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WE16 - Diving into Entrepreneurship

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Diving into Entrepreneurship

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WE16 - Diving into Entrepreneurship

  1. 1. 20 25 Labs DIVING INTO ENTREPRENEURSHIP Melissa Liu CEO 2025 Consulting / 2025 Labs
  2. 2. 20 25 Labs Why Diving into Entrepreneurship? •  Fear may be involved •  You can practice and plan…but it still involves a leap of faith •  Done well, it may look easy…but it’s actually a lot of work •  It’s also uncertain – you may crash and burn, you may fail, you may look like a “fool” in front of a crowd •  But it is exhilarating! I was a high school diver, but this is not me
  3. 3. 20 25 Labs What is entrepreneurship? •  People may envision Uber, Twitter, AirBNB •  Not every new company starts and develops like these •  May be a technology company – or not •  May be Angel/VC funded – or not •  May be planned to become a $ billion company – or not •  May be about a “revolutionary new idea” – or not •  Entrepreneurship = The act of starting (and building) a new company that did not previously exist
  4. 4. 20 25 Labs Data on entrepreneurship and women-owned business •  Women own 36% of all businesses, according to US Census data from 2012, a 30% increase from 20071 •  13% of all US adults are involved in entrepreneurship2 •  Female entrepreneurs start companies with less capital than male entrepreneurs3 •  In 2014, 15.5% of all US based startups receiving VC funding had at least one female founder, up from 9.5% in 20094 •  “Virtually all net new jobs created in the U.S. between 1980 and [mid-2000s] were created by firms that were five years old or less”5 2 Forbes, “U.S. Entrepreneurship hits record high”, 2013 1 Forbes, “Why The Force Will Be With Women Entrepreneurs in 2016 ”, 2016 3 National Women’s Business Council, “Access to Capital by High-Growth Women-owned Business, ” 2014 4 TechCrunch, “Female Founders on an Upward Trend, according to CrunchBase”, 2015 5 CNN, “U.S. economy won’t grow fast until we unleash entrepreneurship”, 2016
  5. 5. 20 25 Labs Getting started – some initial milestones Iterate, build, re-plan, manage from here Legal Entity and Filings Now you have a business! Start-up Financing Enough $ to get started Start-up Team Resourcing Whoever you need to be able to sell something – could be just you Product: Something to Sell Product or service you can sell Company “Presence” Collateral to make your company look legit – web site, business cards, etc. Bank Account Place for you to take payments and pay bills Sales You working on selling something to someone Taxes and Corporate Filings Reporting of the state of your company for taxes and legal filings Real business Can take money Can sell Have revenue
  6. 6. 20 25 Labs Getting started – some initial milestones Iterate, build, re-plan, manage from here Legal Entity and Filings Now you have a business! Start-up Financing Enough $ to get started Start-up Team Resourcing Whoever you need to be able to sell something – could be just you Product: Something to Sell Product or service you can sell Company “Presence” Collateral to make your company look legit – web site, business cards, etc. Bank Account Place for you to take payments and pay bills Sales You working on selling something to someone Taxes and Corporate Filings Reporting of the state of your company for taxes and legal filings Real business Can take money Can sell Have revenue •  Getting to sales does not mean that you have a viable business model… •  ... or that you can ever achieve viability with your current plans and directions •  But it is a start •  You will learn from your experiences to here, and you can evolve your business from that point •  We will come back to the business model topic…
  7. 7. 20 25 Labs Mall Map: simple overview of a business Product or Service – something to try to sell Revenue Model Cost Model Customer Acquisition Legal Entity and Filings “Presence”: Marketing, Web, Media Organization, Hiring, Contracting Cost of Doing Business Revenue Generating Product Related Costs * Area of legal complexity May take iteration to get to a viable business model Business Model: Drives your profit Financial Management IT, Operations, etc. * You are here (maybe)
  8. 8. 20 25 Labs What is a legal entity? Sole Proprietorship •  You own the business as an individual •  Its bank account is your personal bank account •  Its debts are your personal debts •  No “corporate veil” for liability Incorporated Business •  Business has been “incorporated” into an entity distinct from its owner(s) •  C Corp •  LLC •  Non-profit 501(c)3 •  S Corp •  Business has its own bank account attached to the business name •  Protection of “corporate veil” (usually)
  9. 9. 20 25 Labs Business Models: Product vs Technology Example 1: Software “Product” Customers Revenue Model Packaged software (Office or Intuit - traditional) •  User/Purchasers of the software •  Businesses •  OEMs (pre-installed PC) •  $ per package sold •  Site license, volume discount Subscription Software (e.g., Office 365, Intuit Online) •  User/Purchasers of subscriptions •  Can also be businesses •  $ per time period of subscription •  $ per period per user, etc. Free Software (e.g., Google Docs, Facebook) •  Purchasers of ads •  Purchasers of data •  $ per eyeballs or time watched, etc. Can be differentiation between what you are building vs what you are selling. The same “thing” could be sold through different models
  10. 10. 20 25 Labs Business Models: Product vs Technology Example 2: “Radio” “Product” Customers Revenue Model FM Radio •  Advertisers •  Ad revenue •  Sold by duration, peak times, etc. Sirius XM •  Subscription purchasers / listeners •  Car manufacturers? •  $ per time period of subscription Pandora •  Companies that buy ads •  Consumers who pay for a subscription •  “Freemium” (ad-supported) •  Subscription-supported (ad-free) Customer = The person who pays. Others are “users”, “listeners”, “readers” – fans who help you attract paying customers
  11. 11. 20 25 Labs Some key decisions Goods vs Services •  Physical goods: inventory, shipping logistics, sales tax, manufacturing and/or assembly time, etc. •  Services: labor logistics, retention •  Companies can be both gds and svcs •  R&D companies: Can be either, also have up-front cost of development For-Profit vs Non-Profit •  Most businesses are for profit •  Non-profit public benefit companies have many regulatory requirements •  For-profit entities: C-corp, S-corp, LLC, sole proprietorship •  Pass-through vs corporate tax Sole Founder vs Partners •  For some people, it’s better to have partners •  Complementary critical skills •  Partnerships don’t always work and sometimes dissolve •  It can be ugly! In-source / Out-source / Skills •  What you (and partners) can do vs what you need help with •  E.g., outsource web site, logo creation, manufacturing, etc. •  Cost vs internal skill-sets •  Skills you want vs skills you don’t
  12. 12. 20 25 Labs Recap: Product development in a startup environment •  Expect to iterate on: •  products •  customers •  revenue model •  You might find that you can sell to happy customers – and lose money doing it •  May need to iterate on your business model •  Lower product cost, higher sales price, different market, volume/ scale, etc. •  Some companies get pretty far with an unproven – or bad? – business model •  This works if you are well-funded; not everyone has this option
  13. 13. 20 25 Labs We interrupt this story for a few tidbits… •  Steve Blank, “Not All Those Who Wander Are Lost” •  Story about the marketing guy who feels he’s meeting goals because he has made a bunch of calls (activity-based metric) •  Goal in startup marketing is not activity-based – it’s actual sales •  Guy Kawasaki, Pioneer Summit 2015 •  “All you need is someone to build it, and someone to sell it. Everything else is bullshit” Stay focused on selling, and the things you need to do to enable it. Those are your most critical activities.
  14. 14. 20 25 Labs Customer acquisition – some market traits •  Cost Sensitivity: •  Customer’s own money or OPM (“Other People’s Money”) •  Budget constraints •  Sales Lead Time: •  Size of the organization & bureaucracy •  Legal/regulatory oversight and controls •  Individual characteristics within a market will vary •  Wealthy consumers vs not •  Small, growing businesses vs large struggling businesses •  But a market overall will tend to have some characteristics Cost Sensitivity Sales Lead Time Consumer Large (stable) business Individual customer characteristics vary Small business Gov’t Well- funded startup Non-profit (LT varies) Disclaimer: This is the experience of a two-time entrepreneur, not a marketing professional
  15. 15. 20 25 Labs Customer acquisition / marketing / sales What you might see Social media ad placement (mobile, print, web) search key words direct mail cold calls / emails personal contacts formal bidding process consumer governmentcorporate
  16. 16. 20 25 Labs Funding your startup Pre-revenue / customers (Seed Stage) Revenue /Customers (Early Stage) •  Bootstrap •  Friends and family •  Crowdfunding •  Angel (individuals with $) •  Micro-VC •  Accelerator / incubator •  Corporate seed money •  Founders money (“bootstrapping”) •  Friends and family •  Small business loan? Getting Started •  Retained earnings •  VC •  Corporate capital investment •  Debt financing •  Etc. $ $$ $$$-$$$$
  17. 17. 20 25 Labs Taxes, taxes, taxes! C-Corp, LLC taxed as a corporation, but not sole prop. or pass-through entities Corporate taxes: LLC taxed as a “pass-through” entity, sole proprietorship, S-Corp, wages from a C-Corp (double taxation) Individual taxes: W-2 employees (including you: you will pay employment taxes for yourself through corporate or self-employment) Employment taxes: Any pass-through or sole-proprietorship will pay employment taxes through self-employment taxation Self-employment: Business license fees (state/local), e.g., for a license certificate that must be shown in the place of business License fees: Collecting, remitting, reporting taxes for physical products. Rates and taxation varies by state and locality Sales taxes:
  18. 18. 20 25 Labs Employment and employment law •  Employment laws can be complicated and change often •  Know the difference – employee versus contractor •  Where work is performed, equipment, supervision/control, etc. •  Overtime regulations – recently changed •  Minimum wage laws (federal, state, local) •  Letter of the law vs. spirit of the law Disclaimer: I’m not a lawyer, or a CPA; this is not the substitute for advice from a professional…but these are some areas you should keep in mind
  19. 19. 20 25 Labs Final Thoughts It’s work – but it’s worth it! Any one idea may well not work out… … but there are always other businesses that could be started Know the financial risk you can handle Questions? Your picture here
  20. 20. 20 25 Labs Thank You! Find me at: Email: mliu@2025consulting.com LinkedIn: linkedin.com/in/melissaliu

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