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Description

Introduction
Chapter 13
Obtaining Venture and Growth Capital
13 – 1
Discussion Overview
• Preserve Your Equity and Timing
• Angel/Informal Investors
• Venture Capital
• Dealing with VCs
• Some Other Funding Sources
13 – 2
1
Preserve Your Equity and Timing
• Hold on to as much equity as you can
• Earlier capital is more costly
• Bootstrapping minimizes the need for outside
capital
• Investors should contribute more than just funding
• Timing is important!
13 – 3
Angel/Informal Investors
• Most are self-made entrepreneur millionaires
• Typically invest from $10,000 to $250,000 in any one
deal
• Can provide more than money
• Prefer anonymity
• Prefer local ventures
13 – 4
2
Venture Capital
• Professionally-managed, identifiable funds
• Florida Venture Forum
• Provides money, experience, networks, and
industry contacts
• Invest $500,000 to $1.5 million or more
• Long due diligence process
• Less than 4% receive VC funding
• Significant equity dilution
13 – 5
Dealing with VCs
• Obtain personal introduction
• Create a market for your company
• Get to “no” quickly
• Look for fit and expertise in your area
• Never lie or say no
13 – 6
3
Some Other Funding Sources
• SBA 7(a) Guaranteed Business Loan Program
• Small Business Investment Companies
• Small Business Innovation Research
• Corporate Venture Capital
• Mezzanine Capital
• Private Placements
• Initial Public Stock Offerings
• Employee Stock Ownership Plans
• Crowdfunding
13 – 7
The End
13 – 8
4
Introduction
Chapter 14
The Deal:
Valuation, Structure, and Negotiation
14 – 1
Discussion Overview
•
•
•
•
•
•
•
•
•
Art of Valuation
Determinants of Value
Rate of Return
Theory of Company Pricing
Valuation Methods
Staged Capital Commitments
Characteristics of Successful Deals
Critical Aspects Beyond Money
Sand Traps
14 – 2
1
Art of Valuation
• Entrepreneurial finance is very different from
corporate finance
• Entrepreneurial finance: more volatile, more
imperfect, less accessible
• Valuation is more art than science
• There are no standard methodologies
14 – 3
Determinants of Value
• Determinants of value
• Risk factors
• Establishing boundaries and ranges
14 – 4
2
Rate of Return
14 – 5
Theory of Company Pricing
14 – 6
3
Valuation Methods
• Venture Capital Method
• Fundamental Method
• First Chicago Method
• Discounted Cash Flow
• Rule-of-Thumb Methods
14 – 7
Staged Capital Commitments
• Inherent conflicts between entrepreneurs and
investors
• VCs invest in distinct stages
• Maintains VC’s right to abandon weak projects
• Incentivizes the entrepreneurial team
• Favors equity position of the entrepreneur
14 – 8
4
Characteristics of Successful Deals
• Simple
• Robust
• Based on trust rather than legalese
• Match needs of both parties
• Improve chances of venture success
14 – 9
Critical Aspects Beyond Money
• Issues go beyond valuation and ownership
• Critical aspects of a deal:
• Number, type and mix of stocks
• Interest rate
• Board representation and seats
• Right of first refusal
• Legal, accounting, and consulting fees
14 – 10
5
Sand Traps
• Strategic Circumference
• Legal Circumference
• Unknown Territory
14 – 11
The End
14 – 12
6
Introduction
Chapter 15
Obtaining Debt Capital
15 – 1
Discussion Overview
• Sources of Debt Capital
• Before the Loan Decision
• The Lending Decision
• When the Bank Says No
• If You Must Borrow
15 – 2
1
Sources of Debt Capital
• Trade credit
• Commercial banks
• Commercial finance companies
• Factoring
• Leasing companies
15 – 3
Source: Trade Credit
• Trade credit—the ability to buy goods and services
and pay for them later
• Major source of short-term funds for small
businesses
• Takes many forms
• The real cost of trade credit can be very high
15 – 4
2
Source: Commercial Banks
• Prefer existing businesses
• Lower-risk lenders
• Usually require personal guarantees
• Place great weight on quality of management team
• Most loans are 1 year or less
• Usually require collateral
15 – 5
Source: Commercial Finance Companies
• Good option when banks say no
• Lend against liquidation value of assets
• Prefer readily salable items
• Lend percentage of liquidation value
• Make loans banks will not, but …
15 – 6
3
Source: Factoring
• Factoring—a form of accounts receivable financing
• Very expensive source of capital
• Quickly turns receivables into cash
• Saves some expenses and fees
• More common in certain businesses/industries
15 – 7
Source: Leasing Companies
• Important source of medium-term financing
• Readily resalable items
• Lease terms
• Similar criteria to commercial banks
• Leasing advantages
15 – 8
4
Before the Loan Decision
• Choosing a bank
• Approaching and meeting the banker
• What the banker wants to know
• Need a business plan
15 – 9
The Lending Decision
• Lending decisions have become more centralized
• Lending criteria
• Loan restrictions
• Covenants to look for
• Personal guarantees and the loan
• Building a relationship
15 – 10
5
When the Bank Says No
• Does the company really need to borrow now?
• What does the balance sheet say?
• Does the bank have a clear and comprehensive
understanding of your needs?
• Was your written loan proposal realistic?
• Do you need a new loan officer or a new bank?
• Who else might provide this financing?
15 – 11
If You Must Borrow
• Borrow when you do not need it
• Try to avoid personal guarantees
• The devil is in the details
• Try to avoid hair-trigger covenants
• Be conservative and prudent
15 – 12
6
The End
15 – 13
7
Introduction
Chapter 16
Leading Rapid Growth, Crises,
and Recovery
16 – 1
Discussion Overview
•
•
•
•
•
•
•
•
•
•
•
•
Stages of Growth
Rapid Growth Challenges
External Causes of Growth Problems
Internal Causes of Growth Problems
Predicting Trouble
When in Trouble
What Happens Next
Bankruptcy
Intervention (Turnaround)
Culture and Organizational Climate
Common Approaches to Successful Leadership
Chain of Greatness
16 – 2
1
Stages of Growth
16 – 3
Rapid Growth Challenges
• Opportunity overload
• Abundance of capital
• Misalignment of cash burn and collection rates
• Decision making
• Expanding facilities and space … and surprises
16 – 4
2
External Causes of Growth Problems
• Recession
• Interest rate changes
• Changes in government policy
• Inflation
• New competition
• Industry or product obsolescence
16 – 5
Internal Causes of Growth Problems
• Strategic Issues
• Leadership Issues
• Poor Planning, Financial and Accounting Systems,
Practices, and Controls
16 – 6
3
Predicting Trouble
• Net-Liquid-Balance-to-Total-Assets Ratio
• Non-quantitative Signals
• Inability to produce financial statements on time
• Changes in behavior of the lead entrepreneur
• Change in management or advisors
• Lower research and development expenditures
• Reduction of credit line
16 – 7
When in Trouble
• Outside advice is ignored
• Communication stops
• Rumors are flying
• Inventory is out of balance
• Accounts receivable aging
16 – 8
4
What Happens Next
• Forced intervention
• BOD
• Lender
• Lawsuit
• Can lead to:
• Bankruptcy
• Intervention (Turnaround)
16 – 9
Bankruptcy
• Voluntary versus Involuntary
• Bargaining Power
16 – 10
5
Intervention (Turnaround)
• Diagnosis
• Strategic Analysis
• Analysis of Management
• The numbers…
• Turnaround Plan
•
•
•
•
•
Quick Cash
Dealing with Lenders
Dealing with Trade Creditors
Workforce Reductions
Longer-Term Remedial Actions
16 – 11
Culture and Organizational Climate
• Clarity
• Standards
• Commitment
• Responsibility
• Recognition
• Esprit de corps
16 – 12
6
Common Approaches to
Successful Leadership
• E-Leadership
• Consensus Building
• Communication
• Encouragement
• Trust
• Development
16 – 13
Chain of Greatness
Vision
Results in
Leadership
Big picture
Think/act like owners
Best we can be
Which
reinvigorates
the vision
Achievement of personal
and performance goals
Shared pride and leadership
Mutual respect
Thirst for new challenges
and goals
and
which
Perpetual learning culture
Widespread
responsibility/accountability
Train and educate
High performance goals/standards
Shared learning/teach each other
Grow, improve, change, innovate
Understand and interpret the numbers
Reward short-term with bonuses
Reward long-term with equity
Entrepreneurial mind-set and values
Fosters
Take responsibility
Get results
Value and wealth creation
Share the wealth with those who create it
Customer and quality driven
Leads to
16 – 14
7
The End
16 – 15
8
Introduction
Chapter 17
The Family as Entrepreneur
17 – 1
Discussion Overview
• Building Entrepreneurial Family Legacies
• Large Company Family Legacies
• Family Contribution and Roles
• Strategy Frames
• The Mind-Set and Method for Family Enterprising
• The Six Dimensions for Family Enterprising
• The Familiness Advantage for Family Enterprising
17 – 2
1
Building Entrepreneurial
Family Legacies
• Family businesses do not always act
entrepreneurial
• Families …
• Comprise the dominant form of business
organization
• Provide most resources for the entrepreneurial
economy
• Types of family entrepreneurship
• Family enterprising
• Transgenerational entrepreneurship
17 – 3
Large Company Family Legacies
•
•
•
•
•
•
•
•
Mariott Hotels
Ford Motor Company
Walgreens
Comcast
Tyson
Estee Lauder
Wrigleys
Many Others ….
17 – 4
2
Family Contribution and Roles
• Families dominate U.S. economy
• Roles
• Family-influenced startups
• Family corporate venturing
• Family corporate renewal
• Family private cash
• Family investment funds
17 – 5
Strategy Frames
• Frame One: The Mind-set and Method for Family
Enterprising
• Frame Two: The Six Dimensions for Family
Enterprising
• Frame Three: The Familiness Advantage for Family
Enterprising
17 – 6
3
Frame One: The Mind-set and Method
for Family Enterprising
• Entrepreneurial families are opportunity focused!
• Mind-set continuum
• Financial mind-set versus operational mind-set
• Financial mind-set for enterprising
• Proclivity for higher-risk and above normal returns
• Willingness to sell and redeploy assets
• Desire to grow by creating new revenue streams
• Commitment to next-generation entrepreneurship
17 – 7
Frame One (Continued)
• Methods Continuum
• Managerial methods versus entrepreneurial
methods
• Entrepreneurial methods for enterprising
• Systematically searching for new investment
opportunities
• Seeking new opportunities beyond core business
• Making significant changes in products, services,
markets, and customers
17 – 8
4
Frame Two: The Six Dimensions for
Family Enterprising
• Leadership
• Relationship
• Vision
• Strategy
• Governance
• Performance
17 – 9
Frame Three: The Familiness Advantage
for Family Enterprising
• Family resources can create competitive advantage
• Distinctive familiness versus Constrictive
familiness
• Enterprising families assess and plan based on
their distinctive and constrictive familiness
17 – 10
5
The End
17 – 11
6
Introduction
Chapter 18
The Harvest and Beyond
18 – 1
Discussion Overview
• A Journey, Not a Destination
• First Build a Great Company
• Create Harvest Options and Capture Value
• A Harvest Goal: Value Realization
• Crafting a Harvest Strategy
• Harvest Options
• The Road Ahead
18 – 2
1
A Journey, Not a Destination
• It’s the challenge and exhilaration of the journey
• An addiction
• Takes a lot of cash, time, attention, and energy
• Most would do it again
• Takes many years to build significant net worth
18 – 3
First Build a Great Company
• First step toward successful harvest
• Wealth and liquidity are results, not causes
• Payoff will come
18 – 4
2
Create Harvest Options
and Capture Value
• A paradox
• Keep options open
• Reduces risk
• Allows other pursuits
18 – 5
A Harvest Goal: Value Realization
• Setting a harvest goal can:
• Help after-tax cash and enhance net worth
• Provide strategic focus
• Create less stress
• Society also benefits
18 – 6
3
Crafting a Harvest Strategy
• Timing is everything
• Strategic window
• Craft harvest strategy early
• Harvest strategy guidelines and cautions
• Patience
• Realistic valuation
• Outside advice
18 – 7
Harvest Options
• Capital Cow
• Employee Stock Ownership Plan (ESOP)
• Management Buyout (MBO)
• Merger, Acquisition, and Strategic Alliance
18 – 8
4
Harvest Options
(continued)
• Outright Sale
• Public Offering
• Wealth-Building Vehicles
18 – 9
The Road Ahead
• Anchors
• Passion for achieving goals
• Relentless competitive spirit
• Personal ethics and integrity
• Values and principles matter – a lot!
18 – 10
5
The End
Thank You!
www.usf.edu/entrepreneurship
18 – 11
6
Each Case will be worth a maximum of 150 points. As a guideline, each
Case should be approximately 300-400 words in length. A grade of 150
points will be earned for each case discussion that: a) is well written and
correctly answers the question — does not just restate the question or facts
(50 points); b) incorporates lessons from the assigned readings and
lectures (50 points); and, c) reflects an in-depth understanding of theories,
concepts, and main ideas of course material (50 points).
Regarding Case — Optitech, Chapter 18, Pages 464-472, Jim Harris has three main options (or
strategic alternatives) to consider to take Optitech to the next level: 1) maintain private
company structure, 2) growth through acquisition strategy, or 3) strategic sale of the
company. You are Jim’s trusted advisor – which option would you recommend for Jim (he
needs a definitive recommendation based on the available information in the case)? Most
importantly, why (give 3-4 good reasons to support your recommendation)? You are Jim’s
trusted advisor because you can make a definitive decision with the information provided to
you in the case (not merely recommending additional research or requiring additional
information). Be sure to study the Chapter 18 course material (presentation and textbook)
before deciding (this will help you with your decision and recommendation).
Hint: There is no “correct” option – I’m looking for your understanding of the course
material and reasoning. Understanding these strategic harvest/financing options is an
important skill for successful entrepreneurs. Hopefully, in addition to being a great
opportunity to learn and reinforce the material, this exercise will be very beneficial to many
of you in the future! Read the case closely a few times to truly immerse yourself – it will
make for a much more meaningful and robust learning experience. There are a lot of pros
and cons (personal, internal company, and external, etc.) to consider here! Jim is lucky to
have you helping him with this very important decision!
Each Case will be worth a maximum of 150 points. As a guideline, each
Case should be approximately 300-400 words in length. A grade of 150
points will be earned for each case discussion that: a) is well written and
correctly answers the question — does not just restate the question or facts
(50 points); b) incorporates lessons from the assigned readings and
lectures (50 points); and, c) reflects an in-depth understanding of theories,
concepts, and main ideas of course material (50 points).
Regarding Case — Optitech, Chapter 18, Pages 464-472, Jim Harris has three main options (or
strategic alternatives) to consider to take Optitech to the next level: 1) maintain private
company structure, 2) growth through acquisition strategy, or 3) strategic sale of the
company. You are Jim’s trusted advisor – which option would you recommend for Jim (he
needs a definitive recommendation based on the available information in the case)? Most
importantly, why (give 3-4 good reasons to support your recommendation)? You are Jim’s
trusted advisor because you can make a definitive decision with the information provided to
you in the case (not merely recommending additional research or requiring additional
information). Be sure to study the Chapter 18 course material (presentation and textbook)
before deciding (this will help you with your decision and recommendation).
Hint: There is no “correct” option – I’m looking for your understanding of the course
material and reasoning. Understanding these strategic harvest/financing options is an
important skill for successful entrepreneurs. Hopefully, in addition to being a great
opportunity to learn and reinforce the material, this exercise will be very beneficial to many
of you in the future! Read the case closely a few times to truly immerse yourself – it will
make for a much more meaningful and robust learning experience. There are a lot of pros
and cons (personal, internal company, and external, etc.) to consider here! Jim is lucky to
have you helping him with this very important decision!
Introduction
Chapter 13
Obtaining Venture and Growth Capital
13 – 1
Discussion Overview
• Preserve Your Equity and Timing
• Angel/Informal Investors
• Venture Capital
• Dealing with VCs
• Some Other Funding Sources
13 – 2
1
Preserve Your Equity and Timing
• Hold on to as much equity as you can
• Earlier capital is more costly
• Bootstrapping minimizes the need for outside
capital
• Investors should contribute more than just funding
• Timing is important!
13 – 3
Angel/Informal Investors
• Most are self-made entrepreneur millionaires
• Typically invest from $10,000 to $250,000 in any one
deal
• Can provide more than money
• Prefer anonymity
• Prefer local ventures
13 – 4
2
Venture Capital
• Professionally-managed, identifiable funds
• Florida Venture Forum
• Provides money, experience, networks, and
industry contacts
• Invest $500,000 to $1.5 million or more
• Long due diligence process
• Less than 4% receive VC funding
• Significant equity dilution
13 – 5
Dealing with VCs
• Obtain personal introduction
• Create a market for your company
• Get to “no” quickly
• Look for fit and expertise in your area
• Never lie or say no
13 – 6
3
Some Other Funding Sources
• SBA 7(a) Guaranteed Business Loan Program
• Small Business Investment Companies
• Small Business Innovation Research
• Corporate Venture Capital
• Mezzanine Capital
• Private Placements
• Initial Public Stock Offerings
• Employee Stock Ownership Plans
• Crowdfunding
13 – 7
The End
13 – 8
4
Introduction
Chapter 14
The Deal:
Valuation, Structure, and Negotiation
14 – 1
Discussion Overview
•
•
•
•
•
•
•
•
•
Art of Valuation
Determinants of Value
Rate of Return
Theory of Company Pricing
Valuation Methods
Staged Capital Commitments
Characteristics of Successful Deals
Critical Aspects Beyond Money
Sand Traps
14 – 2
1
Art of Valuation
• Entrepreneurial finance is very different from
corporate finance
• Entrepreneurial finance: more volatile, more
imperfect, less accessible
• Valuation is more art than science
• There are no standard methodologies
14 – 3
Determinants of Value
• Determinants of value
• Risk factors
• Establishing boundaries and ranges
14 – 4
2
Rate of Return
14 – 5
Theory of Company Pricing
14 – 6
3
Valuation Methods
• Venture Capital Method
• Fundamental Method
• First Chicago Method
• Discounted Cash Flow
• Rule-of-Thumb Methods
14 – 7
Staged Capital Commitments
• Inherent conflicts between entrepreneurs and
investors
• VCs invest in distinct stages
• Maintains VC’s right to abandon weak projects
• Incentivizes the entrepreneurial team
• Favors equity position of the entrepreneur
14 – 8
4
Characteristics of Successful Deals
• Simple
• Robust
• Based on trust rather than legalese
• Match needs of both parties
• Improve chances of venture success
14 – 9
Critical Aspects Beyond Money
• Issues go beyond valuation and ownership
• Critical aspects of a deal:
• Number, type and mix of stocks
• Interest rate
• Board representation and seats
• Right of first refusal
• Legal, accounting, and consulting fees
14 – 10
5
Sand Traps
• Strategic Circumference
• Legal Circumference
• Unknown Territory
14 – 11
The End
14 – 12
6
Introduction
Chapter 15
Obtaining Debt Capital
15 – 1
Discussion Overview
• Sources of Debt Capital
• Before the Loan Decision
• The Lending Decision
• When the Bank Says No
• If You Must Borrow
15 – 2
1
Sources of Debt Capital
• Trade credit
• Commercial banks
• Commercial finance companies
• Factoring
• Leasing companies
15 – 3
Source: Trade Credit
• Trade credit—the ability to buy goods and services
and pay for them later
• Major source of short-term funds for small
businesses
• Takes many forms
• The real cost of trade credit can be very high
15 – 4
2
Source: Commercial Banks
• Prefer existing businesses
• Lower-risk lenders
• Usually require personal guarantees
• Place great weight on quality of management team
• Most loans are 1 year or less
• Usually require collateral
15 – 5
Source: Commercial Finance Companies
• Good option when banks say no
• Lend against liquidation value of assets
• Prefer readily salable items
• Lend percentage of liquidation value
• Make loans banks will not, but …
15 – 6
3
Source: Factoring
• Factoring—a form of accounts receivable financing
• Very expensive source of capital
• Quickly turns receivables into cash
• Saves some expenses and fees
• More common in certain businesses/industries
15 – 7
Source: Leasing Companies
• Important source of medium-term financing
• Readily resalable items
• Lease terms
• Similar criteria to commercial banks
• Leasing advantages
15 – 8
4
Before the Loan Decision
• Choosing a bank
• Approaching and meeting the banker
• What the banker wants to know
• Need a business plan
15 – 9
The Lending Decision
• Lending decisions have become more centralized
• Lending criteria
• Loan restrictions
• Covenants to look for
• Personal guarantees and the loan
• Building a relationship
15 – 10
5
When the Bank Says No
• Does the company really need to borrow now?
• What does the balance sheet say?
• Does the bank have a clear and comprehensive
understanding of your needs?
• Was your written loan proposal realistic?
• Do you need a new loan officer or a new bank?
• Who else might provide this financing?
15 – 11
If You Must Borrow
• Borrow when you do not need it
• Try to avoid personal guarantees
• The devil is in the details
• Try to avoid hair-trigger covenants
• Be conservative and prudent
15 – 12
6
The End
15 – 13
7
Introduction
Chapter 16
Leading Rapid Growth, Crises,
and Recovery
16 – 1
Discussion Overview
•
•
•
•
•
•
•
•
•
•
•
•
Stages of Growth
Rapid Growth Challenges
External Causes of Growth Problems
Internal Causes of Growth Problems
Predicting Trouble
When in Trouble
What Happens Next
Bankruptcy
Intervention (Turnaround)
Culture and Organizational Climate
Common Approaches to Successful Leadership
Chain of Greatness
16 – 2
1
Stages of Growth
16 – 3
Rapid Growth Challenges
• Opportunity overload
• Abundance of capital
• Misalignment of cash burn and collection rates
• Decision making
• Expanding facilities and space … and surprises
16 – 4
2
External Causes of Growth Problems
• Recession
• Interest rate changes
• Changes in government policy
• Inflation
• New competition
• Industry or product obsolescence
16 – 5
Internal Causes of Growth Problems
• Strategic Issues
• Leadership Issues
• Poor Planning, Financial and Accounting Systems,
Practices, and Controls
16 – 6
3
Predicting Trouble
• Net-Liquid-Balance-to-Total-Assets Ratio
• Non-quantitative Signals
• Inability to produce financial statements on time
• Changes in behavior of the lead entrepreneur
• Change in management or advisors
• Lower research and development expenditures
• Reduction of credit line
16 – 7
When in Trouble
• Outside advice is ignored
• Communication stops
• Rumors are flying
• Inventory is out of balance
• Accounts receivable aging
16 – 8
4
What Happens Next
• Forced intervention
• BOD
• Lender
• Lawsuit
• Can lead to:
• Bankruptcy
• Intervention (Turnaround)
16 – 9
Bankruptcy
• Voluntary versus Involuntary
• Bargaining Power
16 – 10
5
Intervention (Turnaround)
• Diagnosis
• Strategic Analysis
• Analysis of Management
• The numbers…
• Turnaround Plan
•
•
•
•
•
Quick Cash
Dealing with Lenders
Dealing with Trade Creditors
Workforce Reductions
Longer-Term Remedial Actions
16 – 11
Culture and Organizational Climate
• Clarity
• Standards
• Commitment
• Responsibility
• Recognition
• Esprit de corps
16 – 12
6
Common Approaches to
Successful Leadership
• E-Leadership
• Consensus Building
• Communication
• Encouragement
• Trust
• Development
16 – 13
Chain of Greatness
Vision
Results in
Leadership
Big picture
Think/act like owners
Best we can be
Which
reinvigorates
the vision
Achievement of personal
and performance goals
Shared pride and leadership
Mutual respect
Thirst for new challenges
and goals
and
which
Perpetual learning culture
Widespread
responsibility/accountability
Train and educate
High performance goals/standards
Shared learning/teach each other
Grow, improve, change, innovate
Understand and interpret the numbers
Reward short-term with bonuses
Reward long-term with equity
Entrepreneurial mind-set and values
Fosters
Take responsibility
Get results
Value and wealth creation
Share the wealth with those who create it
Customer and quality driven
Leads to
16 – 14
7
The End
16 – 15
8
Introduction
Chapter 17
The Family as Entrepreneur
17 – 1
Discussion Overview
• Building Entrepreneurial Family Legacies
• Large Company Family Legacies
• Family Contribution and Roles
• Strategy Frames
• The Mind-Set and Method for Family Enterprising
• The Six Dimensions for Family Enterprising
• The Familiness Advantage for Family Enterprising
17 – 2
1
Building Entrepreneurial
Family Legacies
• Family businesses do not always act
entrepreneurial
• Families …
• Comprise the dominant form of business
organization
• Provide most resources for the entrepreneurial
economy
• Types of family entrepreneurship
• Family enterprising
• Transgenerational entrepreneurship
17 – 3
Large Company Family Legacies
•
•
•
•
•
•
•
•
Mariott Hotels
Ford Motor Company
Walgreens
Comcast
Tyson
Estee Lauder
Wrigleys
Many Others ….
17 – 4
2
Family Contribution and Roles
• Families dominate U.S. economy
• Roles
• Family-influenced startups
• Family corporate venturing
• Family corporate renewal
• Family private cash
• Family investment funds
17 – 5
Strategy Frames
• Frame One: The Mind-set and Method for Family
Enterprising
• Frame Two: The Six Dimensions for Family
Enterprising
• Frame Three: The Familiness Advantage for Family
Enterprising
17 – 6
3
Frame One: The Mind-set and Method
for Family Enterprising
• Entrepreneurial families are opportunity focused!
• Mind-set continuum
• Financial mind-set versus operational mind-set
• Financial mind-set for enterprising
• Proclivity for higher-risk and above normal returns
• Willingness to sell and redeploy assets
• Desire to grow by creating new revenue streams
• Commitment to next-generation entrepreneurship
17 – 7
Frame One (Continued)
• Methods Continuum
• Managerial methods versus entrepreneurial
methods
• Entrepreneurial methods for enterprising
• Systematically searching for new investment
opportunities
• Seeking new opportunities beyond core business
• Making significant changes in products, services,
markets, and customers
17 – 8
4
Frame Two: The Six Dimensions for
Family Enterprising
• Leadership
• Relationship
• Vision
• Strategy
• Governance
• Performance
17 – 9
Frame Three: The Familiness Advantage
for Family Enterprising
• Family resources can create competitive advantage
• Distinctive familiness versus Constrictive
familiness
• Enterprising families assess and plan based on
their distinctive and constrictive familiness
17 – 10
5
The End
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6
Introduction
Chapter 18
The Harvest and Beyond
18 – 1
Discussion Overview
• A Journey, Not a Destination
• First Build a Great Company
• Create Harvest Options and Capture Value
• A Harvest Goal: Value Realization
• Crafting a Harvest Strategy
• Harvest Options
• The Road Ahead
18 – 2
1
A Journey, Not a Destination
• It’s the challenge and exhilaration of the journey
• An addiction
• Takes a lot of cash, time, attention, and energy
• Most would do it again
• Takes many years to build significant net worth
18 – 3
First Build a Great Company
• First step toward successful harvest
• Wealth and liquidity are results, not causes
• Payoff will come
18 – 4
2
Create Harvest Options
and Capture Value
• A paradox
• Keep options open
• Reduces risk
• Allows other pursuits
18 – 5
A Harvest Goal: Value Realization
• Setting a harvest goal can:
• Help after-tax cash and enhance net worth
• Provide strategic focus
• Create less stress
• Society also benefits
18 – 6
3
Crafting a Harvest Strategy
• Timing is everything
• Strategic window
• Craft harvest strategy early
• Harvest strategy guidelines and cautions
• Patience
• Realistic valuation
• Outside advice
18 – 7
Harvest Options
• Capital Cow
• Employee Stock Ownership Plan (ESOP)
• Management Buyout (MBO)
• Merger, Acquisition, and Strategic Alliance
18 – 8
4
Harvest Options
(continued)
• Outright Sale
• Public Offering
• Wealth-Building Vehicles
18 – 9
The Road Ahead
• Anchors
• Passion for achieving goals
• Relentless competitive spirit
• Personal ethics and integrity
• Values and principles matter – a lot!
18 – 10
5
The End
Thank You!
www.usf.edu/entrepreneurship
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6

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