ability and attitude to

Fast growing. high Dynamic, large,


potential new ventures expanding ventures

Ants Dinosaurs

Traditional Traditional, large,


small ventures bureaucratic ventures

Low Business and operational experience High

Source: Vecsenyi (1995)


Startup Roadmap © J. Vecsenyi, 2014. 11
A startup is a human institution designed
to deliver a new product or service under
conditions of extreme uncertainty.
(Ries, 2010)

A startup enterprise is a baby gazelle


venture with scalable market potential
combined with growth ambition and
global vision of the entrepreneur(s).
(Vecsenyi, 2013)

Startup Roadmap © J. Vecsenyi, 2014. 12


Do I want to be an entrepreneur?
Aspirations, motivations
Why do I want to become
an entrepreneur?

Commitment Lifestyle/ attitude


How much I want, How would
dare? ? I like to live?

Connections Abilities
Whom do I know, Who am I?
who knows Competenecies
me? What do I know?
Startup Roadmap © J. Vecsenyi, 2014. 13
Before you start your business, make your list….

What can I gain if I What would I regret


start... if I don’t start …
What would I lose,
Which is stronger? if I start…

Pros Cons

Startup Roadmap © J. Vecsenyi, 2014. 14


What did I find?
THE IDEA GENERATION

Startup Roadmap © J. Vecsenyi, 2014. 15


The business idea

The great match


Market fit
Product fit
Startup Roadmap © J. Vecsenyi, 2014. 16
From an idea to a business opportunity

(unique, new) product/service for a


The idea certain or potential need, if

+
Market + there is repeatable, growing buying
opportunity potential and

+
+ capable to create profit
Business
+ socially acceptable
opportunity
+ worth to start a new venture on it

Startup Roadmap © J. Vecsenyi, 2014. 17


Is your VP fit and sexy?

VALUE
PROPOSITION

NEED

Is your offer relevant, unique, credible?


Startup Roadmap © J. Vecsenyi, 2014. 18
Value proposition: what do I want to offer?

Product Service Agency

Startup Roadmap © J. Vecsenyi, 2014. 19


Resource driven entrepreneurship
Invention/ competence look for market opportunity
Inventing heath Covering
protection household
material appliances
WHERE
can it be used?
Invention
Idea
WHO
could use it?

Competence

WHY
Would anyone
Accountancy use it? Accounting
competence services
Startup Roadmap © J. Vecsenyi, 2014. 20
Opportunity driven entrepreneurship
Recognized need looks for solution

Unsatisfaction
Frames for the paintings

Shortage, Invention
idea
problem

New need
Competence

Hidden need
Cordon for the qeue
Startup Roadmap © J. Vecsenyi, 2014. 21
The innovative idea
• New combination (different, better, different way on
the target market)
• Innovation= invention * commercialization
5 + 1 forms of innovation of
1. new goods
2. new methods of production
3. the opening of new markets
4. the conquest of new sources of
supply
5. the carrying out of a new
organization of any industry
( Joseph Schumpeter)

6. New business model (making


money in a different way)

Startup Roadmap © J. Vecsenyi, 2014. 22


What kind of idea?

Startup Roadmap © J. Vecsenyi, 2014. 23


In which industry is it worth starting your startup?
Traditional industries Creative industries
• Established ground rules • No ground rules
• Well known products, • New, mostly knowledge
services based creative products
• Existing business model • Mostly new business model
• Low groth potential • High growth potential
• Forseeable market • Very uncertain market
• Market niche for new • The industry niche
innovations

Startups can be
launched in all
industries
Startup Roadmap © J. Vecsenyi, 2014. 24
Sources of ideas for new ventures:

• Determine customer wants/needs


• Follow previous job(s) experience
• Improve products and services already on
the market
• Be open on foreign trips
• Elicit suggestions from channel members
• Check the Patent Office files
• Conduct your own research & development
• Surf on internet

Startup Roadmap © J. Vecsenyi, 2014. 25


Idea-generation tools
1. Searching for shortage, dissatisfaction
 Observing domestic and foreign markets (open eyes)
 Idea notebook
 Brain storming
 Read newspapers, leaflets, brochures
 Internet surfing
2. Recognizing mistakes, failures
 From failure to the solution
 Penicillin, Teflon, Viagra
3. Finding market niche, blue ocean
 Where is a need for new invention with low
competition
 iPod, iPhone, Body Shop
4. Studying trends
 Political, economic, social, ecological, legal trends
 Industry reports, trends

Startup Roadmap © J. Vecsenyi, 2014. 26


Can we make business out of it?
THE BUSINESS CONCEPT

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Conscious preparation for starting a new venture
www.startmybusiness123.com

Value
Market need
proposition

Risk and Decision on


Entrepreneurial Strategy and
Operation strength the start
team action plan
management

Business model Financial model

Defining Testing Deciding


the business the viability of on starting the
concept the business new venture
concept

Startup Roadmap © J. Vecsenyi, 2014. 28


Startup Business Concept Map
FOR WHOM?
Market need

Solution, offer
WHY?

WHAT?
Market Value
needs proposition

Entrepreneurial
WITH WHOM?
Opereations

Entrepreneurial
HOW?

team
Operations
team
Business model
FROM WHAT?
HOW MUCH?

Financial model
HOW MUCH?
FOR WHAT?
Business model Financial model

Startup Roadmap © J. Vecsenyi, 2014. 29


Startup Business Concept Map
Customer Market size and Competitive Positioning,
FOR WHOM?
Market need

segments scalability advantage, pricing

Solution,
WHY?

WHAT?
offer
Uniquness

THE NEED, PROBLEM VALUE PROPOSITION


OF THE CUSTOMERS (PRODUCT/SERVICE )

Distinctive Basic Key internal External

Entrepreneurial
WITH WHOM?
competencies conditions people partners,
Operations
HOW?

CSFs suppliers

team
CORE FUNCTIONS, FOUNDERS/OWNERS/
COMPETENCIES OWNER MANAGERS
Business model

Mission, Sales strategy Financing


FROM WHAT?

Financing
HOW MUCH?

Financial model
HOW MUCH?
vision and channels needs sources and

FOR WHAT?
values methods

REVENUE STREAMS COST STRUCTURE

Startup Roadmap © J. Vecsenyi, 2014. 30


Road on the Startup Business Concept Map
Recognized Recognized
need Will we have solution
market?

Will we have
product?
Will we have revenue?

3. OPERATION 4.TEAM

Will we have
the right
people?
How much will it
cost?

You may want to repeat


Will the revenue be the circle whenever you
enough? have new data
Startup Roadmap © J. Vecsenyi, 2014. 31
Startup Roadmap © J. Vecsenyi, 2014. 32
On-line support software

Startup Roadmap © J. Vecsenyi, 2014. 33


1. Why is there a need and by whom?
Market need
WHY?
FOR WHOM?
Customer Market size and
segments scalability

THE NEED, PROBLEM


OF THE CUSTOMERS

a) What is the need, the problem and


why does this need exist?
b) Who are our customers and what are
their specific needs?
c) What is the size of the market and its
growth potential?
Startup Roadmap © J. Vecsenyi, 2014. 34
The need, the problem
Dissatisfaction with current Traditional bakery, fast
Dissatisfaction offers regarding quality, style, food, mobile application
price, availability, assortment

Locally not available or Drinking water, tapwater,


Shortage, achievable offer, solution alternative energy
problem

Unmet need Mobile phone, alternative


New need energy

These are issues and problems Smart phone, Rubik’s cube


Hidden need that customers face but have
not yet realised

Startup Roadmap © J. Vecsenyi, 2014. 35


Hierarchy of Your Customers’Needs

Psycho-social benefits
Customers’ sought from any
Emotional
Values benefits company
Functional benefits
Functional benefits sought from any
company

Product attributes What we build


into the offer

To look for functional and emotional benefits vs. just product


attributes or features
Copyright © 2007 Impact Planning Group LLC.
What do your customers need?
Granma’s telephone example
Why is it important? Granma’s
Family ties telephone?

Why whould she like it?


Customers’ Easy to use and pleasant
Values Emotional experience
benefits
How can we make it
for her?
• Big, sharp screen How?
Functional benefits
• Big keyboard
• Fast dialing
• Big icons
Product attributes • Few functions
• High voice
Copyright © 2007 Impact Planning Group LLC.
• Wireless
Who would be our customers?

According to B2C
decison making
B2B

B2A

According to Segments:
Groups with
behavior Which is the
similar behavior ideal spaghetti
sauce?
pattern
According to Target group:
desirability the desirable and
reachable segments
Startup Roadmap © J. Vecsenyi, 2014. 38
Who would be our customers?
Buyer (Distributor) Customer Consumer / end user
who purchases it who buys it who eats it

Seller (Factory) who


manufactures the chocolate

Paying customer
Free user

Primary income sources Secondary income sources

Seller
Startup Roadmap © J. Vecsenyi, 2014. 39
Getting to know your customer
Who would make purchase decision? Focus on target market,
Who: segments: the industry, location, buying behavior, direct and
indirect competitors, customer profile

From the customer’s perspective, the specific reasons the customer


Why: purchases your product. Understand primary reason or create a
reason

Exactly what are you selling from your perspective? Factors that
What:
you try to sell and you should emphasize

Time of the day, seasonality, frequency. Adjust to existing habits


When:

Location, location, location. Focus on habits of your customer, offer


Where:
your product that is convenient to the customer

Purchasing for cash, credit, barter? Customer’s preferred


How:
purchasing method, technology.
Source: E. Solymossy, 2007 Startup Roadmap © J. Vecsenyi, 2014. 40
Market size
Total
Available TAM: population of 30-
Market 50 age group

Served SAM: Population of 30-50


Available age group with diabetes 2
Market
IAM: Population of 30-50 age
Ideal group with diabetes 2 and
smart phone
Available
Market SOM: Population of 30-50 age
group with diabetes 2 and
smart phone,
ready to change lifestyle
Serviceable
Obtainable
Market

Startup Roadmap © J. Vecsenyi, 2014. 41


Scalability potential

Window of opportunity Window of expansion


• Growing market need • Expanding market reach

Startup Roadmap © J. Vecsenyi, 2014. 42


2. What do you want to sell, what is unique in it?
“People don’t buy what you do; people buy why you do it.” Simon Sinek

a) What is your value proposition product/


service you offer?
b) What is unique about your product, the
competitive advantage your customers
would buy?
c) Where will you position your offer on
the value-price range?
Startup Roadmap © J. Vecsenyi, 2014. 43
What do you want to offer?

Same

WHAT?

New Special

UNIQUENESS & COMPETIVE ADVANTAGES


perceived by customers

Startup Roadmap © J. Vecsenyi, 2014. 44


Who would be your competitors and how can you have
competitive advantage?

Direct Indirect Substitute


ACTUAL
POTENTIAL

What and how do they offer?


Where do we want to be better, different?

© 2007 Impact Planning Group LLC.


Startup Roadmap © J. Vecsenyi, 2014. 45
Positioning

Price/
Price value

High
end

Low
end Mass Medium Premium

Quality/
Value
Startup Roadmap © J. Vecsenyi, 2014. 46
3. What are the preconditions and what would be your core and
distinctive competencies to start and operate?

a) What core competencies do you have to have to provide your


Value Proposition?What do you want to do on your own and
what will be outsourced?
b) What are your distinctive competencies and Critical Success
Factors (CSFs) which enable you to provide competitive
advantages?
c) What are the basic legal, official, physical, human conditions to
start your operation?
Startup Roadmap © J. Vecsenyi, 2014. 47
How do you want to create value?

SAME
AS OTHERS

COMPETETIVE COMPETENCIES to
provide competetive advantages
HOW? BETTER,
THAN OTHERS

DIFFERENT
THAN OTHERS

Startup Roadmap © J. Vecsenyi, 2014. 48


Operational competencies

Creating Value Conditions to start Creating competitive


proposition and operate advantage

Core Basic Distinctive


competencies conditions competencies
• Development • Legal condition • Human
• „Core activity” • Official licences • Phisical
• Marketing and sales • Phisical and • Economic
• Finance equipment • Technological
• Leadership and conditions • Marketing
management • Legal

Startup Roadmap © J. Vecsenyi, 2014. 49


Core functions, core competencies

Core functions and competencies to create and capture


value

 Development
 Production / operations
 Marketing and sales
 Financial management
 Leadership and business administration
 Info-communication management

Startup Roadmap © J. Vecsenyi, 2014. 50


Critical Success Factors(CSFs)
CSFs are those factors which enables a business to be successful in a
particular industry and make the business capable to win the
competition. These are:
• Human CSFs: special knowledge or skills (e.g., an outstanding chef, PhD,
world class designer, a great team)
• Phisical CSFs: manufacturing, logistical capacity, machines, equipments,
location, sourcing reach, distribution channel (e.g., special, unique machine,
equipment, facility, App store, iTunes)
• Business CSFs: access to resources, economy of sale, economy of
distribution
• Technological CSFs: unique or proprietary technology, special method,
process, IT system
• Marketing CSFs: Innovation, customer intimacy, operational excellence
• Legal CSFs: patents, copyrights, franchises

Startup Roadmap © J. Vecsenyi, 2014. 51


Essential conditions

Essential conditions are those conditions which


are required by law or basics for operations
 Legal condition: Corporation, operational
licenses, opening a bank account

 Official authorization: marketing authorization,


operating permit, education, degree

 Technical, personal, physical, conditions:


facilities, tools and equipment (owned, rent)

Startup Roadmap © J. Vecsenyi, 2014. 52


4. Who would make it happen?
Key internal External partners,
people suppliers

FOUNDERS/OWNERS/
OWNER MANAGERS

a) Who are and will be the owners?


b) Who would we work with in the business,
who would be the key managers and
associates?
c) Who will be the external partners and
suppliers?
Startup Roadmap © J. Vecsenyi, 2014.
53
Creating an entrepreneurial team

Self anaysis Corporations Team


• Purposes • Owner, co- building
• Abilities owners • Goals
• Competencies • Key associates • Roles
• Connections • External • Processes
• Experiences partners, • Interpersonal
suppliers relationship

Startup Roadmap © J. Vecsenyi, 2014. 54


Roles and responsibilities in the new venture
Required, but
outsourceable
Suppliers competencies e.g.,
accountant, lawyer,
External patent agent, designer,
programmer
contributors
Subcontractors Advisory board
Employees
Key managers Key personnel

Owners Providing core


competencies
Board of
directors
Complementary
competencies,
Founder resources
personalities

Startup Roadmap © J. Vecsenyi, 2014. 55


5. What would be the sources of revenue and
how would we get it?

a) What will be the sources of revenue,


what is the way of creating and
capturing value (the business model)?
b) Why do we want run the business?
c) How would we want to acquire revenue
by marketing and sales?

Startup Roadmap © J. Vecsenyi, 2014. 56


Sources of revenue

Asset sale Usage fee Renting fee

Leasing fee License fee Lending fee

Advertising Subscription Brokerage

Startup Roadmap © J. Vecsenyi, 2014. 57


The business model
Creating and capturing value
1. The story: For whom,
why, how do you create
value with what?
2. The value chain: How do
you create, capture
value?
3. The money making: The
revenue stream, the cost
structure, the profit, the
financing need, return?

Startup Roadmap © J. Vecsenyi, 2014. 58


The business model

The story

What are we doing for whom and why would anyone pay?

Printing and Collection and User-friendly,


copying distribution of personalized,
services for job offers via beautiful
customers and the Internet everyday IC
businesses objects

Copy General Profession.hu Apple

Startup Roadmap © J. Vecsenyi, 2014. 59


Sample revenue generation/business models
• Asset sale • Online auction business model
• Auction business model • Online content
• All-in-one business model • Premium business model
• Brick & click
• Professional open-source
• Collective business model
• Cutting out middleman • Retailer
• Direct sale • Pyramid scheme business
• Distribution model
• Franchise • Razor & blades
• Freemium • Servitization of products
• Low-cost carrier business model business model
• Loyalty business models
• Subscription business model
• Monopolistic business model
• Multi-level marketing • Premium
• Network effects business model • Wholesale

Startup Roadmap © J. Vecsenyi, 2014. 60


Mission, vison, values: your story.
Mission, reason for VISION, the state your
your busines exists business wants to reach

VALUES which govern your VALUE PROP, the product


business life you provide
Startup Roadmap © J. Vecsenyi, 2014. 61
STP marketing strategy

Evaluate
S Define market Create market
segments on set
Segmenting for the business segments
criteria

Evaluate the
T Selecting target
attractiveness of
Construct
market segment profile
Targeting the segments

P Develop
positioning
Develop and
implement
Review
Positioning performance
strategy marketing mix

Startup Roadmap © J. Vecsenyi, 2014. 62


6. How will the venture be profitable and how much money
do you need for start and where do you want to get it from?

Financing Financing
needs sources and
methods

COST STRUCTURE

a) What will be your costs and how much


profit you can make?
b) How much money do you need and for
what to start your business?
c) Where do you get financing for starting
your business?
Startup Roadmap © J. Vecsenyi, 2014. 63
How will you make money?
1. Who would pay, why, when and how
much? What would be the primary,
Revenues secondary sources of your income? How
much revenue will you calculate?

– Costs 2. For what, how much, when do you


need to spend?

3. How much profit can you make? When will


= Profit you break even?

Equity 4. How much capital do you need?

Return 5. When will your investment come back?

Startup Roadmap © J. Vecsenyi, 2014. 64


What dou you need money for?

• Seed money

• Operational expenses

• Personal expenses

• Safety reserve

Startup Roadmap © J. Vecsenyi, 2014. 65


Sources of entrepreneurial financing

Founder 3Fs
(Family, Fiends,
Bootstrapping Fools)

Private Business
investors Angels

Venture
Crowdfunding
Capital

Governamental
Bank loan
support

Startup Roadmap © J. Vecsenyi, 2014. 66


Are you sure it’s a good idea?
VIABILITY TEST

Startup Roadmap © J. Vecsenyi, 2014. 67


5+2 initial questions before starting a new
venture
1. Is there a real need/demand?
– Finding, creating, fulfilling market niche with the right product/service
(Marketable)
2. Can we win it with a competitive value proposition?
– Utilizing distinct competencies (better, special, different) (Competitive)
3. Can we do it?
– Launching, managing the new venture with the right people, technology
(method) and organization (Operational)
4. Is it worth doing?
– Making it profitable (Profitable)
5. Do I (we) really want it?
– Mobilizing competence and commitment of a socially responsible
private individual (Commitment and competence)
6. How much money do we need to start?
– Funds required to start the venture (Seed capital)
7. Do we have money for it?
– Getting the seed capital for launching and starting (Capitalization)
Startup Roadmap © J. Vecsenyi, 2014. 68
Is your business idea viable?

1. Would it be marketable?
2. Would it be competitive?
3. Would it be feasible?
4. Would it be profitable?
5. Would you and your team be
competent and committed?

Startup Roadmap © J. Vecsenyi, 2014. 69


A viable business concept

Marketable Comptetitive

with a competent and


committed team

Technically feasible Profitable


Startup Roadmap © J. Vecsenyi, 2014. 70
How can you improve your chances?

RISK MANAGEMENT
Startup Roadmap © J. Vecsenyi, 2014. 71
Startup decision analysis

Risk and Decision on


Strategy and
strength the start
action plan
management

Startup Roadmap © J. Vecsenyi, 2014. 72


Startup decision

Why will it be fine to start?

Later Why do we wait to start?

Why do we not start?

Startup Roadmap © J. Vecsenyi, 2014. 73


With whom do we want to make it?
ENTREPRENURIAL TEAM FORMATION

Startup Roadmap © J. Vecsenyi, 2014. 74


Creating the entrepreneurial team

Self Partners Team


assessment • Owner(s) • Goals
• Attitudes • Employees • Roles
• Abilities • Partners • Processes
• Competencies • Supplyers • Interpersonal
• Network relationship
• Experience

Startup Roadmap © J. Vecsenyi, 2014. 75


‘Must haves’ to become an entrepreneur?

Personality Competencies Network Experience


sense … knowledge
Whom we know
abilities skills Who knows me
motivations attitude

What I was What I learned, Those who What I


born with am able and can add consciously
want to apply value utilize

1. 2. 3. 4.
Know yourself and Strengthen your Cooperate with Learn from your
build on that strengths others! past!

Startup Roadmap © J. Vecsenyi, 2014. 76


Where is your strength?

Entrepreneur-entrepreneur Entrepreneur-manager
– Working on her/his business – Working in her/his business
– Oversees chaos – Makes order in chaos
– Likes to create business – Likes to operate business

Entrepreneur- expert
– Working in her/his business
– Executes things
Source: M. E. Gerber:
– Likes to deliver product The E Myth Revisited.
Startup Roadmap © J. Vecsenyi, 2014.
1995 78
Whom do you need for your technology start-up?

Hackers
(experts in
technology)

Business is not a one man show!

Hustlers Hipsters
(great in sales and (good in business
marketing) and management)

Startup Roadmap © J. Vecsenyi, 2014. 79


Early stage personal decisions

Startup is teamwork!

• Alone or with others?


Founder • With family, friends, associates?
• Investors?

• Employee, subcontractor, or owner?


Associates • Quality or availability and compensation?
• Individual contributor or manager?

• Whom I know, who knows me?


Partners • Who would be the right external partners?
• Who would be the right supplyers, subcontractors?

Startup Roadmap © J. Vecsenyi, 2014. 80


Key roles at the beginning
- Staffing, motivating,
accessing people - Product and technology
- Managing Finances development
- Executing business - Building knowledge
strategy management system
- Networking, PR CEO

COO CTO

CMO - Marketing
- Organization design
management
- IT systems
- Design
- Sourcing
- Sales management
- Logistics
Startup Roadmap © J. Vecsenyi, 2014. 81
The role of the board of directors

• Involvement of external people


• Mentoring
• Review operating and capital
budgets
• Develop longer-term strategic
plans for growth
• Support day-to-day activities
• Resolve conflicts
• Ensure proper use of assets
• Networking

Startup Roadmap © J. Vecsenyi, 2014. 82


What do you need to clarify with co-owners and
employees?

What are the key results, short, medium,


long term goals and the reasons for
Goals existance?
Conflict resolution
Planning

Roles & Who does what?


responsibilities
What are the core processes,
systems, action plans with
Processes deadlines?

What are the core values


Interpersonal relationship and grand rules?

Source: Beckhard, 1975

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What the product will be like?
PRODUCT DEVELOPMENT & DESIGN

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How to create product from the idea?

Source: http://www.innecs.com/html/Product%20development.html
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How can we create value faster and better?
LEAN STARTUP
ACCELERATING MARKET PENETRATION
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The lean startup methodology for product
development
• Learn from users • Coding
• Find conclusions • Designing
• Generate new Ideas • Prototype /
ideas Product building

Learn Build

Data Product

Measure • Check Quality


• Test with users
Source: www.kickstarter.com • Collect evaluations
• Raise statistics
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Minimal viable product (MVP)
1. Helps entrepreneurs start the process of learning as quickly
as possible

2. The goal is to test fundamental business hypotheses

3. Only one hypothesis at a time

4. One total circle of Define, Measure, Learn at a time

5. Do not push perfection just show the prototype,


or the concept to the customer

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Source: http://huitale.blogspot.hu/2010/12/

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More startup failed because of
lack of customers than failures
of product development
Steve Blank

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For what, how much, from where?
FINANCING

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• Entrepreneurship:
Pursuing an opportunity beyond the
resources currently controlled / Howard
Stevenson

• Financing
Obtaining the missing resources

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Why
For what
From where
How
When
you need
How much
money
at the early phase of your new business?

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Financing categories
Equity financing Debt financing
Investing Crediting
• Creates ownership  No ownership but collateral
and/or tangible asset (property)
• Provides control and insight is required
• Equity increase expectations  Pre-defined time frame
• Occasionally dividend/ROI  Interest bearing
expectations  Payback obligation, requires
profit from operation (positive
• Net loss in case of insolvency EBITDA)
• Obtained from capital markets  Usually provided by banks, but
• Investor sometimes provides due to high associated risks is not
a preferred financing tool by
expertise too in startup phase commercial banks in startup
phase

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What financing do you need for?

Growth capital
for expansion
Startup capital
for quick start
Seed capital
for development

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What does the venture need the money for?

1. How much money do you have and how


much will you need for personal use?

2. How much money will you need to start your


business (start-up cost) ?

3. How much money will you need to stay in


business (operational expenses) ?

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What does the venture need the money for?
Development, startup costs Operational expenses
Research and development cost, Licenses, Employee wages, Your living expenses,
permits, Fixtures, equipment, Installing Rent, Supplies, Utilities, Advertising,
insurance, Taxes, Maintenance,Delivery
fixtures, equipment, Beginning inventory / Transportation, Accounting fee,
costs, Rent deposit, Insurance fee, Membership fee,
Advertising for opening, Legal, professional Miscellaneous
fees, Unanticipated expenses

Living costs Reserve needs


Food, clothing, utilities, insurance, rent, Be more realistic with the projections
entertaintment, transportation, health Minimum of 3-6 months operative
care, etc. expenses or 10-30%

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The Business model: Making money

Revenue 1. Who will pay for what, how


much, when?

– Cost 2. Spending on what, how much,


when?

3. How much, when will break-


Profit even be reached, positive cash
flow?

4. How much investment is


Investment needed?
Return
5. When will the investment return?

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Break-even analysis

Money Realistic?
Enough? Profit

Minimum Price
Variable
cost

Fix cost

Fix
cost

Break- even point Volume/Time


Minimum volume

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Sources of entrepreneurial financing

Founder(s) 3F
(Family,
Bootstrapping Fiends, Fools)

Private Business
investors Angels

Venture
Crowdfunding
Capital

Governmental
Bank loan
support

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How can we get out from the Valley of Death?

Valley of Source:
Death
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Return

1. When will the operation become profitable?


– Operating break-even
2. When will the return on investment reach its
break-even point?
– Duration of the Return on investment
3. What is the rate of investment compared to
other investments?
– ROI

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Two pitches for two kinds of audience

• Investment pitch wants to


convince investors to give
money to your business

• Sales pitch wants to convince


customers to buy your
product/service

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Elevator pitch for investors
5. What we offer to,
what we request
• 2-5 minutes pitch from the investor?
• Raises investor’s attention to
the new venture 4. Who are the
members of the
winning team?

3. What is the value


1. No nonsense for the market and
for the investor?
2. Easy to understand
3. Greed inducing 2. What is the
4. Irresistable solution/value
proposition?

1. What is the
problem/ need?
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Preparation for the elevator pitch

1. Define your business concept


2. Define why do you want to pitch, what do you want to
accomplish
3. Formulate what do you want to tell and how
4. PRACTICE, PRACTICE, PRACTICE
5. Ask for feedback
6. Tell your pitch to the investors
10
7. Listen to the questions
8. Give brief answers to the questions. Be prepared for
expected questions
9. Be calm in taking the results
10. Assess your performance and be prepared for the next
pitch

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How can you convince the investors?
CREATING YOUR BUSINESS PLAN

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Why do you need a business plan?

WHY? FOR WHOM? HOW? WHAT?

Convincing For the Systematic Viable


profound founders, for thinking using STARTUP BUSINESS
arguments 3F investors Self confident
CONCEPT
and business www.startmybusines Profound
s123.com
angels Concious
Execution

Idea
Self confident
Planned
Concious
Convincing, For the founders, Execution
Detailed
Detailed
credible investors planning with
document Business plan BUSINESS PLAN
toolkit

109
Startup Roadmap © J. Vecsenyi, 2014.
A business plan for a new venture is
… a convincing and credible document for starting and financing
a new venture to prove that in the next 2-3 years the new venture
 with its products and services
 on the target market
 with the entrepreneurial team
 can make profit
 and manage risk
…prepared
 for and by the founders to make a conscious decision on
starting a new venture
 for the investor to convince financing institutions or
private investors

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A business plan is…

Convincing Credible
when it proves when the founder
 to the founder that to  Analyzed the market and
start the business is industry
rewarding and possible  Planned actions to market
entry
 to the investor that  Defined and designed products
financing the new and services
business is rewarding  Designed operational
and safe conditions of the business
 Identified the necessary staff
 Calculated the profit making
potential
 Calculated risks and risk
management tools
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Content of a business plan

1. Cover sheet
2. Executive summary
3. Introducing the business
4. Industry, market, competitor analysis
5. Product /service
6. Marketing plan
7. Operational plan
8. People and organization
9. Financial and financing plan
10. Risks and risk management
11. Attachments

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Analyzing business environment
Industry Competitors
Industry trends Competitive value
Growth potential props
Market segments and Industry value chain
groups

Industry success Labor market


factors Networks
Official regulations Legal system
Technology trends

Preferred purchasing Investors’ ecosystem


and payment methods Accounting Act
Purchasing power Tax Act
Payment moral

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How much money will your startup make?
Financial statements for entrepreneurial answers
Would it be Would it be Would it be
profitable? liquid? thriving?
Income statement Cash-Flow statement Balance sheet
Sales Cash in Debt
- Costs - Cash out Assets
Net income Equity
Cash Flow

Financing
Income statement

Beginning Closing
balance Balance
sheet Sheet

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114
How to start?
FOUNDATION STEPS

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Basic conditions for launching a new venture?
Legal conditions

Name
Licences
selection
Legal Technical, organizational, human
form Patents
Core activities Sales strategy
and products and force
Business conditions People Investment
Tax Organization Site, office
Insurance
regulations
Bank Accounting
selection Accountant

Experts
Advisors
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116
How do we start selling?
MARKET ENTRY

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Steps to the market

Market Market Market


research entry retention
1. Who would be our 1. What do we sell, to 1. How do we get feedback
customers, what do whom, satisfying from our customers?
we know about their what needs? (Correction needs)
buying behavior? (Positioning) 2. How will we react to
(Segmenting) 2. How do we price? correction needs, short
2. What are the needs (Pricing) term? (Reactive
of our targeted 3. How will we customer service,
segments? (Needs communicate to the
analysis) complaint management)
market?
3. What do our (Promotion) 3. How will we react to
competitors offer? 4. Where and how will correction needs, long
(Competitive we sell? (Sales term? (Proactive
analysis) channels, strategies actions, product
execution) development)

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Do you still want to start a business?
CLOSING REMARKS

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Instinct can never replace knowledge,
but perfectly complement it.
Kristina Ohlsson, 2012

It is not enough to invent it…


You should make it…
You should sell it…
You should make money out of it

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Staircase of entrepreneurial success

Personal You are happy


success
Social It is useful, not harmful
success to society
Business
You can make money out of it
success
Sales
You can sell it
success
Technical
success You can make it

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Enjoy the journey
not just the
destination!

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Sources

1. Aulet (2013) Disciplined Entrepreneurship Videos


2. Blank, Steve (2013) The Four Steps to the 1. http://www.ted.com/talks/lang/eng/simon_sinek_
Epiphany how_great_leaders_inspire_action.html
3. Béza és társai (2013) Kisvállalkozások 2. 8 secrets of success
finanszírozása. Perfekt 3. If You Don’t Understand People, You Don’t
4. Gerber Michael E. (2001) The E-Myth Revisited Understand Business
5. Ries Eric (2011) Lean startup 4. http://www.ted.com/talks/malcolm_gladwell_on_
6. Szirmai P.-Klein S. Üzleti tervezés kívül és belül. spaghetti_sauce.htm
Induló vállalkozások tervezése. EDGE 2000 Kiadó, 5. Marketing Strategy
Budapest 6. http://www.youtube.com/watch?v=Tq0tan49rmc
7. Timmons, J. (2003) New venture creation. 7. On pitching to VCs
Entrepreneurship for the 21st century. Irwine 8. The era of open innovation
8. Vecsenyi János: (2012) Kisvállalkozások indítása és 9. Before Avatar ... a curious boy
működtetése. 72h
9. Wasserman, Noam (2012) The Founder’s dilemmas

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