ENTREPRENEURSHIP

REPORTERS: ESTORGIO
SALVACION
LAUDE
DAPLAS
Why Partners are Needed?

- The right partners can provide the

needed initial funding, opening doors to
further fund and spread financial risk,
creating immediate credibility and
making the entrepreneur highly
accountable.
  INVENTORY OF BENEFITS OF HAVING GREAT
PARTNERS

1. Provide immediate feedback or strengths and weaknesses of plans

2. Help give operational and strategic directions

3. Provide additional funding

4. Spread out financial risk

5. Narrow your knowledge gap

6. Offer immediate credibility to your company

7.Open their network of contacts to you(key suppliers, customers) to lower cost

8. Give an assurance of fairness on dealing with valuation and stock ownership, specially after
recovering investment.

9. Mentorship on a professional level

10. Mentorship on a personal level

 OUTSIDE INVESTORS AND YOUR COMPANY’S
WORTH

- If outside investors would be needed,

discipline is needed and the entrepreneurs
cannot do the business leisurely as
investors expect the entrepreneur to work
hard for long hours to grow fast, attain
goals, be better than competition and be
market leader.
THREE SERIES OF
INVESTMENT
SERIES REVENUE PROFIT DESCRIPTION RISK LEVEL INVESTMENT
PREMIUM

A NO NO Product or High None or Lowest

service exists
but no business
operation
B YES NO Business exists Moderate but Case-to-Case
with revenue can be
generation but attractive if
lack either, investment will
revenue sources leapfrog volume
or productivity way beyond
scale to be breakeven point
profitable.

C YES YES Company is Low Highest

operating with
both revenue
and profit
increasing
 ENDOWMENT EFFECT AND LOSS AVERSION

-In order for investors to gain, a challenge of

entrepreneurs is to avoid the “endowment
effect”, a supply- side thinking of
overvaluing the things they have, more than
what they are actually worth in the market,
a reflection of emotions and cognitive blind
spots.
 WHAT IS THE ROI EXPECTED?

- ROI ( RETURN ON INVESTMENT)

The best investment is always the one
that gives the highest return on
investment, that also pays out dividend
consistent with investor’s goals.
 WHO TO PARTNER WITH?

- In considering which types of investors

are best to partner with, based on their
expectations and the pressure they might
to impose, expect venture capital and
private equity investors, who are
composed to people organized to
maximize their ROI, to be the most
demanding investors.
 WHAT INVESTORS ARE LOOKING FOR

- There are four important and inter-

related clusters of questions that investors
will likely be asking and entrepreneurs
must have answers for these.
16 QUESTIONS INVESTORS
NEED TO ASK
INTER-RELATED FACTORS FOR GOAL KEY QUESTIONS THEY ASK
INVESTORS TO MAXIMIZE ROI THEMSELVES

MARKET To determine if there is a scalable and • Is the market/industry big with lots
suistanble market of unserved market?
• Can it be scaled fast?
• Are there customers waiting?
• Are there exclusive agreements?

PRODUCT To determine if the value proposition • Is the value proposition(product

is compelling and ownable and price) compelling to the
customers to keep buying?
• Is the product or technology are
already available
• Is there a potential source of
competitive advantage.i.e. a
barrier for competitive entry
(patient,copyright,etc.)?
• Is the margin good for better cash
flow?
INTER-RELATED FACTORS FOR GOAL KEY QUESTIONS THEY ASK
INVESTORS TO MAXIMIZE ROI THEMSELVES

PEOPLE To determine if the entrepreneur is • Has the entrepreneur done well in

trustworthy and believable the past?
• Has the entrepreneur
demonstrated high AQ?
• Is this entrepreneur committed
and is the right person for the
job?(experience,behavior,full
time)
• Does my intuition feel good about
working with the entrepreneur?
(EQ, win-win attitude, realistic
projection, etc.)

ROI To determine if beyond market, • Are uncertainties negated?

product and people, it is a good (Government rules, legal cases,
investment. patent,etc.)
• Is the timing right?
• Are tensions controllable?(Cost,
license, manpower needs,
inventories, receivables,etc.)
• Is it a good deal?
 FORMING YOUR TEAM

- Three issues need to be planned well.

Choosing partners, choosing founding
members and choosing mentors.
12 AGENDA ITEMS FOR A
SHAREHOLDER
AGREEMENT
CRITICAL STAGE KEY QUESTIONS
BEFORE OPERATING • How will decision making among
partners be made?
• Who is to do what?
• How will profit and dividend be
split?
• Is the intent to grow or exit and
sell the business eventually? If
exit, should stockholders sell
individually or as a block?
EXAMPLES OF POTENTIAL
AGREEMENT
Majority decisions among partners. In
case of tie, the chairman decides.
CEO is overall supervision, one
partner in charge of business
development, another marketing,
another operations and logistics, and
another finance.
A management fee of x% is set for
partners actively managing the
business before profit is distributed
according to shares owned.
Partners selling shares must give right
of refusal to fellow partners by way
of open disclosure to all. Preference
is to sell majority or minority shares
as a block, based on an attractive
price earning(PE) ratio.
WHILE OPERATING • What happens when work load of
partners become lighter in the future
because the critical task has been done
ahead?
• Are partners allowed to pursue their
own business opportunity? If so, will
individual partners be required to
submit an opportunity to the board with
right of first refusal?
• What will happen when there is call for
additional capital and one or some
partners cannot or do not wish to put
their corresponding shares?
• What happens when a founder changes
priorities while the business is ongoing?
Software may have lesser workload in the
future, instead of hiring a software
programmer, the IT partner will handle
administration to expand role.
Partnership will have right of first refusal.
Partners are expected to allocate 80% of their
office time to the business.
Partners who cannot and will not put out
additional funds when needed, must agree to
be diluted.
Partners will have vesting schedules and
cannot withdraw investment in the first x
years as a protection to the business.
The management fee will also be affected.
Salary will be reassessed based on time and
impact contribution.
WHEN LEAVING • What happens when things turn bad? Accountabilities to employees and
suppliers will be paid based on a win-win
formula before partners get what is left
of their money.

• How do we ensure that history of the Company website will have a history
company will be preserved and page with founders’ names, partners’
founders, who gave the idea, as well as names and their corresponding
those who brought the idea to life, contribution.
introduced innovation during or after
company launch, are recognized for
their effort?

• In case major conflict, how will this be Legal remedy will be last resort. Senior
resolved? mentor acceptable to parties in conflict
will be the first option under the
principle of win-win.

• In case of an impasse, what must be Consider selling shares to the rest after
done when a conflict cannot be having a conversation in a public place
resolved and one party is unhappy? (like a restaurant) outside the company
(hopefully to maintain collegiality).
4 DIFFERENT TYPES OF
MENTORS NEEDED BY
ENTREPRENEURS
TYPES OF MENTORS ROLE OF MENTOR FOR THE EXAMPLES FOR A START-UP ADVERTISING
NEEDED ENTREPRENEURS AGENCY

OPERAIONAL Guides on matters related to present Client Acquisition, Presentation, Execution

operations, especially key factors for success
that the firm should do exceptionally well

FUNCTIONAL Guides on matters related to support Accounting, Tax, Human Resource

functional areas on which the entrepreneur
may need some advice

PERSONAL Guides on matters related to personal Work-life Harmony

growth

STRATEGIC Guides on matters related to the future Consulting, Service

vision of the entrepreneur
 8 QUALITIES EXPECTED
FROM GREAT MENTORS
1. Interested in the success of the mentee
2. Invest time to listen and understand the different situations of
the mentees
3. Provide advice, both business and personal
4. Help mentees by tapping into the mentor’s work
5. Open doors of opportunities
6. Lessen risk by calling attention to such areas
7. Inspire the meente
8. Sincerely desire that the entrepreneur succeeds and be even
better than them