BRIEF CONTENTS

Preface xxi

Acknowledgments xxvii

About the Authors xxix

PART I . INTRODUCING THE ENTREPRENEURIAL LIFESTYLE

CHAPTER 1. Entrepreneurship: A Global Social Movement 4

CHAPTER 2. Practicing Entrepreneurship 36

CHAPTER 3. Developing an Entrepreneurial Mindset 62

CHAPTER 4. Supporting Social Entrepreneurship 88

PART I I . CREATING AND FINDING OPPORTUNITIES

CHAPTER 5. Generating New Ideas 120

CHAPTER 6. Using Design Thinking 144

CHAPTER 7. Testing and Experimenting in Markets 176

PART I I I . EVALUATING AND ACTING ON OPPORTUNITIES

CHAPTER 8. Building Business Models 202

CHAPTER 9. Planning for Entrepreneurs 224

CHAPTER 10. Creating Revenue Models 250

CHAPTER 11. Learning From Failure 276

PART IV. RESOURCING NEW OPPORTUNITIES

CHAPTER 12. Bootstrapping for Resources 304

CHAPTER 13. Financing for Startups 328

APPENDIX A. Financial Statements and Projections for Startups 359

CHAPTER 14. Developing Networks 382

CHAPTER 15. Navigating Legal and IP Issues 412

CHAPTER 16. Marketing and Pitching Your Idea 444

APPENDIX B. The Pitch Deck 475

Glossary 492

Notes 500

Name Index 516

Subject Index 518

DETAILED CONTENTS

Preface xxi

Acknowledgements xxvii

About the Authors xxix

An Open Letter to All Students 1

PART I . INTRODUCING THE ENTREPRENEURIAL LIFESTYLE

CHAPTER 1. ENTREPRENEURSHIP: A GLOBAL SOCIAL MOVEMENT 4Entrepreneurship Requires Action and Practice 5

Entrepreneurship May Be Different From What You Think 6

Media Images of Entrepreneurs 6

● ● ENTREPRENEURSHIP IN ACTION: Niari Keverian, CEO and Partner, ZOOS Greek Iced Teas 7

Debunking the Myths of Entrepreneurship 8

A Brief History of the Evolution of Entrepreneurship in the United States 12

Emergence of the Self-Made Man (Colonial America Before 1776) 12

An Entrepreneurial Nation (First Industrial Revolution 1776–1865) 12

The Pinnacle of Entrepreneurship (Second Industrial Revolution 1865–1920) 13

Rise of Institutional America (Interwar and Postwar America 1920–1975) 13

Confined Re-Emergence (Knowledge Economy 1.0, 1975–Present) 14

● MINDSHIFT: Tell Me Your Story 16

Types Of Entrepreneurship 16

Corporate Entrepreneurship 16Entrepreneurs Inside 17Buying a Franchise 18Buying a Small Business 18Social Entrepreneurship 18

●● YOU BE THE ENTREPRENEUR 20Family Enterprising 20

Serial Entrepreneurs 21The World Is Participating in Entrepreneurship 22

Entrepreneurship as a Social Movement 23Global Entrepreneurship 24Gender and Entrepreneurship 27What Makes a Country Entrepreneurial? 28● RESEARCH AT WORK: The Diana Project 29

How This Book Will Help You Practice Entrepreneurship 30

●● ● ENTREPRENEURSHIP MEETS ETHICS: Business Practices in Developing Countries 31

CHAPTER 2. PRACTICING ENTREPRENEURSHIP 36Two Main Perspectives on Entrepreneurship 37

● ● ENTREPRENEURSHIP IN ACTION: Rob Hunter, Founder and CEO, HigherMe 38

Prediction and Creation in Action 40

● RESEARCH AT WORK: The Creation Approach 41

The Five Skills Most Important to The Practice of Entrepreneurship 43

The Skill of Play 43The Skill of Experimentation 43The Skill of Empathy 44The Skill of Creativity 44The Skill of Reflection 44

Entrepreneurship Is More a Method than a Process 48

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● ● ENTREPRENEURSHIP MEETS ETHICS: Practicing Entrepreneurship 50

The Practice of Entrepreneurship: An Introduction 50

Eight Components of The Practice of Entrepreneurship 51

Using the Practice to Achieve Ongoing Success 53

● MINDSHIFT: The 3-Hour Challenge 54●● YOU BE THE ENTREPRENEUR 56

The Concept of Deliberate Practice 56

CHAPTER 3. DEVELOPING AN ENTREPRENEURIAL MINDSET 62The Power of Mindset 63

● ● ENTREPRENEURSHIP IN ACTION: Robert Donat, Founder and CEO, GPS Insight 64

What Is Mindset? 66

● RESEARCH AT WORK: Study on Luck 67The Mindset for Entrepreneurship 68

● MINDSHIFT: What Does Your Mindset Say About You? 70

Passion and Entrepreneurship 70Entrepreneurship as a Habit 71

The Self-Leadership Habit 71

The Creativity Habit 74The Fear Factor 75A Creative Mind 76

The Improvisation Habit 78

●● ● YOU BE THE ENTREPRENEUR 80The Mindset as the Pathway to Action 81

Self-Efficacy and Entrepreneurial Intentions 81

The Role of Mindset in Opportunity Recognition 82

●● ● ENTREPRENEURSHIP MEETS ETHICS: Stakeholder Relationships and Trust 83

CHAPTER 4: SUPPORTING SOCIAL ENTREPRENEURSHIP 88The Role of Social Entrepreneurship 89

● ● ●ENTREPRENEURSHIP IN ACTION: Arthur Steingart, Founder of Symp1e 90

● RESEARCH AT WORK: Defining Social Entrepreneurship 91

Social Entrepreneurship and Wicked Problems 91

Types of Social Entrepreneurship 94Social Purpose Ventures 94Social Consequence Entrepreneurship 95Enterprising Nonprofits 96Hybrid Models of Social Entrepreneurship 99

Capital Markets for Social Entrepreneurs 100

● ENTREPRENEURSHIP MEETS ETHICS: The Unintended Consequences of Social Entrepreneurship 101

Microfinance as a Source of Social Financing 103

●● ● YOU BE THE ENTREPRENEUR 104Social Entrepreneurs and Their Stakeholders 104

Types of Stakeholders 107

● MINDSHIFT: Practice Being “Other-Centered” 109Differences Between Social Entrepreneurship And Corporate Social Responsibility 109

Social Entrepreneurship and Global Inclusion 111

PART I I . CREATING AND FINDING OPPORTUNITIES

CHAPTER 5. GENERATING NEW IDEAS 120The Entrepreneurial Mindset and Opportunity Recognition 121

● ● ENTREPRENEURSHIP IN ACTION: Jack McCarthy, Founder, UltimateUglyChristmas.com 122

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What Is an Opportunity? 123Innovation, Invention, Improvement, or

Irrelevant? 123

Opportunities Start with Thousands of Ideas 125The Myth of the Isolated Inventor 126Seven Strategies for Idea Generation 126

● ● ENTREPRENEURSHIP MEETS ETHICS: Improving on Someone Else’s Idea 127

● ● MINDSHIFT: In Love With Your Idea? 130Two Pathways to Opportunity Identification 130

Opportunities Through Active Search and Alertness 132

Active Search 133Alertness 133Building Opportunities: Prior Knowledge and

Pattern Recognition 134

●● ● YOU BE THE ENTREPRENEUR 136From Idea Generation to Opportunity Recognition 136

● RESEARCH AT WORK: SEEC Study 138

CHAPTER 6. USING DESIGN THINKING 144What Is Design Thinking? 145

● ● ENTREPRENEURSHIP IN ACTION: Anna Haupt and Terese Alstin, Founders, Hövding 146

Design Thinking as a Human-Centered Process 147

● RESEARCH AT WORK: Helping You Find Your Inner Adult 149

●●● YOU BE THE ENTREPRENEUR 150Design Thinking Requires Empathy 150

The Design-Thinking Process: Inspiration, Ideation, Implementation 152

● ENTREPRENEURSHIP MEETS ETHICS: Empathy as an Ethical Challenge 153

Inspiration 154Ideation 155Implementation 156

The Three Phases of Design Thinking in Action 157

Pathways Toward Observation and Insights 158Observation Techniques 159

Interviewing as a Useful Technique for Identify Needs 160

Preparing for an Interview 161

● MINDSHIFT: Observations to Insights 162Conducting the Interview 164After the Interview 164

Variations of the Design-Thinking Process 166

CHAPTER 7. TESTING AND EXPERIMENTING IN MARKETS 176What Are Experiments? 177

● ENTREPRENEURSHIP IN ACTION: Mark Wallace, Pete Endres, and Jason Epstein, Cofounders, Parlor Skis 178

The Six Steps of Scientific Experimentation 179

Hypotheses and Customer Identification 181Limited, Low-Cost Experimentation 182Testing Hypotheses With Potential

Customers 182

● ENTREPRENEURSHIP MEETS ETHICS: The Rights of Research Participants 185

Generating Data and the Rules of Experimentation 186

● YOU BE THE ENTREPRENEUR 187● ● RESEARCH AT WORK 188

Types of Experiments 189Trying Out New Experiences 189Taking Things Apart 190Testing Ideas Through Pilots and

Prototypes 190

The Power of Storyboarding 192

● MINDSHIFT: Create a Storyboard and One Simple Experiment 195

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PART I I I . EVALUATING AND ACTING ON OPPORTUNITIES

CHAPTER 8. BUILDING BUSINESS MODELS 202What Is a Business Model? 203

● ENTREPRENEURSHIP IN ACTION: Tanzeel urRehman, Cofounder and CEO, Virtual Force (VF) 204

The Four Parts of a Business Model 205The Offering 206Customers 206Infrastructure 206Financial Viability 206

The Customer Value Proposition (CVP) 206

● ENTREPRENEURSHIP MEETS ETHICS: Attack of the Clones 207

Getting the Job Done 208Four Problems Experienced by Customers 209

● YOU BE THE ENTREPRENEUR 212

Different Types of CVPs and Customer Segments 212

Types of Value Propositions 212Defining Your Target Customer 213Types of Customer Segments 214

The Business Model Canvas (BMC) 215The BMC in Action 218

● MINDSHIFT: Create Your Own BMC 219● ●● RESEARCH AT WORK: Peer-to-Peer

Business Models 220

CHAPTER 9. PLANNING FOR ENTREPRENEURS 224The Importance of Planning to Entrepreneurs 225

● ENTREPRENEURSHIP IN ACTION: Michele Pytko, Bark ‘N Leash 226

The Trim Framework 227

Plans Take Many Forms 227Back of a Napkin 228

● ENTREPRENEURSHIP MEETS ETHICS: Ethical Business Planning 229

Sketches on a Page 230

● MINDSHIFT: The Vivid Vision Checklist 232Business Model Canvas 232The Business Brief 233Feasibility Study 236The Pitch Deck 238The Business Plan 239Summary of Different Types of Plans 241

The Business Plan Debate 242

● YOU BE THE ENTREPRENEUR 244Tips for Writing Business Plans 244

Remove Any of the Fluff 244

● RESEARCH AT WORK: How Valuable Are Business Plans? 245

Be Realistic 245Avoid the Exaggerated Hockey Stick 245Avoid Typos, Grammatical Mistakes, and

Inconsistencies 246

Use Visuals 246

CHAPTER 10. CREATING REVENUE MODELS 250What Is a Revenue Model? 251

● ENTREPRENEURSHIP IN ACTION: Shane Kost, Founder, Chicago Food Planet Food Tours and Food Tour Pros 252

Different Types of Revenue Models 253Unit Sales Revenue Model 253Advertising Revenue Model 254Data Revenue Model 255Intermediation Revenue Model 255Licensing Revenue Model 255Franchising Revenue Model 256Subscription Revenue Model 257

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Professional Revenue Model 257Utility and Usage Revenue Model 257Freemium Revenue Model 257

Generating Revenue From “Free” 258

● ENTREPRENEURSHIP MEETS ETHICS: Creating Revenue Models 259

Direct Cross-Subsidies 260Multiparty Markets 260

Revenue and Cost Drivers 262

● ● YOU BE THE ENTREPRENEUR 262Revenue Drivers 263Cost Drivers 264Income Statement 265

Pricing Strategies 266

● RESEARCH AT WORK: From Freemium to Premium 267

Pricing Products and Services 268Different Types of Pricing Strategies 269

Calculating Prices 271

● MINDSHIFT: Is Value the Same Thing as Price? 272

Cost-Led Pricing 272Target-Return Pricing 272Value-Based Pricing 273

CHAPTER 11. LEARNING FROM FAILURE 276Failure and Entrepreneurship 277

● ENTREPRENEURSHIP IN ACTION: Tom Hatten, Founder and CEO, Mountainside Fitness 278

The Failure Spectrum 280

Fear of Failure 283

● ENTREPRENEURSHIP MEETS ETHICS: Learning From Failure 284

● RESEARCH AT WORK: Grief and Business Failure 286

Global Fear of Failure 287

● YOU BE THE ENTREPRENEUR 289Learning From Failure 291

Lessons Learned by Successful Entrepreneurs 292Building a Blame-Free Environment 292

● MINDSHIFT: Your Failure Résumé 295Getting Gritty: Building a Tolerance for Failure 295

Building Grit 296Removing the Stigma of Failure 297

PART IV. RESOURCING NEW OPPORTUNITIES

CHAPTER 12. BOOTSTRAPPING FOR RESOURCES 304What Is Bootstrapping? 305

● ENTREPRENEURSHIP IN ACTION: Gregor Lawson, AFG Media/MorphCostumes (formerly Morphsuits) 306

Bootstrapping or External Financing? 308The Bootstrapped Startup 309

Bootstrapping Strategies 309

Crowdfunding Versus Crowdsourcing 310

● ENTREPRENEURSHIP MEETS ETHICS: Bootstrapping for Resources 311

Crowdsourcing to Improve Medical Treatment 312Crowdsourcing to Reduce Labor Costs 312Crowdsourcing Through Technology 312

Crowdfunding Startups and Entrepreneurships 313Types of Crowdfunding Sites 314Equity Crowdfunding 315

The Four Contexts for Crowdfunding 316Patronage Model 316

● RESEARCH AT WORK: Crowdfunding: A Revolutionary Change in Funding New Ventures 317

Lending Model 318

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Reward-Based Crowdfunding 318The Investor Model 318

● YOU BE THE ENTREPRENEUR 318The Advantages of Crowdfunding 319

A Quick Guide to Successful Crowdfunding 319

● MINDSHIFT: Kickstarter Assessment 320Make Sure Your Product or Service

Solves a Real Problem 320Test and Refine Your Idea 320Be Prepared 320Seek and Accept Advice 321Get your Campaign Started—Now! 321Money Matters 322Focus on the Pitch 322Make the Most of Crowdfunding

Opportunities 323Commit to Your Campaign 323Avoid the Crowdfunding Curse! 323

CHAPTER 13. FINANCING FOR STARTUPS 328What Is Equity Financing? 329

● ENTREPRENEURSHIP IN ACTION: Jason Craparo, Cofounder, Contap, Inc. 330

Splitting the Ownership Pie 331Stages of Equity Financing 331Forms of Equity Financing 332

The Basics Of Valuation 333How Can Entrepreneurs Value

Their Companies? 333How Do Investors Value Startups? 334Convertible Debt 335

Angel Investors 336Finding an Angel Investor 337Types of Angel Investors 337Angel Groups 340

● YOU BE THE ENTREPRENEUR 341Venture Capitalists (VCs) 341

A Brief History of Venture Capital 342

● ● RESEARCH AT WORK: Talk About the Losses 343How Venture Capital Works 344

● MINDSHIFT: Find an Investor–Entrepreneur Pair 347

Due Diligence 347

Exits/Harvesting 348

The Entrepreneur’s Dilemma 349

Rich or King/Queen? The Trade-off Entrepreneurs Make 349

● ENTREPRENEURSHIP MEETS ETHICS: Approaching Investors 350

A View From the Top 352

APPENDIX A. FINANCIAL STATEMENTS AND PROJECTIONS FOR STARTUPS 359Financial Projections for Startups 359

Three Essential Financial Statements 360The Income Statement 360

The Balance Sheet 362

The Cash Flow Statement 365

Linkages between the Three Financial Statements 368

The Journey of Cash: The Cash Conversion Cycle 368

Building Pro Forma Financial Statements 372The Mechanics and Research 372

Research 373

Building Assumptions: Forecasting Sales 375

Building Assumptions: Cost of Goods and Operating Expenses 376

Labor Estimates 377

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Building Assumptions: Operating Policies and Other Key Assumptions 379

Building Integrated Pro Forma Financial Statements 379

Sensitivity Analysis 380Reasonableness Test 380

CHAPTER 14. DEVELOPING NETWORKS 382The Power of Networks 383

● ENTREPRENEURSHIP IN ACTION: John Hite and Franklin Yancey, Cofounders of College Comfort 384

The Value of Networks 387Advantages to Networks 387Impression Management and Self-confidence 388

● RESEARCH AT WORK: The “Dirtiness” of Professional Networking 389

Self-Selected Stakeholders 390

Building Networks 391

● MINDSHIFT: Analyzing My Network 392Learning How to Network 392Networking to Find Mentors 395

Virtual Networking 396Maintaining Your Network 400

● ENTREPRENEURSHIP MEETS ETHICS: Ethics and Social Media in the Workplace 401

Networking to Build the Founding Team 402Characteristics of a Great Founding Team 402

● YOU BE THE ENTREPRENEUR 403The Value of Team Diversity 405

CHAPTER 15. NAVIGATING LEGAL AND IP ISSUES 412Legal Considerations 413

● ENTREPRENEURSHIP IN ACTION: Corey Hague, FlexGround 414

Types of Legal Structures 416Sole Proprietorship 417General Partnership 417C Corporation 418S Corporation 419Limited Liability Company (LLC) 419Limited Partnership and Limited Liability

Partnership (LP and LLP) 420Benefit Corporation 421Not-for-Profit Entities 421

Legal Mistakes Made by Startups 421

Intellectual Property (IP) 423The Four Types of Intellectual Property 425

● MINDSHIFT: Patent Search 427Global IP Theft 428

● ● RESEARCH AT WORK: Patent Trolls 429● YOU BE THE ENTREPRENEUR 429

Common IP Traps 430Publicly Disclosing Your Innovation 430Failure to Protect Product and Processes 431Inability to Determine Originality 431Failure to Assign Ownership 431Failure to Protect IP in Global Markets 432

Hiring Employees 432Equal Employment Opportunity 432Employer Identification Number (EIN) 432

● ENTREPRENEURSHIP MEETS ETHICS: Navigating Legal and Intellectual Property Issues 433

Unemployment and Workers’ Compensation 433

Withholding Taxes 433Employee Forms 434Benefits 434Workplace Posters 435Safety Measures 435The Employee Handbook 435

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Hiring a Contractor or an Employee? 436

Compensating Employees 437

CHAPTER 16. MARKETING AND PITCHING YOUR IDEA 444The Role of Marketing and Pitching in Entrepreneurship 445

● ENTREPRENEURSHIP IN ACTION: Andrew Loos, Managing Partner and Cofounder, Attack! Marketing 446

The Basic Principles of Marketing 447Branding 449Reframing the 4 Ps 453

Entrepreneurial Marketing 455Traditional Marketing Versus Entrepreneurial

Marketing 455Features of Entrepreneurial

Marketing 455Guerrilla Marketing 456

Marketing Through Social Media 457Getting the Most From

Social Media 458Creating Content That Drives Sales 460Your Website 461

Marketing Yourself 462How to Make a Good First

Impression 463

The Art of Pitching 464

● RESEARCH AT WORK: Pitching Trustworthiness 465

Pitch Approaches 465

● YOU BE THE ENTREPRENEUR 466

● ENTREPRENEURSHIP MEETS ETHICS: Social Media and Marketing 468

● MINDSHIFT: Pitch Practice 469

APPENDIX B. The Pitch Deck 475Overview of the Pitch Deck 475

Pitch Deck Slides 476Slide #1: Title 476Slide #2: Company Purpose/Description 477Slide #3: The Problem/Need 477Slide #4: The Solution 478Slide #5: Why Now? 478Slide #6: Market Opportunity 480Slide #7: Getting Customers 482Slide #8: Competitor Analysis & Differentiation 482Slide #9: Traction 485Slide #10: Financials 486Slide #11: Team 486Slide #12: Call to Action 488

The Question and Answer Period 488Team Questions 488Product/Customer Questions 489Competition Questions 489Financial Questions 489Growth Questions 490

Glossary 492

Notes 500

Name Index 516

Subject Index 518

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