Technology Ventures: From Idea to OpportunityChapter 6: Summary

Our greatest glory is not in never falling but in rising every time we fall.

Confucius

What determines the success of entrepreneurial efforts and how can they be managed?

A new venture that creates a novel solution to a problem will be subject to uncertainty of outcome. An action in an uncertain market is sure to experience a risk of delay or loss. It is the entrepreneur’s task to reduce and manage all risks as much as possible.

Summary

Technology Ventures: From Idea to OpportunityChapter 6: concept

Risk is the chance or possibility of loss.

Regret is the amount of loss a person can tolerate.

Technology Ventures: From Idea to OpportunityChapter 6: Figure 6.1

Risk = Hazard x UncertaintyHazard =Level of Total Investment

Perceived Risk

Attractive Venture

Opportunity

New Venture Choice

Anticipatedreturns

Variability of Outcomes = Uncertainity

Risk Adversity of Team

Fit of Team Competencies with Venture

Decision

Decision

Technology Ventures: From Idea to OpportunityChapter 6: concept

Economies of scale are expected based on the concept that larger quantities of units sold will result in reduced per-unit costs.

Scalability refers to how big a firm can grow in various dimensions to provide more service.

Question: A new firm plans to develop and sell a database offering information on college admissions and selectivity. If successful, will this firm expect economies of scale and scalability?

Technology Ventures: From Idea to OpportunityChapter 6: Figure 6.7

Network economies arise in industries where a network of complementary products is a determinant of demand (also called network effects).

+

+

Re-enforcing Loop

Utility (Value) of the network

Wide visibility and recognition of the value of the network

+

Number of users on the network

The reinforcing characteristic of a positive loop exhibiting network effects.

Technology Ventures: From Idea to Opportunity

Usability is a measure of the quality of a user’s experience when interacting with a product.

The Five Factors of Usability

Ease of Learning How long does it take to learn the product's operation?

Efficiency of Use Once experienced, how fast can the user complete the necessary steps?

Memorability Can the user remember how to use the product?

Error Frequency and Severity

How often do users make errors and how serious are these errors?

Satisfaction Does the user like operating the product?

Chapter 6: Table 6.6

Technology Ventures: From Idea to OpportunityChapter 6: Figure 6-11

Risk and Return

40

30

20

10

0

0 Low Moderate High Highest

Annual Expected

Return (%)

Higher return & higher risk of a disruptive application

High-return & high risk venture

Risk-free T-bill

S&P500 stock portfolio

Low risk franchise

Moderate risk venture

Technology Ventures: From Idea to OpportunityChapter 6: Principle

The entrepreneur seeks to manage risks and attain economies of scale, scope, and networks while achieving scalability of the business.

Technology Ventures: From Idea to OpportunityChapter 6: Venture Challenge

VENTURE CHALLENGE

1)Describe the major risks for your venture. How can you reduce these risks?

2)What is the potential for economies of scale and scope? Is this business scalable?

3)Describe the venture’s potential for creating network effects.

4)Is your product or service a disruptive application?

Technology Ventures: From Idea to OpportunityChapter 6: DVD Video

DVD Video

“Types of Entrepreneurial Risk”

Jerry Kaplan (Winster)