Business Opportunities: there is a Market for what you product (people value and will pay you) – if they pay someone else it is a job Types of Business Ideas: 1. Lifestyle Entrepreneurs: opportunity to create one’s own opportunity (trade off/priorities: activities, hours, clients, employees, income) a. Job Businesses: replaces a job – provides income (commitment/involvement) business profit = salary (takes longer to start) – career choice (inspiring):Start-Up Cost less than one year’s profit/salary – financing options are limited) b. Hobby Businesses: part time & doesn’t replace a job (income) not fully committed (income is supplement) 2. Wealth-Building Entrepreneurs (Real Estate): not getting paid; building assets within business (wealth vs. income) initial equity is a challenge (Trump, casinos, chain restaurants, office buildings) Sweat Equity: Plow CF back into business in order to build value or create more capacity Debt/Collateral 3. Innovating Entrepreneurs (Silicon Valley) create new market or tap into existing market - separated by the duration of opportunity: introducing change (new products and services) may provide a job but not intended to create a job a. Product (Business) Ideas: temporary opportunity (move fast but smart, build in a margin to make it worth your while, bank the profits by investing them in your next idea – save income, do not reinvest profits into same business) (Olympic, Championship products) b. Big Ideas (ideas that VCs back): what constitutes BIG depends on the ratio of the new venture’s potential value relative to the capital required to make it happen (not just to get it started, ALL capital required) Rule of thumb > 10X (company that requires $25m needs to have a potential of $250m)
Source of Big: Requires (1) Large market opportunity (2) sublime execution (3) defensible position (concentrated market share/high margins); Leads to a large company that eventually takes on a life separate from the entrepreneur (over $100 million in revenue opportunities); Key is to attract a truly big opportunity that offers at least one characteristic to allow a single firm to dominate much of the sector

Types of BIG Ideas (not mutually exclusive)(1) Network Effects (communication technologies): Products become much more valuable as more people use them (hard to do but large rewards to success – switching costs – product’s increasing value supports growth and margins – Value concentrated in “local network” to get over “downside” of network problems (a) Direct Network Effect: Other users create value (communication/language technology) (b) Indirect Network Effect: Other users lead to something that creates value (entertainment platforms/television stations get more channels) Critical Mass: the amount of market penetration necessary for a network good to have any meaningful value to customers Standards: goods that are used by everyone in a network (language is an open standard – anyone can use it) Open Standards: quicken a network’s growth but commoditize most products Closed Standard: necessary to get increasing returns Local Network: exist when a relatively small group can capture most of a network good’s benefits (2) Disruptive Technologies: (hard to develop) new products that offer a fundamental advantage over existing products but suffer from an initial price/performance disadvantage (Critical Flaw) (1) Product offers a fundamental advantage (2) Product contains a (Clear) critical flaw (quality) (3) the crucial flaw is expected to diminish over time (4) the product is difficult to sell at first (crucial flaw prevents product from being attractive to existing customers) “Mobility” most common fundamental advantage - Initially sold to market/users who value the fundamental advantage - Natural for a new company (not for an established company) - Big payoff when flaw disappears (product eventually captures existing market and experiences explosive growth) (3) Repeat Purchase Branded