Managing Growth and
Scaling
Module 4
Startups
• startup company ("startup"): A company, partnership, or
temporary organization designed to search for a repeatable
and scalable business model.
– became very popular during dot-com bubble
– often a company poised for rapid growth
• must be able to reach many people, and make money from them
– a new/small company != a startup, ... but most are
– often based on technology
• low cost to enter market
• easy to reach many people
• high risk, high reward
– ... Could you make a startup??
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Your idea
• Are you sure your idea is even any good?
– Many successful ideas are "disruptive" to an existing market, or
create a new market that was not seen before
• example: Tivo disrupts TV market / creates DVR market
• example: Facebook, Twitter disrupt online social networking
– You may need to do market research to validate your idea.
• assess / develop business ideas and concepts (what is it?)
• assess revenue potential (can it make money?)
• identify potential for growth (what is the future of the idea?)
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Do you own it?
• You might not "own" your idea if:
– the idea came from a course or project
– you built it in a group (group may collectively own it)
– it uses any university resources (servers, libraries, etc.)
– it uses any university intellectual property
• Many startups must acquire IP protection of their ideas.
– Often close to 100% of the value of a startup is in its IP.
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A minimal startup team
• A hacker
– (developer, writes most of the code)
• A hustler
– (manager, handles business side)
• A hipster
– (designer)
• Some teams have a few hackers instead of just one
– but ignoring the other categories is perilous
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A startup timeline
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Prototypes
• Hack out a prototype.
– spend 2-10 weeks max
– Investors are much more likely to
fund you if you can show them some
minimal initial version of your idea.
• one source: hack-a-thons
– Some universities run 24-hour hack-a-thons where groups build
prototype apps to win prizes.
– Sometimes investors or other groups watch these events and
contact promising groups about turning these into startups.
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Iterating on a prototype
• Even if started as a prototype/hack, software engineering
principles are still important for a project
– back-create a spec and requirements, rough feature list
– set up version control repo
– code review it, refactor poorly designed code
– add unit tests and some system tests
– daily builds and automated tests
– speak to potential users, do UI/usability testing
– re-examine code for security, performance, reliability, etc.
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Money
• Do you need funding to build your prototype?
– Growing a company typically requires money.
– Can you afford to "bleed" till your demo hits?
• Reasons you might need money:
– pay core employees (developers, managers, designers)
– purchase equipment (computers, servers, software, services...)
– pay for licenses to use intellectual property
– rent office space
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Angel investors
• angel investor: An affluent individual who
provides initial capital for a business start-up.
– amount is generally smallish
– gets company off the ground to prototype stage
– often decided quickly and on a fairly informal proposal
– angels are accredited investors to comply with SEC regulations
– in US, many angels (≥40%) are in Silicon Valley
• other sources: NYC, Seattle, Austin, Boston, NC Research Triangle
• angels are compensated with:
– ownership equity (a percentage of ownership of the company)
• implies company's value (e.g. $10k for 5% stock => $200k value)
– convertible debt (options to buy stock in the company later)
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Venture capital
• venture capital ("VC"): Financial
resources given to early-stage companies.
– given to startups by VC firms (groups)
– VC firm gets % of profits or equity (stock)
– different from bank loans; does not need to be paid back
• stages of VC financing:
– seed funding: initial minimal funds; often given by angels
– start-up: early funds from VC firm for marketing/dev
– growth ("series A"): large investment ($1-2M) for preferred stock
– second round: company is successful, but not profiting
– expansion ("mezzanine"): $ given to a newly profitable company
– exit/bridge: VC firm sells stock once company matures
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Getting VC
• VCs won't fund just anyone.
You must convince them.
– have a means of contacting/meeting a VC firm
– pitch your product
– convince the firm that:
• you have a good idea
• people want it
• that you have addressed a problem or need and will solve it
• it is profitable
• it has growth potential
• you have assembled a good team to execute it
• you can beat any (potential) competitors
• you have legal right to produce the product (own relevant IP, etc.)
• you are open to suggestions, partnership with the VC firm
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Funding timeline
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Other funding sources
• friends and family funding :
asking friends to borrow/donate money
• grants or government funding
• bank loans: taking out a standard business loan to be repaid
• public equity: Selling stock in the company
– IPO (initial public offering) often comes after VC funding
• crowd funding: Asking the public for donations
– e.g. Kickstarter
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Startup incubators
• incubator: Program designed to support successful
development of startups by providing business resources.
– business, marketing, and networking advice
– computing resources (computers, net access, servers)
– financial advisors
– management teams
– access to loans and banks
– access to angel investors and/or venture capitalists
– legal advisors (such as for intellectual property rights)
– Examples: Ycombinator, Techstars
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Working at startup - pros
• motivation
– work on something you believe in
• autonomy
– smaller team; you get to make decisions
• ownership
– you may be given stock in the company
• compensation (long-term)
– chance to get rich if company becomes a hit
• casual workplace atmosphere
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Working at startup - cons
• compensation (short-term)
– somewhat lower pay than at big company
• fewer perks
– less free food, games, toys
• job security
– company might fail
• long hours
– entire company's fate rests on short-term milestones;
may have to work long days and/or weekends to meet them
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Startup failure
• Up to 75% of startups fail. Why?
– can't raise enough initial angel/VC funding
– wasting too much money at early stages
– company doesn't begin with the best people
– doesn't produce something people want
– hires too many people too quickly
– hires the wrong people, or people with the wrong skills
– doesn't produce a working product in a timely manner
– not able to successfully monetize the idea
– beaten out by a competitor
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Case Studies of Prototypes
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Case Studies of Prototypes
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Case Studies of Prototypes
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Case Studies of Prototypes
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Case Studies of Prototypes
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Case Studies of Prototypes
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Case Studies of Prototypes
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Case Studies of Prototypes
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Case Studies of Prototypes
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Case Studies of Prototypes
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Case Studies of Prototypes
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Introduction to Social
Entrepreneurship
Definition: Social entrepreneurship refers to the practice of
identifying, developing, and implementing innovative solutions to
address social and environmental challenges.
Characteristics:
•Focuses on creating sustainable social impact alongside financial
returns.
•Employs entrepreneurial principles such as innovation,
risk-taking, and resourcefulness.
•Seeks to address root causes of societal problems rather than
merely alleviating symptoms.
Examples: Muhammad Yunus' Grameen Bank, which pioneered
microfinance to alleviate poverty, is a notable example of social
entrepreneurship.
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Importance of Social Entrepreneurship in
Addressing Social Issues
• Addressing Market Failures: Social entrepreneurs often
target underserved populations and neglected issues that
traditional markets fail to address adequately.
• Driving Innovation: By applying entrepreneurial principles to
social challenges, social entrepreneurs develop innovative
solutions that can disrupt existing systems and create positive
change.
• Catalyzing Systemic Change: Social entrepreneurship goes
beyond charity by fostering sustainable solutions that can lead
to systemic change and long-term impact.
• Amplifying Social Responsibility: Social enterprises inspire
other businesses to incorporate social and environmental
considerations into their operations, contributing to a more
responsible business ecosystem. 37
Examples of Successful Social
Enterprises
• TOMS Shoes (USA): Operates on a one-for-one model, where
for every pair of shoes purchased, a pair is donated to a child
in need, addressing the issue of inadequate footwear in
developing countries.
• BRAC (Bangladesh): A global development organization that
operates a wide range of programs addressing poverty,
healthcare, education, and women's empowerment,
demonstrating the scalability and multifaceted impact of social
enterprises.
• Fairphone (Netherlands): Produces ethically sourced and
environmentally sustainable smartphones, challenging the
electronics industry's norms and promoting fair labor practices
and environmental stewardship.
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Definition and Evolution of
CSR
• Definition: Corporate Social Responsibility (CSR) refers to a
business practice that involves initiatives aimed at benefiting
society beyond the firm's economic interests. It encompasses
voluntary actions that integrate social, environmental, and
ethical considerations into a company's operations and
interactions with stakeholders.
• Evolution: CSR has evolved from a philanthropic add-on to a
fundamental aspect of business strategy. Initially, it was
primarily seen as charitable giving, but it has evolved to
encompass a broader range of activities that address social,
environmental, and ethical concerns while aligning with
business objectives.
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Importance of CSR in
Business Operations
• Enhancing Reputation and Brand Image: CSR initiatives can
improve a company's reputation and brand image by demonstrating
a commitment to social and environmental responsibility, leading to
increased consumer trust and loyalty.
• Mitigating Risks: Proactive CSR practices can help companies
mitigate various risks, including regulatory, legal, environmental, and
reputational risks.
• Attracting and Retaining Talent: Employees are increasingly
drawn to companies with strong CSR commitments, as they want to
work for organizations that make a positive impact on society.
• Fostering Innovation and Long-term Sustainability: CSR
encourages innovation by promoting the development of sustainable
products, services, and business models that address societal needs
while ensuring long-term business viability.
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Different Approaches to CSR
• Philanthropy: Involves charitable donations and contributions to
social causes, such as supporting community development projects,
education initiatives, or disaster relief efforts.
• Environmental Sustainability: Focuses on reducing
environmental impact through measures such as energy efficiency,
waste reduction, sustainable sourcing, and carbon footprint
reduction.
• Ethical Labor Practices: Ensures fair treatment of employees,
including adherence to labor laws, providing safe working conditions,
promoting diversity and inclusion, and combating forced labor and
child labor.
• Other Approaches: Beyond these, CSR can also include initiatives
related to ethical sourcing, community engagement, stakeholder
partnerships, transparency and accountability, and corporate
governance.
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Benefits of CSR for
Businesses
• Enhanced Brand Reputation: CSR initiatives contribute to a
positive brand image and reputation, which can differentiate a
company from its competitors.Consumers are more likely to support
and trust brands that demonstrate a commitment to social and
environmental responsibility.
• Increased Customer Loyalty:CSR can foster customer loyalty and
retention by aligning with the values and concerns of socially
conscious consumers. Studies show that consumers are willing to pay
a premium for products and services from socially responsible
companies.
• Attracting and Retaining Talent: Companies with strong CSR
commitments are more attractive to prospective employees, leading
to higher-quality talent acquisition.CSR initiatives can improve
employee morale, engagement, and retention, resulting in a more
motivated and productive workforce.
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• Risk Mitigation: Proactive CSR practices can help companies
mitigate various risks, including regulatory, legal, environmental, and
reputational risks. By addressing social and environmental issues,
companies can prevent potential crises and negative publicity.
• Access to Capital and Investment Opportunities:Investors are
increasingly considering environmental, social, and governance (ESG)
factors in their investment decisions. Companies with robust CSR
programs may have better access to capital and investment
opportunities, including sustainable and impact investment funds.
• Innovation and Market Differentiation:CSR encourages
innovation by promoting the development of sustainable products,
services, and business models that address societal needs.Companies
that innovate in response to social and environmental challenges can
gain a competitive advantage and differentiate themselves in the
market.
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• License to Operate: CSR initiatives help companies build
positive relationships with stakeholders, including communities,
regulators, NGOs, and the media. Maintaining a social license
to operate is essential for businesses to sustain long-term
operations and growth.
• Long-Term Sustainability: Adopting CSR practices
contributes to the long-term sustainability and resilience of
businesses by considering the impact of their operations on
society and the environment. Sustainable business practices
are essential for addressing global challenges and ensuring
business continuity in the face of changing societal
expectations and environmental pressures.
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Importance of Social Impact
Entrepreneurship
• Addressing Social Needs: Discuss how social impact
entrepreneurship tackles pressing social and environmental
challenges such as poverty, inequality, and climate change.
• Driving Innovation: Highlight the role of social entrepreneurs
in developing innovative solutions to complex problems through
creative thinking and resourcefulness.
• Empowering Communities: Explore how social impact
entrepreneurship empowers marginalized communities by
providing economic opportunities and addressing systemic
barriers.
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Characteristics of Social
Impact Entrepreneurship
• Mission-Driven: Social impact entrepreneurs are driven by a
desire to create meaningful social or environmental change
alongside financial sustainability.
• Scalability: Discuss the importance of scalability in social
impact entrepreneurship to reach a larger audience and
maximize impact.
• Collaboration: Highlight the value of partnerships and
collaboration with stakeholders, including nonprofits,
government agencies, and other businesses.
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Examples
• TOMS Shoes: Explore TOMS' one-for-one model, where for
every pair of shoes sold, a pair is donated to a child in need.
• Warby Parker: Discuss Warby Parker's socially conscious
eyewear business model, which provides affordable glasses to
underserved communities.
• Seventh Generation: Highlight Seventh Generation's
commitment to producing environmentally friendly household
products and promoting sustainability.
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Integrating CSR into
Business Models
• Definition of CSR: Corporate Social Responsibility (CSR)
refers to the voluntary commitment of businesses to operate in
an economically, socially, and environmentally sustainable
manner.
• It involves integrating social and environmental concerns into
the core business operations and interactions with
stakeholders.
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Rationale for Integrating
CSR
•Building Trust with Stakeholders: CSR fosters trust and
credibility among stakeholders, including customers, employees,
investors, and communities. By demonstrating a commitment to
social and environmental responsibility, businesses can build
long-term relationships based on transparency and
accountability.
•Enhancing Brand Reputation: CSR initiatives contribute to a
positive brand image and reputation, which can differentiate a
company from its competitors. Consumers are increasingly
seeking products and services from companies that demonstrate
ethical values and social consciousness.
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• Mitigating Risks: Proactive CSR practices help businesses
identify and mitigate various risks, including regulatory
compliance, reputational damage, and supply chain disruptions.
Addressing social and environmental issues proactively can
prevent potential crises and negative publicity.
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Benefits of Integrating CSR
into Business Models
• Stakeholder Engagement: CSR initiatives foster meaningful
engagement with stakeholders by addressing their concerns
and values.Engaged stakeholders are more likely to support the
company's mission, products, and services, leading to
increased loyalty and advocacy.
• Innovation and Differentiation: Integrating CSR into
business models encourages innovation by fostering creative
solutions to societal challenges. Companies that innovate in
response to social and environmental issues can gain a
competitive advantage and differentiate themselves in the
market.
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• Long-Term Sustainability:
CSR contributes to the long-term sustainability and resilience of
businesses by considering the impact of their operations on
society and the environment. Sustainable business practices
are essential for addressing global challenges and ensuring
business continuity in the face of changing societal
expectations and environmental pressures.
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Implementation
Strategies-CSR
• Embedding CSR into Company Culture: CSR should be
ingrained into the company's values, mission, and
organizational culture to ensure widespread adoption and
commitment. Leadership plays a critical role in promoting a
culture of social and environmental responsibility throughout
the organization.
• Creating Shared Value Initiatives: Companies can identify
opportunities to create shared value by aligning business
objectives with societal needs. Shared value initiatives generate
both economic value for the company and social value for the
communities they serve.
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• Collaborating with Stakeholders:
Collaboration with stakeholders, including NGOs, government
agencies, suppliers, and customers, is essential for designing
and implementing effective CSR initiatives. Partnerships enable
companies to leverage expertise, resources, and networks to
maximize social impact and create sustainable change.
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