New Venture Management

The Entrepreneur's Roadmap for Development, Management, and Growth

Donald F. Kuratko, Jeffrey S. Hornsby

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000326758
• Edition: 3
• Topic: Business
• Subtopic: Imprenditoria
• Index: Business

The third edition of this practical textbook provides an introduction to the world of new and emerging ventures and to the fundamentals of effective new venture management, including such diverse activities as planning, marketing, financing, and growth.

This textbook is divided into four distinct parts, guiding readers through the entire new venture management process and focusing in turn on ideas and opportunities, planning, finance, and management challenges. All chapters of this revised edition feature international cases, and the complete business plan has been replaced with a contemporary version. Other new elements to the third edition include:

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• Expanded coverage of the Lean Startup methodology

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• Improved focus on the development and importance of teams

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• A new section on the emergence of equity crowdfunding

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• Further discussion of ethics and the dangers of dramatic scaling

Presented in an easy-to-understand style, this book will be a valuable resource for undergraduate and postgraduate students in entrepreneurship and new venture management classes as well as active new venture owners and managers.

Online resources include an instructor's manual, test bank, PowerPoint slides, and additional materials to aid instructors and students in applying their knowledge.

Part I New Venture Opportunities

1 New Ventures

The Quiet Giant

Introduction: The Entrepreneurial Imperative

Competitive enterprise is the economic basis for all entrepreneurial activity. It means that any individual is free to transform an idea into a business. The opportunities for potential entrepreneurs are unlimited across the world today. The constantly changing economic environment provides a continuous flow of potential opportunities if an individual can recognize a profitable idea amid the chaos and cynicism that also permeate such an environment. Thousands of alternatives exist since every individual creates and develops ideas with a unique frame of reference.

During the last two decades, new ventures have emerged at an exponential rate. Entrepreneurs have fueled innovation, and their new ventures have generated millions of jobs to offset the huge reductions by Fortune 500 firms. LinkedIn, Facebook, Twitter, Tesla, and YouTube illustrate the new generation of entrepreneurial ventures, as they captured the economic spotlight by demonstrating that new ideas from emerging ventures can create the giant institutions of tomorrow. Leading organizations like Apple, FedEx, Intel, Microsoft, Amazon, and Google were once entrepreneurial startups that changed the world forever. Thus, entrepreneurial ventures hold the greatest potential for continued innovation and economic prosperity across the globe. Harsh lessons have been learned over the years, and major corporations realized that the same entrepreneurial spirit in people who developed these new ventures may be present within the organizational boundaries. The entrepreneurial flame has caught on throughout the world, with former socialist economies searching for the competitive enterprise solution through entrepreneurial development. It is truly the entrepreneurial imperative of the 21st century.¹

New Ventures: Energizing Global Economies

The past two decades have witnessed the most powerful emergence of entrepreneurial activity throughout the world. Many statistics illustrate this fact. For example, during the past ten years in the USA, new business incorporations averaged 400,000 per year. This trend clearly demonstrates the popularity of new venture activity, whether it is through startups, expansions, or development. More specifically, in the new millennium we have witnessed the number of smaller businesses in the USA soar to over 30 million, generating over 65 percent of net new jobs and employing over 57 million people.² Let’s examine some of the historical numbers supporting this phenomenon.

Several methods are used to measure the impact of new ventures on the economy—for example, efforts to start a firm (which may not be successful), incorporation of a firm (which may never go into business), changes in net tax returns filed (reflecting new filings minus filings no longer received), and a substantial amount of full-time and part-time self-employment. Within the United States, the U.S. Small Business Administration reports that smaller firms reached a record total of 30.7 million in 2019. Of these, approximately six million were employing firms, and they accounted for 49.6 percent of U.S. private sector jobs. Small firms made up 99.7 percent of U.S. employing firms. Further, women- and minority-owned businesses increased. Minority-owned businesses numbered eight million, and women-owned businesses totaled 7.8 million, a 20.1 percent increase over the five-year span.³

According to the 2019 Global Entrepreneurship Monitor (GEM) United States Report, The highest rates of early-stage entrepreneurial activity in the developed world exist in the United States. Even with the low unemployment rate reported during 2018–2019, it is clear that American people have enough job options, but entrepreneurship represents a viable career path for many. In fact, 63 percent of Americans believe entrepreneurship is a good career choice. Entrepreneurial activity was found to be strong across the entire age spectrum of the 18–74 adult population. Furthermore, the year 2018 marked an all-time high for both men and women entrepreneurs, and the gender gap between men and women notably narrowed. Interestingly, the 35–44 age group, which is the most entrepreneurially active, is the same age group that in 2018 experienced one of the lowest discontinuance rates (4.3 percent). Among all entrepreneurs engaged in early-stage entrepreneurial activity, 87 percent expect to create jobs for others, driving overall economic growth.

While so much attention tends to be focused on technology or venture capital–backed businesses, it is important to understand that entrepreneurial behavior can benefit multiple contexts.⁴ The GEM United States Report revealed that one-third of entrepreneurs started their business with family, 11 percent of the adult population is active in the gig/sharing economy, and eight percent of Americans are starting businesses for their employer. However, U.S. entrepreneurs continue to be among the world’s leaders in new technology and innovation offerings, which means that early-stage startups are engaged in developing and delivering an innovative product or service as their base offering at a rate that is at least double that of established businesses.⁵ According to the Kauffman Indicators of Entrepreneurship,⁶ a leading indicator of new business creation in the United States, 0.32 percent of American adults created a business per month in 2019, or 565,000 new entrepreneurs emerged in the largest volume from ages 55–64, representing 26 percent of all new entrepreneurs.

From a worldwide perspective, the Global Entrepreneurship Monitor (GEM) studies over 50 economies and 100 countries, which account for over 75 percent of the world’s population and 90 percent of the world’s GDP. The belief and confidence in one’s ability to succeed are indicators of one’s readiness for entrepreneurship. In 36 of the 50 economies, more than half of the population consider that they have the skills, knowledge, and experience to start their own business, while in 42 of the 50 economies, less than half of those who see good opportunities would be deterred by fear of failure. In GEM’s 2019–2020 report, it was found that multiple governments increasingly focused on putting into place policy frameworks and mechanisms to drive and promote entrepreneurship. Overall, GEM data suggest that entrepreneurship has been on the increase over the past two decades for most of the participating economies.

Thousands of new ventures have been founded, including many established by women, minorities, and immigrants. These new ventures have come from every sector of the economy and every part of the world. Together these new ventures make a formidable contribution to the world economy, as newer entrepreneurial ventures—some of which did not exist 15 years ago—have collectively created millions of new jobs during the past ten years. The world economy has achieved its highest economic performance during the last ten years by fostering and promoting entrepreneurial activity. All of these numbers illustrate how the entrepreneurial mindset has spread across the globe.⁷

In summary, new and emerging ventures make two indispensable contributions to the world economy. First, they are an integral part of the renewal process that pervades and defines market economies. New and emerging firms play a crucial role in the innovations that lead to technological change and productivity growth. In short, they are about change and competition because they change market structure. The wor...