Bringing Entrepreneurial Ideas to Life
We just submitted a brand new paper.
Abstract:
Organizational design in the context of new venture development is particularly challenging due to initially severe resource constraints. Deepening our understanding of differential productivity in the startup resource assembly process is therefore important. We address the twin questions of what assets are important to venture performance, and under what conditions are those assets especially important? We do so by considering initial venture idea assets and founder contracting experience. The resource-based view of the firm stresses developing the right assets, which accords with idea assets. Firm boundary theories of the firm emphasize structuring relationships in the right way given a set of organizational assets, which accords with founder contracting experience. Using unique survey data, we find that neither view by itself is as important as both theories taken together. We therefore advance an integrated perspective by showing that new ventures perform better when they both identify valuable resources and also assemble human assets with expertise in structuring organizational arrangements to commercialize those ideas. An important implication is that organizational resources have a range of potential values, and that realizing the upper range of value capture involves the additional ability to structure organizational relationships.
Friday, October 30, 2009
Why Do Start-Up Small Businesses Fail?
Below will give you an idea of why Start-ups fail a lot of times.
However, the first few points will also give you an idea of what VCs look for in a start-up venture before they consider investing. Apart from the below pointers, VCs also look out for the amount of skin the "owners" have in the start-up.
1. The Idea .... The foremost thing is the idea behind starting the venture (business). The foundation of this idea is of primary importance. If it's not given a comprehensive thought and planning .... then it will only see DOOM's DAY.
2. Execution of this plan .... Execution is critical. If done well then one can sail through with a little less money as well. However, this is where most start-ups are blown off.
3. Management .... Amateurs with lack of experience on planning both actions and money, lose out in the race. Most of the time they are at the losing end simply because they are too early in the business ... often because of ROSY pictures painted in their minds (unrealistic and unsupported expectations). This is still better than another worse condition. That being that too often some management of start-up companies have double standards. The idea shown is different from what they actually want to gain. It could be a short term loss making venture that is planned only for quick personal gains. This is the worst scenario.
4. Run-out of Money ..... It depends where the funding is coming from obviously. Venture capitalists today are known to take more than a year to go through the analysis of profitability of an idea. At the same time they are looking at an investment period of a max of 4-5 years and expect aggressive profits. This is a situation that puts pressures on the very vision and forces of the core management team to look for short term gains.
The consequence is, they lose long term vision and slip into "money drains". If the money is coming from conventional HNI investors, then they start looking for early results since there is no understanding of life cycle and the business both. The situation boils down to .... "You said, this would happen. So why has this not happened?" It generally comes within 3-4 months. Lack of patience and fading trust, stops the committed funds that were needed to survive.
5. Run-out of Commitment .... Usually, markets don't perceive new players as genuine long term players because there is so much generalization. This can be thoroughly demotivating. Pressures mount up and investors ratchet up more pressures. This makes the Management Team lose focus completely. So it also looks like they have lost commitment. However, this is not the case many times. It is just that the conducive environment for SUCCESS is snatched away.
6. Investors are those people who invest money for medium/long term gains. These gains have to be spread over time. The better the support system for any business, the better it performs. But, it is strange that no one understands this when it comes to investing in new ventures.
WHY do people not look at long term investment, when it comes to start-ups? All Fortune companies were also start-ups when they began. It is only over a long period of time that they have become so BIG. People will easily play safe by investing money for 25 years in a Govt. company / Fortune company but not start-ups.
There is lack of a belief system. This is one of the big reasons for dooming start-ups. A full fledged support system should be created to ensure success and over a longer time, not just 3-4 years. If the idea is right, SUCCESS is certain. Usually most ideas are good, if implemented properly and are need based. No doubt the risk is high, but gains are even higher.
7. Due to all these factors and a few others, start-up companies have a huge problem in attracting talent. So a big compromise needs to be made on this account. Also, technology may be a cause of concern since it costs a lot of money and returns are not as quick as one would demand.
So start-ups are constrained by these and several other factors, to ensure FAILURE. That may sound like a pessemisstic view .... but not really. I wanted to hit you between the eyes with some reality so you'll wake-up .... and put in the effort necessary to avoid the above pitfalls. Do that ... and you won't be a failure. You'll be one of the success we celebarte and point to.
However, the first few points will also give you an idea of what VCs look for in a start-up venture before they consider investing. Apart from the below pointers, VCs also look out for the amount of skin the "owners" have in the start-up.
1. The Idea .... The foremost thing is the idea behind starting the venture (business). The foundation of this idea is of primary importance. If it's not given a comprehensive thought and planning .... then it will only see DOOM's DAY.
2. Execution of this plan .... Execution is critical. If done well then one can sail through with a little less money as well. However, this is where most start-ups are blown off.
3. Management .... Amateurs with lack of experience on planning both actions and money, lose out in the race. Most of the time they are at the losing end simply because they are too early in the business ... often because of ROSY pictures painted in their minds (unrealistic and unsupported expectations). This is still better than another worse condition. That being that too often some management of start-up companies have double standards. The idea shown is different from what they actually want to gain. It could be a short term loss making venture that is planned only for quick personal gains. This is the worst scenario.
4. Run-out of Money ..... It depends where the funding is coming from obviously. Venture capitalists today are known to take more than a year to go through the analysis of profitability of an idea. At the same time they are looking at an investment period of a max of 4-5 years and expect aggressive profits. This is a situation that puts pressures on the very vision and forces of the core management team to look for short term gains.
The consequence is, they lose long term vision and slip into "money drains". If the money is coming from conventional HNI investors, then they start looking for early results since there is no understanding of life cycle and the business both. The situation boils down to .... "You said, this would happen. So why has this not happened?" It generally comes within 3-4 months. Lack of patience and fading trust, stops the committed funds that were needed to survive.
5. Run-out of Commitment .... Usually, markets don't perceive new players as genuine long term players because there is so much generalization. This can be thoroughly demotivating. Pressures mount up and investors ratchet up more pressures. This makes the Management Team lose focus completely. So it also looks like they have lost commitment. However, this is not the case many times. It is just that the conducive environment for SUCCESS is snatched away.
6. Investors are those people who invest money for medium/long term gains. These gains have to be spread over time. The better the support system for any business, the better it performs. But, it is strange that no one understands this when it comes to investing in new ventures.
WHY do people not look at long term investment, when it comes to start-ups? All Fortune companies were also start-ups when they began. It is only over a long period of time that they have become so BIG. People will easily play safe by investing money for 25 years in a Govt. company / Fortune company but not start-ups.
There is lack of a belief system. This is one of the big reasons for dooming start-ups. A full fledged support system should be created to ensure success and over a longer time, not just 3-4 years. If the idea is right, SUCCESS is certain. Usually most ideas are good, if implemented properly and are need based. No doubt the risk is high, but gains are even higher.
7. Due to all these factors and a few others, start-up companies have a huge problem in attracting talent. So a big compromise needs to be made on this account. Also, technology may be a cause of concern since it costs a lot of money and returns are not as quick as one would demand.
So start-ups are constrained by these and several other factors, to ensure FAILURE. That may sound like a pessemisstic view .... but not really. I wanted to hit you between the eyes with some reality so you'll wake-up .... and put in the effort necessary to avoid the above pitfalls. Do that ... and you won't be a failure. You'll be one of the success we celebarte and point to.
Thursday, October 29, 2009
Oprah's 2008 address at Stanford
Oprah talks to graduates about feelings, failure and finding happiness
Not a small topic this is, finding happiness. But in some ways I think it's the simplest of all. Gwendolyn Brooks wrote a poem for her children. It's called "Speech to the Young : Speech to the Progress-Toward." And she says at the end, "Live not for battles won. / Live not for the-end-of-the-song. / Live in the along." She's saying, like Eckhart Tolle, that you have to live for the present. You have to be in the moment. Whatever has happened to you in your past has no power over this present moment, because life is now.
But I think she's also saying, be a part of something. Don't live for yourself alone. This is what I know for sure: In order to be truly happy, you must live along with and you have to stand for something larger than yourself. Because life is a reciprocal exchange. To move forward you have to give back. And to me, that is the greatest lesson of life. To be happy, you have to give something back.
I know you know that, because that's a lesson that's woven into the very fabric of this university. It's a lesson that Jane and Leland Stanford got and one they've bequeathed to you. Because all of you know the story of how this great school came to be, how the Stanfords lost their only child to typhoid at the age of 15. They had every right and they had every reason to turn their backs against the world at that time, but instead, they channeled their grief and their pain into an act of grace. Within a year of their son's death, they had made the founding grant for this great school, pledging to do for other people's children what they were not able to do for their own boy.
The lesson here is clear, and that is, if you're hurting, you need to help somebody ease their hurt. If you're in pain, help somebody else's pain. And when you're in a mess, you get yourself out of the mess helping somebody out of theirs. And in the process, you get to become a member of what I call the greatest fellowship of all, the sorority of compassion and the fraternity of service.
The Stanfords had suffered the worst thing any mom and dad can ever endure, yet they understood that helping others is the way we help ourselves. And this wisdom is increasingly supported by scientific and sociological research. It's no longer just woo-woo soft-skills talk. There's actually a helper's high, a spiritual surge you gain from serving others. So, if you want to feel good, you have to go out and do some good.
But when you do good, I hope you strive for more than just the good feeling that service provides, because I know this for sure, that doing good actually makes you better. So, whatever field you choose, if you operate from the paradigm of service, I know your life will have more value and you will be happy.
I was always happy doing my talk show, but that happiness reached a depth of fulfillment, of joy, that I really can't describe to you or measure when I stopped just being on TV and looking at TV as a job and decided to use television, to use it and not have it use me, to use it as a platform to serve my viewers. That alone changed the trajectory of my success.
Not a small topic this is, finding happiness. But in some ways I think it's the simplest of all. Gwendolyn Brooks wrote a poem for her children. It's called "Speech to the Young : Speech to the Progress-Toward." And she says at the end, "Live not for battles won. / Live not for the-end-of-the-song. / Live in the along." She's saying, like Eckhart Tolle, that you have to live for the present. You have to be in the moment. Whatever has happened to you in your past has no power over this present moment, because life is now.
But I think she's also saying, be a part of something. Don't live for yourself alone. This is what I know for sure: In order to be truly happy, you must live along with and you have to stand for something larger than yourself. Because life is a reciprocal exchange. To move forward you have to give back. And to me, that is the greatest lesson of life. To be happy, you have to give something back.
I know you know that, because that's a lesson that's woven into the very fabric of this university. It's a lesson that Jane and Leland Stanford got and one they've bequeathed to you. Because all of you know the story of how this great school came to be, how the Stanfords lost their only child to typhoid at the age of 15. They had every right and they had every reason to turn their backs against the world at that time, but instead, they channeled their grief and their pain into an act of grace. Within a year of their son's death, they had made the founding grant for this great school, pledging to do for other people's children what they were not able to do for their own boy.
The lesson here is clear, and that is, if you're hurting, you need to help somebody ease their hurt. If you're in pain, help somebody else's pain. And when you're in a mess, you get yourself out of the mess helping somebody out of theirs. And in the process, you get to become a member of what I call the greatest fellowship of all, the sorority of compassion and the fraternity of service.
The Stanfords had suffered the worst thing any mom and dad can ever endure, yet they understood that helping others is the way we help ourselves. And this wisdom is increasingly supported by scientific and sociological research. It's no longer just woo-woo soft-skills talk. There's actually a helper's high, a spiritual surge you gain from serving others. So, if you want to feel good, you have to go out and do some good.
But when you do good, I hope you strive for more than just the good feeling that service provides, because I know this for sure, that doing good actually makes you better. So, whatever field you choose, if you operate from the paradigm of service, I know your life will have more value and you will be happy.
I was always happy doing my talk show, but that happiness reached a depth of fulfillment, of joy, that I really can't describe to you or measure when I stopped just being on TV and looking at TV as a job and decided to use television, to use it and not have it use me, to use it as a platform to serve my viewers. That alone changed the trajectory of my success.
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