Marshalling Resources Strategic Alliances Over 75% of technology businesses are active in strategic alliances. 63% said critical or very important. (PricewaterhouseCoopers, Trendsetter Barometer 2001). Most are informal Joint venture – jointly owned entity Speed to market Access to markets, technology or knowledge Access to capital Spin-ins & spin-outs
Marshalling Resources Strategic Alliances Forms Marketing – access to distribution e.g. Nestle in Europe Technological – joint research, e.g. Celebrex for Pfizer Manufacturing – subcontract operations, e.g. Jurismonitor Investment – Intel had 220 active investments in 2004
Marshalling Resources Advantages to Strategic Alliances Gain access to a resource, e.g. production, skills, capital Economies of scale Risk & cost sharing Gain access to international market Learning Speed to market Neutralizing or blocking competitors Barringer & Ireland, Entrepreneurship
Marshalling Resources Risks of Strategic Alliances Loss of proprietary information Management complexities High risk of failure Become dependent on partner Risk of opportunism Non performance Loss of decision autonomy Clash of cultures Precludes partnership with another firm or exit Barringer & Ireland, Entrepreneurship
What Resources Do New Ventures Have? People Physical Assets Intangible Financial Social & Personal
Marshalling Resources Social Network Network Industry contacts Mentors, YPO Family Outside service providers- legal, accounting, bankers Board of Directors and Advisors Owe you favors
Marshalling Resources Personal Resources Staying power Your personal resources Borrowing capacity Spouse who works Culture that you create Personal characteristics You are likeable Integrity
Marshalling Resources What is Bootstrapping? “Launching ventures with modest personal funds”, Bhide Other People’s Resources (OPR), “Key is not to own resources, but to have use of & be able to control or influence deployment”, Timmons Scrooge mode
Marshalling Resources Bootstrapping Examples Make vs. buy Volume purchasing Hiring employees vs. subcontract or temps Employee benefits Office and location Used equipment PR vs. advertising & promotion Strategic alliances - Jurismonitor Grants
Marshalling Resources Benefits of Bootstrapping - Enhances Funding Need less capital Reduces financial exposure Reduces amount of money need to raise - less dilution Reduces risk Obsolescence Lower sunk costs Investor's love it Proves concept and management team Reduces risk
Marshalling Resources Benefits of Bootstrapping - Provides Flexibility Permits strategic experiments Make changes quickly Cost of making a mistake is minimized Mistakes less likely to be fatal Inexperienced entrepreneurs can screw-up Don’t have the pressure of high growth
Marshalling Resources Benefits of Bootstrapping - Improves Problem Solving Like zero inventory in JIT Reveals hidden problems Forces management to solve them Focus is on profits Forces management to solve problems Price for profitability Reduces costs Lower fixed costs Higher variable costs, but high Gross Profit Margin solves Lower break-even point
Marshalling Resources Benefits of Bootstrapping - Sets the Right Culture Employees Suppliers
Marshalling Resources Can An Entrepreneur Have Too Much Money? Don’t focus or address real issues Throw money at it Dot.bombs Try-it, fix-it approach is difficult “Are we being fooled twice” Try to compete on price – buy market share Don’t focus on achieving high margins
Marshalling Resources What Is the Greatest Source of Cash?
Marshalling Resources Marshaling Resources Conclusion Control rather than own - OPR Money is not the solution. May be the problem. Bootstrapping is an attitude What is a downside of focusing on resources?