Entrepreneurship Chapter 12 Homework Accumulated Over Time Decisions Create Cultures And

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Instructor Resource

Neck, Entrepreneurship

SAGE Publishing, 2018

Lecture Notes

Chapter 12: Bootstrapping for Resources

Learning Objectives

• Define bootstrapping and illustrate how it applies to entrepreneurs.

• Identify common bootstrapping strategies used by entrepreneurs.

• Explain the difference between crowdsourcing and crowdfunding

Notable Quote

• “Waiting until you get funding for all your ideas can be compared with taking the

chances of getting struck by lightning while you are standing at the deep end of a

swimming pool on a very sunny day.”

• Gordon Sharp, author

Start with the eight Components of Entrepreneurship

• Reflect on your desired impact on the world.

• Start with means at hand.

• Describe the idea today.

Instructor Resource

Neck, Entrepreneurship

SAGE Publishing, 2018

Notes:

Here is a quick reminder of the eight steps from Chapter 2.

Bootstrapping

• Bootstrapping is the process of building or starting a business with very little funding or

capital or virtually nothing at all.

Notes:

Bootstrapping Strategies

• Be frugal

• Renting/ leasing before buying

• Minimize personal salary

• Use your network

• Offering equity reimbursement

• Low operating inventory

Notes:

Crowdsourcing

• Crowdsourcing—the process of using the Internet to attract, aggregate, and manage

ostensibly free labor from enthusiastic customers and like-minded people.

Notes:

Instructor Resource

Neck, Entrepreneurship

SAGE Publishing, 2018

Throughout this text we have emphasized the importance of information as a critical and

Crowdsourcing

• Crowdsourcing to improve medical treatment—PatientsLikeMe

• Crowdsourcing to reduce labor costs—Local Motors

• Crowdsourcing through technology—Wikihouse

Crowdfunding

• Crowdfunding—the process of raising funding for a new venture from a large audience

(the “crowd”) typically through the Internet.

Notes:

Crowdfunding is such a recent phenomenon that very little research on it has been conducted.

One study used data from the largest and most well-known crowdfunding site, Kickstarter.

The study utilized data from 48,526 funding efforts representing $237 million in pledges or

contributions. Of these projects, 48% succeeded in raising their goal investment. Failed projects

tended to receive $900 in pledges in comparison with successful projects, which raised an

average of $7825.

Instructor Resource

Neck, Entrepreneurship

SAGE Publishing, 2018

Crowdfunding Sites

• Kickstarter—U.S. based

• Indiegogo—Global

• RocketHub—Science-related projects

• Peerbackers—Creative, civic, entrepreneurial projects

• Quirky—for inventors

• Crowdrise—nonprofit fundraising

Notes:

Just as crowdsourcing is a useful way to acquire valuable feedback and information,

crowdfunding can be an effective way of getting the funds you need to really get your business

3 Rules for Kickstarter

• Projects must create something to share with others.

• Projects must be honest and clearly presented.

• Projects can’t fundraise for charity, offer financial incentives, or involve prohibited

items.

Notes:

Each Kickstarter project is set up to run over a set period of time with a set fundraising goal.

Project creators can build web pages that describe the projects they are looking to fund, the

Instructor Resource

Neck, Entrepreneurship

SAGE Publishing, 2018

Critical Thinking Questions

• Do you want to work in a company with a cultural story about success achieved from

lying or tricking others?

• How much “embellishment” is it acceptable for entrepreneurs to convey about their

product or service?

• How do you determine the point at which an embellishment has to be acknowledged

and the truth told—or the embellishment exaggerated even further?

Notes:

Key Crowdfunding Statistics: Smaller Goals are More Attainable

• Average campaign is $7000

• Average length of campaign is nine weeks

• More successful campaigns obtain 30% in first week

Notes:

Key Crowdfunding Statistics: Marketing Drives Raises

• There is a direct correlation between the number of outside links to a crowdfund and

the success of the fundraise.

• Social media is critical.

Notes:

Instructor Resource

Neck, Entrepreneurship

Equity Crowdfunding

• Investors become shareholders

• Gaining popularity

Four Contexts of Crowdfunding

• Patronage Model

• Lending Model

• Reward-Based Model

• The Investor Model

Notes:

The patronage model describes the financial support given by backers without any expectation

In the lending model funds are offered as loans with the expectation that the money will be

repaid. Lending models can take different forms; for example, some backers will expect interest

to be paid on the loan, while other backers might only expect to be reimbursed if and when the

Reward-based crowdfunding involves rewarding backers for supporting a project. As in the

example of Kickstarter, this is the most popular form of crowdfunding today. Rather than giving

Instructor Resource

Neck, Entrepreneurship

SAGE Publishing, 2018

which can often take the form of more unique offerings such as product samples or

experiences.

For example, Coolest Cooler founder Ryan Grepper rewards his backers by giving them the

option to receive a discount on the Coolest Cooler product, or branded T-shirts and beverage

Advantages of Crowdfunding

• Provides funding

• Gauges interest and enthusiasm

• Builds early relationships with customers

• Variety of options

• Builds excitement

Notes:

There are many benefits to crowdfunding for entrepreneurs all over the world. Not only will

crowdfunding provide the money you need to get your business off the ground, but it also

Instructor Resource

Neck, Entrepreneurship

SAGE Publishing, 2018

Quick Guide to Successful Crowdfunding

• Make sure your product solves a problem

• Test and refine your idea

Critical Thinking Questions

• What would you consider to be the pros and cons of crowdfunding?

• 2. How would you use crowdfunding to raise funds for your own project?

• 3. How would you ensure your product was delivered on time to meet demand and

expectations?

Notes:

Quick Guide to Successful Crowdfunding

• Money matters

• Focus on the pitch

Common Crowdfunding Mistakes

• Choosing the wrong platform

• Setting an unrealistic funding goal

Common Crowdfunding Mistakes

• Failure to get feedback and advice from the “crowd”

Instructor Resource

Neck, Entrepreneurship

SAGE Publishing, 2018

• Insufficient media coverage

• Failure to deliver product or rewards

Notes:

Critical Thinking Questions

• Of the top five reasons for success, which do you think are most attainable for your

entrepreneurial idea?

• 2. Of the top five reasons for failure, which do you think your entrepreneurial idea is

most vulnerable to?

Notes:

Crowdfunding is an exciting process. It is an excellent way for you to make new contacts, build

your brand, attract customers, raise awareness for your products, and create a buzz before