Table Of Content

2 Production Credits Vice President & Veronica Publisher: Visentin Acquisitions Editor: Darren Lalonde Marketing Manager: Anita Osborne Editorial Manager: Karen Staudinger Media Editor: Luisa Begani Production and Meaghan Media Specialist: MacDonald Developmental Gail Brown Editor: Editorial Assistant: Maureen Lau Cover Design: Joanna Vieira Cover Photo: Image Source/Getty Images Typesetting: Aptara Printing and Binding: Courier Copyright © 2015 John Wiley & Sons Canada, Ltd. All rights reserved. No part of this work covered by the copyrights herein may be reproduced, transmitted, or used in any form or by any means—graphic, electronic, or mechanical—without the prior written permission of the publisher. Any request for photocopying, recording, taping, or inclusion in information storage and retrieval systems of any part of this book shall be directed to The Canadian Copyright Licensing Agency (Access Copyright). For an Access Copyright Licence, visit www.accesscopyright.ca or call toll-free, 1-800-893-5777. Care has been taken to trace ownership of copyright material contained in this text. The publishers will gladly receive any information that will enable them to rectify any erroneous reference or credit line in subsequent editions. Library and Archives Canada Cataloguing in Publication Bygrave, William D., 1937-, author Entrepreneurship / William D. Bygrave, Babson College, Andrew Zacharakis, Babson College, Sean Wise, Ryerson University. —Canadian edition. ISBN 978-1-118-90685-9 (pbk.) 1. New business enterprises. 2. Entrepreneurship. 3. Small business—Management. I. Zacharakis, Andrew, 3 author II. Wise, Sean, 1970-, author III. Title. HD62.5.B94 2014 658.4’21 C2014-906820-4 Printed and Bound in the United States of America 1 2 3 4 5 CC 18 17 16 15 14 John Wiley & Sons Canada, Ltd. 5353 Dundas Street West, Suite 400 Toronto, Ontario, M9B 6H8, Canada Visit our website at www.wiley.ca 4 ABOUT THE AUTHOR Sean Wise, BA, LLB, MBA, PhD, is an expert on startups and venture capital. He uses this expertise in his various roles as university professor, bestselling author, international business speaker, and partner at Ryerson Futures, a seed stage venture capital fund and technology accelerator. Dr. Wise has published five books and more than two dozen peer-reviewed research papers and case studies of high-growth startups. Dr. Wise spent five seasons as a consultant for CBC on the hit reality show Dragons’ Den before moving in front of the camera as the host of the Naked Entrepreneur, set to appear on the Oprah Winfrey Network in 2015. 5 PREFACE Entrepreneurship gives an economy its vitality. It gives rise to new products and services, fresh applications for existing products and services, and new ways of doing business. Entrepreneurship stirs up the existing economic order and prunes out the dead wood. Established companies that fail to adapt to the changes cease to be competitive in the marketplace and go out of business. Within the broadest definition, entrepreneurs are found throughout the world of business because any firm, big or small, must have its share of entrepreneurial drive if it is to survive and prosper. Bygrave, Entrepreneurship, Canadian Edition focuses on starting and growing independent new ventures. It is based on entrepreneurship courses taught at Babson College in Massachusetts, Ryerson University in Toronto, and at universities around the world. Babson College is ranked as the top school for entrepreneurship in the world and Ryerson University is ranked as the top entrepreneurship school in Canada. This provides an excellent foundation and creates a more relevant resource for Canadian students. The Canadian edition of Bygrave, Entrepreneurship, has been thoroughly revised and enhanced throughout and includes cases and examples from a Canadian perspective. Since the dawn of the twenty-first century entrepreneurial paradigms have been crystalized and startup pedagogy has evolved. One of the most common questions that entrepreneurship educators are asked is, Can entrepreneurship be taught? Our response is that anyone with a desire to become an entrepreneur will be more successful if he or she has taken a course on how to start and grow a new venture. About 30% of the students who have taken the new-venture course at Babson College since 1985 have gone on to start full-time businesses at some time in their careers. Many have started more than one. While this textbook empowers would-be entrepreneurs to start and grow their new ventures, it’s not only for them. Any student who reads this book will learn about the entrepreneurial process and the role of entrepreneurship in the economy. We believe that all business students, regardless of whether they start a new business, will benefit from learning about entrepreneurship. After all, entrepreneurship and small business create most of the jobs in the U.S. and Canadian economies. They are ubiquitous and so integral to the economy that almost every student will work in one way or another with entrepreneurs and small businesses after graduation. This textbook will stand students in good stead—not only for starting their own firms, but also for dealing with startups as investors, bankers, accountants, lawyers, customers, vendors, employees, landlords, and in any other capacity. Information technology and the Internet have profoundly changed the way companies do business, none more so than startup companies. Today’s students were born after the personal computer came into common use, and they came of age in the era of the Web. We believe they need an entrepreneurship text in which information technology is completely integrated all the way through. This book combines concepts and cases to present the latest theory about entrepreneurship and relate actual experiences. The concepts cover what would-be entrepreneurs need to know to start and grow their businesses, and the cases illustrate how real entrepreneurs have gone out and done it. They cover all stages of the entrepreneurial process, from searching for an opportunity to shaping it into a 6 commercially attractive product or service, launching the new venture, building it into a viable business, and eventually harvesting it. We have also included concepts such as the lean startup methodology, agile development, and customer development—all concepts that are less than a decade old. Chapter 1 discusses the role of entrepreneurship in the economy and looks at the entrepreneurial competitiveness of nations throughout the world. Chapter 2 is an overview of the factors critical for starting a new enterprise and building it into a successful business. Chapters 3 through 9 look in detail at what budding entrepreneurs need to do before they open their doors for business. The section starts with searching for opportunities and evaluating them. It explains how to build a workable business model and covers marketing, selling, strategy, team building, financial projections, and business planning. At the end of this section students will know how to write a business plan and how much startup capital they will need to start their ventures. The next section, chapters 10 through 12, deals with financing businesses. Chapter 10 reviews the sources of financing for starting and growing businesses. Chapter 11 discusses the nuts and bolts of raising money, particularly equity, to start and grow a business. Chapter 12 examines debt and other sources of financing. Entrepreneurs need to understand the legal and tax issues associated with organizing a new business. They also need to know how to protect their intellectual capital. Chapter 13 explores these topics. Anyone can start a new venture, but very few new businesses grow into substantial enterprises. Chapter 14 discusses what it takes to grow a business into a healthy company that provides financial rewards for the entrepreneur and good jobs for employees. Finally, Chapter 15 looks at social entrepreneurship. Today, many students are looking at business ideas that may not only earn a profit, but also address a social concern. Each chapter is accompanied by a case study of entrepreneurs in action. We chose the cases carefully, using these criteria: The entrepreneurs and their companies represent a spectrum of situations and industries that is as broad as we could make it. The judgment point in most cases occurs in the twenty-first century. All stages of the entrepreneurial process are covered, from pre-startup through harvest. There’s no substitute for the experience gained from actually starting a business, but we believe that the case studies provided at the end of each chapter will enable students to gain wisdom that would take years to pick up by trial and error as entrepreneurs starting and building businesses from scratch. In Chapter 2, the end-of-chapter case features iconic Canadian entrepreneur John Sleeman and his family’s legacy—Sleeman Breweries. The Chapter 4 case looks at Zumba and how three South American entrepreneurs created a new exercise craze. It explores the entrepreneurs as they try to determine the best business model for their venture. In Chapter 5 we examine Eu Yang Sang and how this highly successful Singaporean company works to grow into new global markets—specifically China and the United States. The company has to consider how customers in these markets are different and also what kinds of channels might be appropriate to reach these customers. The Chapter 7 case featuring Zeo, Inc. looks at how three college-age founders build their team. They recruit and form a scientific advisory board, and they seek and hire a CEO to help the company penetrate and build its market. Chapter 11 features Derek Szeto, founder of Red Flag Deals as he started, grew, and finally exited his successful venture. Finally, Chapter 15 features Bruce Poon Tip founder of G Adventures, a social entrepreneurship that successfully harmonizes a profitable bottom line with environmental quality and social justice. With these and other cases and examples throughout the textbook, we are confident 7 that the Canadian edition of Bygrave, Entrepreneurship, fulfills our mission of empowering and enabling young entrepreneurs. Each chapter ends with a unique Opportunity Journal. Here students can reflect on the lessons learned and think about how to apply them to their own entrepreneurial ventures or to managing their careers. Finally, a Web exercise builds upon key concepts covered in each chapter. Teaching Supplements The following teaching supplements to accompany Bygrave, Entrepreneurship, Canadian Edition are available on the instructor’s companion website at www.wiley.com/go/bygravecanada. Instructor’s Manual. The instructor’s manual has been designed to facilitate convenient lesson planning and includes the following: General Chapter Outline. The main headers provide a quick snapshot of all of the chapter content. Case Teaching Notes. Detailed teaching notes go into depth on the material covered in each chapter’s accompanying case. They include discussion questions, classroom activities, and additional information on the businesses and entrepreneurs from the cases. PowerPoint Slides. A robust set of PowerPoint slides gives you the ability to completely integrate your classroom lecture with a powerful visual statement of chapter material. Test Bank. With 60 questions per chapter, the test bank consists of multiple choice, true/false, and short answer questions of varying difficulty. A computerized version of this test bank is also available so that you can customize your quizzes and exams. Additional Cases. In addition to the 15 cases included in the book, additional cases, available on the book’s companion site, give instructors more choices and give students more real-life examples. Videos. A hallmark of the Canadian edition is the video content integrated throughout. These videos feature author Sean Wise’s series The Naked Entrepreneur Show (www.NakedEntrepreneur.tv). The show features interviews with prominent entrepreneurs and innovators sharing their experience, knowledge, and insight into what it takes to be a successful entrepreneur. Icons throughout the textbook indicate where related video content is available. As well, an additional set of videos on the book’s website provide students with first-hand accounts from entrepreneurs with in-depth, detailed analysis of their venture. These videos feature entrepreneurs in a question-and-answer session with students—an invaluable opportunity for students to gain first- hand knowledge. 8 These videos are ideal lecture launchers and a great way to grab a class’s attention. Entrepreneurship Simulation. Available with the textbook is Traction, a strategic entrepreneurship simulation game that allows students to develop a startup company in both pre- and post-revenue stages —focusing on the team, funding, product development, business models, internal processes, and so on. This simulation combines academic concepts and practical experience. Students learn to manage in an information-uncertain environment with an evolving business model, complete with Web access, live agent support, topical social media, grading metrics, syllabus support, and presentations of concepts. Traction provides students with an opportunity to put entrepreneurship concepts into practice. Ask your local Wiley representative for more information. Acknowledgments We are forever indebted to everyone involved in the entrepreneurial process who has shared their experience and wisdom with us. They include entrepreneurs from novices to old hands, informal investors, business angels, venture capitalists, bankers, lawyers, and landlords—indeed, anyone involved with entrepreneurs. We have learned so much from them. We’re especially thankful for all the students and alumni we have worked with over the years. Their feedback has helped us shape what we teach and how we teach it. We would also like to thank our student research assistants, Ryerson University graduates Madelon Crothers and Phillip Raffi. Video content was produced by Ryerson’s Radio & Television faculty and managed by Dana Abou Shackra. Many reviewers offered thoughtful suggestions that have improved this book. We are indebted to every one of them: Richard Benedetto, Merrimack College Lowell Busenitz, University of Oklahoma Luella Chiasson, Nova Scotia Community College Pat H. Dickson, Georgia Institute of Technology Hung-bin Ding, Loyola University Angelo Dossou-Yovo, Dalhousie University William Gartner, Clemson University Todd A. Finkle, University of Akron Vance H. Fried, Oklahoma State University Jeffrey June, Miami University of Ohio Steve Karpenko, Bishop’s University Mohammad Keyhani, University of Calgary Jay Krysler, The Northern Albert Institute of Technology (NAIT) Nicola Lacertera, University of Toronto Mark Lieberman, USC Marshall School of Business 9 Peter Miller, Seneca College Heidi Neck, Babson College William R. Sandberg, University of South Carolina P.K. Shukla, Chapman University We are indebted to our families, our patient and supportive spouses, and our beautiful and talented children. Thank you for being so understanding when we were pushing hard to meet our deadlines. Finally, much love is sent to our latest entrepreneur, born during the writing of this text, Edison Atlas Wise. 10