Preface of Textbook
About the Textbook
About the Authors
Book Website at McGraw-Hill
DVD Contents
Stanford 1e Book Website
McGraw-Hill 1e Book Website
Book Contents
Table of Contents
Venture Opportunity, Concept and Strategy
Venture Formation and Planning
Functional Planning of the Venture
Financing and Building the Venture
  Business Plans (App. A)
  Case Studies (App. B)
Online Sources (App. C)
Sample Syllabus
Course Overview
Calendar of Sessions
Entrepreneurial Perspective
Idea or Opportunity
Gathering Resources
Managing Ventures
Entrepreneurship and You
Additional Resources
Schools Using This Textbook
Authors Blog

A new firm creates a sales model describing how it will generate revenues from its customers. Then it determines how it will generate profits from its revenues. The revenue and profit engines show how the firm will create powerful value for its customers and how customers will enable the new firm to profit. Many new ventures assume that profit will flow naturally from sales but discover that profits are not guaranteed. It is difficult to operate in a market that is chronically unprofitable. A new firm seeks positive cash flow as soon as is feasible and acts to move to profitability early in its life. Managing revenue growth is important since uncontrolled growth can lead to negative cash flow and the need to constantly raise new funds from outside investors. Furthermore, a firm needs a plan to harvest the benefits of its growing venture for all owners. Entrepreneurs must also be realistic and accept that termination of the new venture is a possibility.


Zaplet faces internal challenges following the dramatic change in the economy and the resulting market demand for its product. Teaching Purpose: To gain an understanding of the decisions required during an organizational downsizing. What are the options, and the consequences, of each decision? How does the revenue model impact the direction of the company and resulting consequences?
Software Associates
The president of a small consulting firm has just seen his second-quarter profit and loss statement, showing an increase in revenues but a substantial decline in profits. He asks his chief financial officer to explain the results in a meeting the next day. The CFO works hard to accumulate information so she can explain the impact of the quantity of billed hours, billing rates, consultant expenses, operating expenses, and the shifting mix of business between the two principal product lines. The situation provides an excellent opportunity for students to learn the fundamentals of variance analysis and flexible budgeting in the context of a professional service firm, without the complications that arise in manufacturing firms of overhead absorption and fixed-cost volume variances.
Artemis Images
Artemis Images is based on entrepreneur Christine Nazarenus's vision of building a dynamic company for digitizing photo and video archives. With a seemingly solid team and content management expertise, Chris falls upon a perfect opportunity with the Indianapolis Motor Speedway Corporation (IMSC) archive to jumpstart her own business. She and her partners propose a long-term revenue-sharing business model, which differs from the traditional model of selling media management systems. Artemis also proposes to differentiate itself from its competitors with not only better content, but also better search functionality through its collection as well as merchandising options and community chatrooms. With a solid marketing and sales strategy and a promising market, where did Artemis make a wrong turn?

(DVD Section 16.5) Karen Richardson: Lessons from Failure
At various points in her career, Karen has been part of companies that have failed. She talks about the lessons she learned from those failures and how they have shaped her career.

Carol Bartz: Learning From Failure
Fail fast forward: people who failed within Buzzsaw, were often given new projects to work on. Failure was valued. Rather than criticizing projects that failed, they were valued... and people would say, --Great job, what did we learn, how can we apply it to new projects?
Vinod Khosla: Career: Learning from Failure Early On
Khosla's career development: Story of first startup in India-milk from soybeans. Travelled to Carnegie Mellon, and then to Stanford University. Describes why persistence, and evangelism is important. He was not admitted at first, saught more real-world experience, and was not admitted again. Through persuasion and persistence, he was finally accepted.
Heidi Roizen: Bootstrapping: Still a Great Way To Raise Money
Roizen talks about the importance of bootstrapping, and maintaining control of the company in the early stages. Not only do entrepreneurs have to work for a living but they also have to make the money raised last for a longer time. When capital became easily available people stopped making the money the old fashion way, by working. If you create profit, shareholder value will definately follow. If you make profits you don't need other people to invest in your company. This is a great advantage.
Frank Levinson: How to sustain growth rate
The rate at which a company grows will vary for each individual venture. Sustaining the growth can be a tricky thing. Frank Levinson explains Finisar's rapid growth and weighs the pros and cons of quick growth and sustainability.
Fern Mandelbaum: The Decision to Sell
Fern sold her first major company, Skyline Toys, when the company was at a critical juncture: they either need to find a strategic partner or raise a lot of money. A perfect partner was found in IDEO, and Fern sold the company. Fern decided to take her career in a new direction because she was intrigued by the opportunities of the internet and was interested in joining a venture firm.
John Hennessy: If Your So Smart, How Come You're Not Rich?
How do you get people to stay at Stanford when there is so much opportunity in the business sphere? Hennessey remarks that companies are great things, but they are missing most of what makes a university so appealing to its employees: the freshness and excitement of the students and the freedom to conduct your own research.

Profit Pools: A Fresh Look at Strategy
This article provides a fresh look at strategy, showing that what counts isn't just growth but profitable growth. In charting strategy, many managers focus on revenue growth, assuming that profits will follow. But that approach is dangerous: today's deep revenue pool may become tomorrow's dry hole. To create strategies that result in profitable growth, managers need to look beyond revenues to see the shape of their industry's profit pool.

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