APS1015 Class 10: Scaling Social Entrepreneurship

APS 1015: Social Entrepreneurship

Class 10: Scaling Social Enterprise Wednesday, July 10, 2013

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Instructor: Norm Tasevski ([email protected]) Karim Harji ([email protected])

© Norm Tasevski & Karim Harji

Agenda

•  Seizing the Scale Opportunity •  Managing the Scale Opportunity •  Break •  Overview of Final Presentations

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Seizing the Scale Opportunity

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The “Scale Opportunity”

The point in time when you have a critical choice: grow substantially larger, stay purposely small, or quit

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The Entrepreneurial Life Cycle

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IDEA DEVELOPMENT PROOF OF CONCEPT START-UP SCALE REPLICATION EXIT

•  Few/no critical decisions made about business model

•  Pre-revenue (no product, no customers)

•  Timing – typically a few months

•  Preliminary business model identified, but may change quickly/fundamentally

•  Pre-revenue (product to be validated, customers to be validated)

•  Timing – typically <1 year

•  First business model decided upon (but could still change)

•  First revenues (first product launched, first customers ID’d)

•  Timing – 1-2 years (or more)

•  Business model solidifies (& new business opportunities emerge)

•  Stable revenues (product established, mature understanding of customers)

•  Timing – ongoing

•  Business model in flux (minor/major changes made regularly)

•  Revenues in flux (inconsistent) •  Timing - ??? (varies)

The Scale Opportunity


How Do You Know You’ve Reached the Scale Opportunity Point?

•  Short answer: –  You won’t know until you get there…

•  Long answer: –  You’ve overcome bumps in the road (imperfect product,

imperfect decision making, unstable cash flows)

–  You have a track record behind you (satisfied customers, refined product offering, brand recognition in the market)

–  Your strategy conversations change (from “how do we stabilize the business?” to “how do we grow the business?”)

–  In some cases, an “outside force” emerges (a big funder/investor looking to invest substantially, another company wanting to partner/merge, etc.)

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Managing the Scale Opportunity

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There are Risks to Scaling…

•  Scaling too quickly without the “fundamentals” in place –  There is a desire to scale much sooner than the business is

ready –  Fundamentals:

1.  Systems (decision making, cash management, product development, production, etc.)

2.  Financial resources (retained earnings, outside capital) 3.  Human resources (the “right” people deployed

effectively) –  The risk: implosion (i.e. get too big too quickly that the systems

can’t keep up) •  Scaling without a proper read of the market

–  You have a superficial/imperfect understanding of the market –  The risk: financial ruin (i.e. the customers you were anticipating

don’t materialize)

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Planning Around These Risks

•  Plan Ahead –  Conduct regular strategic planning –  Be deliberate, not opportunistic (i.e. know when to say “no” to business opportunities)

•  Stay Tuned into the Market –  Do not assume you ever fully know who your customers are (constantly check in) –  Question whether you are targeting the right customers

•  Build the “Right” Systems –  Construct a rigorous decision making system –  Establish core business standards (e.g. documentation, policies and procedures for making

and following through on decisions) –  Hire the right people to manage the scale effort (experienced entrepreneurs) –  Construct a rigorous information system, and collect data (CRM, online info tracking tools,

etc.) •  Stabilize your cash runway

–  Begin investing profits into a reserve –  Seek outside capital for specific purposes (e.g. use of funds targeted to growth objectives) –  Create a rigorous budgeting and financial tracking system

•  Welcome Change! –  Complacency = threat –  Be fully committed to your strategy, but flexible in your approach

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Your Presentations…

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Presentation guidelines

•  Due Dates –  Investment Pitch: Midnight on Sunday, July 21st

•  Format –  PowerPoint deck

•  Time Allotment –  12 min presentation (strict) – will give you 5 and 2 minute

warnings –  6 min Q&A

•  Grading –  To be done by Karim and Norm –  Judges will inform me, but not assign your grades

•  Feedback from Judges –  Norm will email his and judges’ feedback shortly after the

class to integrate into angel investor pitch

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Timing

•  Arrive by 6:30pm!!

•  Group order will be assigned on the Monday prior to the presentation

•  At the end of the pitches, the judges will deliberate (for 10 minutes)

•  Judges will then provide feedback to the entire class (and I will provide individual group feedback)

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Advice for your presentations

•  Focus on the key components of the business model, and highlight the key financial #s –  Can you clearly explain how your business works? How it

makes money? How it generates social/environmental change?

•  Comfortably stick to the time allotment –  In your practice, aim to deliver your presentation in 10-11

minutes

•  Anticipate the investor questions –  If you were investing your own money into the business,

what would you care to know about the business model?

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Contents for the Presentation…

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•  Overview and mission •  Management and

Advisors •  Problem

–  social issue being addressed

•  Size of the problem –  how big is the social issue

•  Solution –  Here’s how it works…

•  Value proposition –  Inc. social benefit

•  Business model •  Competitive advantage •  Collaboration/

partnerships •  Marketing and Sales •  Financial projections •  Financial requirements


PowerPoint tips

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An Example…

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