by Paulina A.

3 questions when thinking about a business idea

How visible is the failure? o The less visible, the more you can cause surprise (“WOW, all this time I thought it was

normal, how did I never notice it was so dumb? It’s way easier now”). Customers many times don’t see failures BUT be careful to ensure it really is a failure. Sometimes, it’s not good or facilitating enough to convince people it’s a better option.

o In sum: Less visible ó easier to surprise; Customers most times don’t see failure (but make sure it is really a failure).

Is it possible to solve profitability? o Confirmation bias is probably the biggest enemy of an entrepreneur. Confirmation bias

is the tendency to search for, interpret, favour, and recall information in a way that confirms or supports one's prior beliefs or values while at the same time ignoring or minimalizing new information that contradict what we want to believe.

o Entrepreneurs feel defensive upon critics - it’s hard to not take it personal but criticism is essential because if we are the only ones getting it and liking it it’s not because we are better, it is rather because the idea is not good enough so probably, something must be changed. Don’t argue back, understand, and improve with feedback. Don’t stop looking and listening to people who doubt you.

o In sum: Confirmation bias is probably your biggest enemy; Always look and listen to people who doubt you.

Can you build it? o Building a business and scaling it is not easy, can you bring the right skills to the table?

Entrepreneurs can have the motivation, personality, and technical knowledge in the ield, but they need to know about business and need to manage well OR get someone to do it well for them. Most investors invest in ideas and then people to accomplish them.

Every time the world changes, these questions are played again

3 Stages of entrepreneurial development

TAGE 1: IDEATION [RESEARCH / DISCOVERY PHASE] The seeds of an initial idea: very beginning where it’s essentially about the vision and effectuation logic

is followed; exploring different options to make sure we choose the best solution to the problem.

  • A perception of pain / failure

  • Starting to design a potential solution

  • Starting to convert solution into a revenue generating business

  • Fixing loose ends, clarifying things


The business is launched to start developing more solid processes and frameworks: more serious decisions are made (not definitive though) and besides vision and effectuation, strategy starts playing an important role.

  • Everything is a pilot

  • Every step aims to grow the business – revenue is the validator, not profits

Aiming to get a better understanding of how to create a business


The business starts to seek and deliver returns to shareholders and stakeholder: in this phase the size and structure have increased and a need for balance between effectuation and causal logic is needed so eventually a defined operating model will replace effectuating and along with the maintained strategy and vision will allow for scaling of the business.

  • Consistency becomes important to allow for replication and repetition

  • Replicating allows for scaling

    This phase is essentially where the business seeks to stabilize operations and thereby allow profitable growth.

What is investor funding?

There’s also the option for investor funding (third parts, non-relate to the founder) who are willing to invest their money in the success of the business with the main intention of gaining big profit back. However, and contrary to the before mentioned funding types, this capital causes some loss of independence, control, and ownership of the venture. There are 2 main types of investors:

- Angel Investors / Corporates: o They’re individuals who have money and want to “take risks” and contribute a lot, are more personally invested. If angels have more than 25% ownership they can block decisions and injections – they also want to give advice, and may put pressure on what they want which is not always the best

Venture Capital / Corporates: o VCs are companies dedicated to the management and application of investors’ funds in high potential ventures. They are more professional and distant and also have more capital capacity (ex: 1-5million capital investment with an expected exit value of 50million), more professional but makes founders lose control of company: sometimes liquidity clauses happen (“I get 5 times my investment if the company is sold at any time”, high risk) - VCs bring money AND connections to the table. They usually come later into the process since they normally like to invest in businesses that already exists and not in air-floating ideas and hypothesis –it’s not seed capital it can be in even larger quantities to really help to scale the business.

  • Angel investors are generally more eager to place a big bet on a startup with an interesting idea, whereas a VC firm will want to see growth potential.

  • On average, VC firms will invest a larger amount of money than angel investors, but VC investors will also get a higher equity stake in the company.

  • Perhaps the most important difference is that VC firms usually demand that they have some level of operational control, whereas angel investors prefer to be passive investors.


Paulina A.


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