LECTURES FOUNDATIONS AND FORMS OF ENTREPRENEURSHIP
Lecture 1:
“Entrepreneurship is the process of creating value by bringing together a unique
combination of resources to exploit an opportunity”.
Emphasis on a set of behaviors rather than who is the entrepreneurial actor. It’s a mindset.
Trends promoting entrepreneurship:
Technological changes
o New technologies have reduced the costs associated with creating and
managing startups.
Economic changes
o More dynamic labor market increases the importance of skill upgrading and
reduces opportunity costs to become self-employed.
Institutional changes
o The ecosystem that is needed to support entrepreneurs has improved (e.g.,
venture capital).
Social changes
o Entrepreneurship now often viewed as a desirable career choice.
Unique challenges:
Liability of newness
o Lack of established track-record makes resource acquisition challenging.
Resource scarcity
o Entrepreneurs often lack the resources (e.g., time, human resources) needed
to exploit a perceived opportunity.
Extreme uncertainty
o Creating something new requires entrepreneurs to engage in trial-and-error
learning.
Quiz questions
1. People who become entrepreneurs generally share similar psychological profiles such
as being leaders, risk-takers, or adventurous. False
a. Genetics affect the tendency to engage in entrepreneurship and the ability to
perform it. Genes can affect this by influencing the type of personality you
develop.
2. Most entrepreneurs are under 40 years of age. False
a. Do it now
i. Before family handcuffs get too strong
ii. Before becoming too specialized
iii. Before becoming too reliant on employer resources
b. Wait in order to
i. Build more human capital
ii. Build more social capital
iii. Build more financial capital
c. Young people lack experience, credibility, access to capital but have energy,
‘low cost base’ (e.g., no family responsibilities) and commitment.
, d. Older people have experience, but may be looking for retirement.
3. Among entrepreneurs, people with strong networking skills outnumber ‘lone wolfs’.
False
a. A garage and an idea.
4. College-educated people are less likely to become entrepreneurs. False
a. Theory is ambiguous: education may potentially provide skills to establish a
business, but these skills are also attractive to employers.
b. Education may en-/discourage self-employment depending on the study
program design and associated job opportunities.
c. Evidence finds no link between education and probability of becoming self-
employed. However, higher education is almost a pre-requisite for high tech
start up.
5. Working for someone else decreases the chances that a person will become an
entrepreneur. False
a. Legend of the garage entrepreneur; portrays entrepreneurs as lone
individuals who found a company through their extraordinary skills.
b. Entrepreneurs acquire human, social and financial capital through
employment at existing firms.
c. Founders often come from pre-existing organizations in similar industries.
d. Founders often locate their firms in the same region as their prior employers.
6. Immigrants are more likely than non-immigrants to become entrepreneurs. False
a. Cultural propensity – some cultures favor self-employment more than others.
b. Some ethnic groups have greater ‘resources’ available.
c. Discrimination in waged sectors pushes individuals towards self-employment.
Difficulties in gaining credit may also hamper immigrant in becoming
entrepreneurs.
Lecture 2: Evaluating new venture opportunities
Idea possibility opportunity.
Feasibility analysis personal analysis
Inventor’s side
Feasibility study
Preliminary evaluation of a business idea
o Conduct a feasibility study to determine whether your idea is an attractive
business opportunity.
o NOT a full-fledged business plan.
o Supported by evidence
Conduct it early
o Evaluate ideas before much resources are wasted
o Usually plan A doesn’t work. So, get feedback fast to refine your ideas and
develop a plan B.
Components of a feasibility study
Product/service feasibility
o Can the product be built? Does it solve an important problem?
, Industry/market feasibility
o Is there a real customer who wants this? Are the industry and target market
attractive?
Organizational feasibility
o What are the required resources? How can they be obtained?
Financial feasibility
o What are the funding needs? What is the risk/return?
The need for data
Essentially, your idea is a hypothesis
o A belief that a certain customer need exists, which you need to
test by collecting data.
E.g., observe customers, collect secondary data, etc.
Exploitation: refinement, efficiency, stability, commitment, current events.
older more conventional companies.
Exploration: novelty, variation, uncertainty, play, discovery, future events.
entrepreneurs.
Lean start-up approach
Use as little sources as possible to learn as much as possible.
Determine what assumptions underlie your business idea.
Validate ideas without investing a lot of time and money.
Ensure that you are not developing a perfect product that no one wants.
Personal analysis
Is it do-able? – can I do it?
Is it worth doing? – Do I want to do it?
Apply at least 4 criteria to assess whether there’s a fit between an opportunity and yourself:
1. My goals
2. My capabilities (skills and experience)
3. My lifestyle
4. My relationships
Investor’s side
Entrepreneurial finance theory
3 key differences between finance for large and small businesses:
1. Personal characteristics of owner-manager
2. ‘downside risks’ associated with business (failure)
3. ‘informationally’ vague marketplace.
The entrepreneur – investor relationship
Interests of the entrepreneur
o Obtain resources, retain as much of their companies’ value as possible,
maintain control, build reputation.
Interest of the investor
Lecture 1:
“Entrepreneurship is the process of creating value by bringing together a unique
combination of resources to exploit an opportunity”.
Emphasis on a set of behaviors rather than who is the entrepreneurial actor. It’s a mindset.
Trends promoting entrepreneurship:
Technological changes
o New technologies have reduced the costs associated with creating and
managing startups.
Economic changes
o More dynamic labor market increases the importance of skill upgrading and
reduces opportunity costs to become self-employed.
Institutional changes
o The ecosystem that is needed to support entrepreneurs has improved (e.g.,
venture capital).
Social changes
o Entrepreneurship now often viewed as a desirable career choice.
Unique challenges:
Liability of newness
o Lack of established track-record makes resource acquisition challenging.
Resource scarcity
o Entrepreneurs often lack the resources (e.g., time, human resources) needed
to exploit a perceived opportunity.
Extreme uncertainty
o Creating something new requires entrepreneurs to engage in trial-and-error
learning.
Quiz questions
1. People who become entrepreneurs generally share similar psychological profiles such
as being leaders, risk-takers, or adventurous. False
a. Genetics affect the tendency to engage in entrepreneurship and the ability to
perform it. Genes can affect this by influencing the type of personality you
develop.
2. Most entrepreneurs are under 40 years of age. False
a. Do it now
i. Before family handcuffs get too strong
ii. Before becoming too specialized
iii. Before becoming too reliant on employer resources
b. Wait in order to
i. Build more human capital
ii. Build more social capital
iii. Build more financial capital
c. Young people lack experience, credibility, access to capital but have energy,
‘low cost base’ (e.g., no family responsibilities) and commitment.
, d. Older people have experience, but may be looking for retirement.
3. Among entrepreneurs, people with strong networking skills outnumber ‘lone wolfs’.
False
a. A garage and an idea.
4. College-educated people are less likely to become entrepreneurs. False
a. Theory is ambiguous: education may potentially provide skills to establish a
business, but these skills are also attractive to employers.
b. Education may en-/discourage self-employment depending on the study
program design and associated job opportunities.
c. Evidence finds no link between education and probability of becoming self-
employed. However, higher education is almost a pre-requisite for high tech
start up.
5. Working for someone else decreases the chances that a person will become an
entrepreneur. False
a. Legend of the garage entrepreneur; portrays entrepreneurs as lone
individuals who found a company through their extraordinary skills.
b. Entrepreneurs acquire human, social and financial capital through
employment at existing firms.
c. Founders often come from pre-existing organizations in similar industries.
d. Founders often locate their firms in the same region as their prior employers.
6. Immigrants are more likely than non-immigrants to become entrepreneurs. False
a. Cultural propensity – some cultures favor self-employment more than others.
b. Some ethnic groups have greater ‘resources’ available.
c. Discrimination in waged sectors pushes individuals towards self-employment.
Difficulties in gaining credit may also hamper immigrant in becoming
entrepreneurs.
Lecture 2: Evaluating new venture opportunities
Idea possibility opportunity.
Feasibility analysis personal analysis
Inventor’s side
Feasibility study
Preliminary evaluation of a business idea
o Conduct a feasibility study to determine whether your idea is an attractive
business opportunity.
o NOT a full-fledged business plan.
o Supported by evidence
Conduct it early
o Evaluate ideas before much resources are wasted
o Usually plan A doesn’t work. So, get feedback fast to refine your ideas and
develop a plan B.
Components of a feasibility study
Product/service feasibility
o Can the product be built? Does it solve an important problem?
, Industry/market feasibility
o Is there a real customer who wants this? Are the industry and target market
attractive?
Organizational feasibility
o What are the required resources? How can they be obtained?
Financial feasibility
o What are the funding needs? What is the risk/return?
The need for data
Essentially, your idea is a hypothesis
o A belief that a certain customer need exists, which you need to
test by collecting data.
E.g., observe customers, collect secondary data, etc.
Exploitation: refinement, efficiency, stability, commitment, current events.
older more conventional companies.
Exploration: novelty, variation, uncertainty, play, discovery, future events.
entrepreneurs.
Lean start-up approach
Use as little sources as possible to learn as much as possible.
Determine what assumptions underlie your business idea.
Validate ideas without investing a lot of time and money.
Ensure that you are not developing a perfect product that no one wants.
Personal analysis
Is it do-able? – can I do it?
Is it worth doing? – Do I want to do it?
Apply at least 4 criteria to assess whether there’s a fit between an opportunity and yourself:
1. My goals
2. My capabilities (skills and experience)
3. My lifestyle
4. My relationships
Investor’s side
Entrepreneurial finance theory
3 key differences between finance for large and small businesses:
1. Personal characteristics of owner-manager
2. ‘downside risks’ associated with business (failure)
3. ‘informationally’ vague marketplace.
The entrepreneur – investor relationship
Interests of the entrepreneur
o Obtain resources, retain as much of their companies’ value as possible,
maintain control, build reputation.
Interest of the investor
