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Business Development and Entrepreneurship Basics

Presented by:

Tony Redpath & Allyson Hewitt

Vice President, Partner Programs

Director, Social Entrepreneurship

MaRS Discovery District

6 October 2010

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Start with the Basics

1) Why do I want to start this business? • What is my motivation? • Do I want to make money and make a difference?

2) What resources do I need? •  Basement vs. Corporate Office vs. Shared Spaces

3) How do I fit into the rest of the world? • Is my service/product unique?

4) What is my business model? •  For profit, non profit, hybrid model

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The Organizational Spectrum

Social Enterprise

Non-profit that

generates revenue

Traditional Charity

Traditional Corporation

Corporate Social

Responsibility (CSR)

Social Purpose Business

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Types of organizations: CONSULTING

 Key Characteristics:

  Multiple Participants, Diverse focus, Size

  Examples

–  Hatch Associates

–  Aperio

 Benefits & Risks of Model

  Low Capital Costs & Minimal Input

  Liability Insurance; lack of support

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Types of organizations: SERVICES

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 Key Characteristics:

  Specialty business serving existing businesses

  Examples

 Benefits & Risks of Model

  On-line software as a service

  Capital Costs can be high: labs services: servers

Types of organizations: SERVICES

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Social Venture: SERVICES

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Types of organizations: PRODUCTS

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Types of organizations: PRODUCTS

  Products

  Key Characteristics:

  Tangible offering ( pharmaceutical compound, medical device, consumer product

  Examples

  Benefits & Risks of Model

  High development costs; market traction

  Production costs high: outsource?

  Potential for huge scale

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Social Venture: PRODUCTS

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Show me the Money….

  Forms of Financing

 Debt - borrow from someone, using an asset as security; rate & time period to be negotiated

  Equity - sell a piece of your venture to someone in exchange for an investment in the venture

  Bootstrap - self-fund and reinvest all profits for growth

  Grants – foundations/government funding

  Hybrid Models – important to both enterprise types

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The Lemonade Stand Example

Assume you’re 8 years old and you need $20 to set up a lemonade stand

Revenues Debt 50:50 Equity

Rain $10 lender loses $10 partner loses $15

entrepreneur gets $0 entrepreneur gets $5

Cloud $30 lender is even partner loses $5

entrepreneur gets $10 entrepreneur gets $15

Sun $50 lender is even partner makes $5

entrepreneur gets $30 entrepreneur gets $25

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The Lemonade Stand Example II

Assume you’re 8 years old and you need $20 to set up a lemonade stand

Revenues Debt 50:50 Equity

Rain $10 lender loses $10 partner loses $15

entrepreneur gets $0 entrepreneur gets $5

Cloud $30 lender is even partner loses $5

entrepreneur gets $10 entrepreneur gets $15

Sun $50 lender is even partner makes $5

entrepreneur gets $30 entrepreneur gets $25

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Where can I get debt financing?

 YOU

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Sources of Equity Financing

 The 3F’s again – Friends, Family and Fools

 Angels (aka high net worth individuals)

 Generally like to invest in areas that they have worked in or are comfortable with

 Can add valuable hands-on experience

 http://www.angelinvestor.ca/

 http://www.mapleleafangels.com/186103_186104.html

 Venture Capital Funds

 Different funds invest at different stages in the growth of a company

 http://www.cvca.ca/

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Special Financing Sources

 Proof of Principle / Idea to Innovation

  www.ResearchNet.com

 www.nserc-crsng.gc.ca/index_eng.asp

 NRC - IRAP

 http://irap-pari.nrc-cnrc.gc.ca/main_e.html

  Foundations:

 Trillium Fund - www. TrilliumFoundation.org

 Gates Foundation – www.gatesfoundation.org

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The Financing Life Cycle

Risk

Concept Start-up Growth Expansion

Grants

Venture Capital

Public Markets

Seed Funds

Angels

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The Financing Life Cycle

Risk

Concept Start-up Growth Expansion

Grants

Venture Capital

Public Markets

Seed Funds

Angels

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The Financing Life Cycle

Risk

Concept Start-up Growth Expansion

Grants

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How do I secure financing/support?

Investors/backers are concerned about risk associated with

any start-up

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What are the Risks?

  Technology Risks

  Stage of Development (concept proof of concept prototype of product)

  Product development path (costs and “risks”)

  Competitive technologies

  IP Risks

 Nature of the invention

 Scope of the invention

  IP form: Patent, know-how, software

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Risks Continued

  Market Risks

  Market size, dynamics and growth potential

  Route to market, access, scalability

  USPs of the products or services

  Execution Risk

 Knowledge of the market, networks

 Skills required to move the enterprise through all stages of development

 Reputation in the marketplace

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Risks for the Social Venture

  Mission Drift

  Balancing a Social and Financial Bottom Line

  Execution Risk

  Knowledge of the market, networks

 Skills required to move the enterprise through all stages of development

 Reputation in the marketplace

  Lack of Awareness

 This is an emergent area and it is tough to get people to get it