1. NEW VENTURE CREATION
A new venture creation is a task that is not done with a few simple steps, it is by far more challenging and there are a lot of things that need to be taken care of. The step to create a new and own venture needs to be considered very well at the beginning and it is really important to pay enough attention to everything that is connected with it.
At the beginning is always an opportunity and an idea, which lead to the founding of a new venture. An idea about the product or service which the venture should be offering and the idea of improving things with this product or service which are not done good enough by other companies or not even existing so far. It is possible to say that many entrepreneurial ventures are based on innovative ideas (Collins, 2007). The opportunity is about making a profit with even this idea, about the right time to start a new venture with the given idea and about taking the risk to found a new venture and to transform it into a successful company. The most important step is to use this opportunity and to transform this initial idea into a working venture, which is able to work successfully at the market. This process needs to be considered very careful and it is important to take care of as many influences on the success of the business as possible. The main questions that should be considered to answer before starting a business are the following ones.
1) | What is the key activity of the venture? |
2) | What are the key resources needed for this kind of business? |
3) | What is the value proposition for potential customers? |
4) | Which are the customer segments the venture is targeting on? |
5) | What key partners are needed for this kind of business? |
6) | What is the expected cost structure and what will be the revenue streams? |
7) | How to fund the new venture? |
Besides the fact, that there are some models to help to answer all these questions at the beginning, like the Business Model Canvas, the probably most important question should be the question about the funding.
To have a good idea or to see an opportunity is one thing, but to raise the money to implement this idea into action and using the opportunity is the important and, of course, the difficult part. There are several ways of funding a new venture and with the fast improvement in technology and better communication possibilities today, the channels for funding a business are increasing and changing as well.
1.1. Who is an Entrepreneur?
The first issue is to figure out what an entrepreneur actually is. An easy description is an entrepreneur is a person who identifies the opportunities and chances of a business and assumes the risk of creating and running this business to take advantage of it (Collins, 2007). According to Spinelli and Timmons (2008), entrepreneurship is an opportunity obsessed way of thinking, reasoning and acting, which is holistic in approach, and leadership balanced for the purpose of value creation and capture. There are different kinds of entrepreneurship but according to Blanchflower and Oswald (1998), the simplest kind of entrepreneurship is self-employment According to surveys where people could choose if the wish to be self-employed or an employee, a large number of people would like to be self-employed and see this as a kind of target to reach. From an amount of 1453 Americans, 63% gave the answer that they would like to be self-employed. The percentage is a bit lower in Great Britain, where at least 48% of 1297 asked people wish to be self-employed as well as 49% of 1575 asked Germans (Blanchflower and Oswald, 1998). But unfortunately, not everybody reaches this target and is able to be self-employed one day. The amount of people that is actually self-employed in the three mentioned countries is around 15%, so there is a huge cap to the percentage of people that actually would like to achieve this target (Blanchflower and Oswald, 1998). One of the resulting questions according to this fact is, why some people are able to reach this target and why some individuals not?
In reference to Blanchflower and Oswald (1998), one possible reason is the lack of available capital to actually start the own venture. This fact already shows the importance and necessity of available capital to realize the wish of being self-employed and to start an own venture.
According to Filion (2008), there is a wide range of entrepreneurial roles as there are venture creators, intrapreneurs, extrapreneurs, self-employed people, technopreneurs and many others. All of them should result in the creation, realization and enhancement of value and not just for the owners of the business, as well for the other participants and stakeholders (Spinelli, Timmons, 2008). The entrepreneurship itself is a set of activities with human, managerial, technical and other characteristics, which need a set of diverse skills to be performed on a good level (Filion, 2008).
Another interesting approach according to Dollinger (2008) is, that the general view on what an entrepreneur actually is changed over the last years. A few years ago, entrepreneurs were seen as small business founders which are strongly tending to be independent and which are born like this, but not made because of some circumstances. Today this is seen different and the part of being a leader is getting a more important role. An entrepreneur nowadays has to lead the organization and the employees and it is important to be able to motivate employees as good as possible as well as to set a role model which leads to the culture of the business. These new entrepreneurs can come from totally different backgrounds and thanks to globalization, the entrepreneurial spirit is promoted to big and small companies, as well as that the huge improvements in information technology made it possible for small start-ups to actually compete against big businesses (Dollinger, 2008).
The word āentrepreneurā comes from the French language and is derived from the verb āentreprendreā which actually means something like āto doā. If the word entrepreneur is divided into the two parts entre and preneur, it basically means something like ābetween-takerā. The term first appeared around 1253 in literature and was used very commonly in the 15th and 16th century (Filion, 2008).
In the common opinion, an entrepreneur is a person that is owning and leading an own business, but specialists use a lot more elements to define entrepreneurs (Julien, 1998). Like already mentioned above, there are different kinds of entrepreneurs and there are a lot of activities connected with being one. Filion (2008) identified 15 elements which are mentioned most frequent for the definition of entrepreneurship in literature and which are probably the most relevant once.
Table 1.1. Most frequent mentioned elements in the definition of an entrepreneur
Elements defining the entrepreneur | Authors |
Innovation | Schumpeter (1947); Cochran (1968); Drucker (1985); Julien (1989; 1998). |
Risk | Cantillon(1755); Knight (1921); Palmer (1971); Reuters (1982); Rosenberg (1983). |
Coordination of resources for production; organizing factor of production or of the management of resources | Ely and Hess(1893); Cole (1942 and in Aitken 1965); Belshaw (1955); Chandler (1962); Leibenstein (1968); Wilken (1979); Pearce (1981); Casson (1982). |
Value creation | Say (1815, 1996); Bruyat and Julien (2001); Fayolle (2008). |
Projective and visionary thinking | Longenecker and Schoen(1975); Filion (1991; 2004). |
Focus on action | Baty (1981). |
Leadership | Hornaday and Aboud (1971). |
Dynamo of the economic system | Weber (1947); Baumol (1968); Storey (1982); Moffat (1983). |
Venture creation | Collins, Moore and Unwalla (1964); Smith (1967); Collins and Moore (1970); Brereton (1974); Komives (1974); Mancuso (1979); Schwartz (1982); Carland, Hoy, Boulton and Carland (1984); Vesper (1990). |
Opportunity recognition | Smith (1967); Meredith, Nelson and Neck (1982); Kirzner(1983); Stevenson and Gumpert (1985);Timmons (1989); Dana (1995); Shane and Venkataraman (2000); Bygrave and Zacharakis (2004); Timmons and Spinelli (2004). |
Creativity | Zaleznik and Kets de Vries (1976); Pinchot (1985). |
Anxiety | Lynn (1969); Kets de Vries (1977; 1985). |
Control | McClelland (1961). |
Introduction of change | Mintzberg (1973); Shapiro (1975). |
Rebellion/Delinquency | Hagen (1960). |
Source: Filion, 2008
The table 1.1. shows the 15 most often mentioned elements in the definition of an entrepreneur. To be innovative and to take risk are some of the elements, as well as leadership, creativity and so on. It is possible to see, that venture creation is just one of this 15 elements, which means that the actual creation of the venture is not more important when it comes to the mentioned elements than control or creativity. According to Filion (2008), there are many different dimensions that need to be considered in the definition of an entrepreneur and there are different levels of being an entrepreneur, what basically results in the fact, that there is no ultimate and fixed definition.
For the following context of this book, it is important to set the frame that the venture creation is an essential part, since this actually sets the base for leading a venture and having the possibility to be creative and to create values. In other words, the venture creation is the key element and needs to be done before it is possible to get the chance to be a successful entrepreneur in an own business and making the dream of being self-employed real. This matches to the description of Spinelli and Timmons (2008), which say that the classical expression of entrepreneurship is a simple and raw start-up company with an innovative idea that should be developed into a high-growth company.
1.2. Why starting a new Business?
An entrepreneur is made out of many different elements like it was figured out in section 1.1., but why somebody is starting a new business? The survey presented by Blanchflower and Oswald (1998) showed that a lot more people would like to be an entrepreneur than the amount of people actually are. As already mentioned as well, one of the biggest reasons why not everybody is just starting its own venture, is the lack of capital to do so, or more precise, the actually needed capital to fund a venture.
What is the main intention of being an entrepreneur and to start a new venture? The desire to be self-employed is not the only reason, but, of course, one of them. Other reasons are to achieve financial independence, to enjoy the creative freedom and to find the best way of own skills and knowledge. Entrepreneurs are mostly people with a vision, people that are willing to take a risk to reach the desired goals (Collins, 2007). According to Arthurs, Busenitz and Townsend (2010), one of the most common motivating factors of starting an own venture is the believing in own abilities. For sure there are other purposes as well like to have the prestige of being the person in charge or to just have the possibility to be involved in the total operation of the business, starting with the concept and ending at the daily business operations. The term of entrepreneurial self-efficacy has an important role and describes the believing of an individual into its own according to reach a goal or to complete a task. According to DrnovÅ”ek, Wincent and Cardon (2010), entrepreneurial self-efficacy includes three dimensions and generally involves the individualsā beliefs regarding their capabilities to accomplish success and controlling the recognition for successfully reaching the challenging goals of a new venture creation process. Entrepreneurs have different goal beliefs, which are assessments of oneās capabilities to take actions and engage in activities that will lead to a successful outcome of a task or the whole new venture creation process as well as control beliefs, which are the beliefs of an entrepreneur about his capabilities to cont...