Business training

FAQ

 

Business model and company structure

 

 

In creating a start-up, what should be the structure of the company, e.g., the size of the board, the management team, etc.?

Steps in creating a start-up:

  1. Decision on creating a start-up.

Before creating a start-up it needs to be clarified

  • what will be the activity of the new company
  • what scale will be the activity,
  • are there market perspectives for the product or services you are going to provide,
  • what resources (financial, human) will I need to run the company?

The decision should be based on a rough, but already realistic plan of the future company. The best way is to draw a feasibility study or at least a pre-feasibility study of the future company.

  1. Structure of the company.

A start-up is usually a microenterprise. The structure and legal status can be as follows:

  • individual entrepreneur, who owns and operates the factors of production,
  • partnership (commandite, general, limited)

The legal form will define, whether a simple structure or a more complex structure is the best solution to run the intended company. The structure should be the minimum able to guarantee the functioning of the start-up or SME in order to lower fix costs. The size of the board of management team is not as important as the organization of it.

The legal form and structure should be based on due consideration of the planned activity (scale, market, resources needed). In each country these legal forms are regulated differently.

  1. After the decision on the setting-up the start-up firm:
  2. Agreement with partners
  3. Agreement on IPR rights
  4. Selection of a legal representative
  5. Selection of an accountant (if needed) and selection of the bank for the accounts of the new firm
  6. Decision on the name (and logo) of the new company
  7. Legal procedure to set-up the company.

 

 

Where can I get hands on support on business model design and company structure?

 

How do I estimate market size and potential market share for a commercial venture?

Already in the feasibility study of the start-up, but later in outlining the business plan of the company, the estimation of the market potential and share is one of the key issues to start and run the company.

For estimation of the potential market, steps to follow:

  1. Collecting the information of the targeted market. (Domestic and/or international, trends in the market, estimation of market niches.)

Commercial research can be considered the most effective tool, however normally is rather expensive- sometimes unaffordable- for an entrepreneur. Indirect research (Internet...) and competition analysis can be implemented on a more cost effective basis.

  1. Evaluating the collected information.
  2. Evaluating the risks of the market.
  3. Defining the realistic share of the targeted market you can achieve.

 

In estimating the potential market share, one is sometime in need of the services of a professional marketing company. This can be useful especially in case of an innovative product or services you are going to introduce.

 

Further assistance can be provided by organisations for enterprise promotion in your country.

 

What are good business models for creative industries SMEs?

There are no uniform business models for creative industries SMEs. Most CI SMEs are at the same time innovative SMEs, too. Business models for innovative SMEs are very diversified, depending upon the content of the innovative activity.

Business models you can find described on the web are mostly of established enterprises.

For defining a good business model suited to your enterprise you could obtain assistance from Business and Innovation Centres, local/regional enterprise promotion agencies etc.

Click here to find creative industry support partners  in our country

Click here to access contact details for labeled Business and Innovation Centre in your country

Share ideas and approaches in our LinkedIn group“supporting creative businesses”

 

What needs to be included in a business plan?

A business plan must include information clear enough to convey main aspects of the business idea to a third part (Investor, Bank, Administration...).  Most important components should be: Description of the promoter and idea/Marketing Plan/Production or Services Plan/Human Resources Plan/Investments Plan/Economic-Financing Plan/Legal structure definition/Time schedule/Key aspects and Final Assessment. The business plan should be written in clear and standard language for it to be easily understood, especially components such as description of Key Aspects of the company and the Final Assessment.

 

Business plans can be required for different purposes, e.g. attracting venture investors, acquiring credit financing, setting up a proposal for a definite call for proposal, etc.

First, you have to define the purpose of the business plan.

Questions a good business plan is going to answer:

  • What is the novelty of the idea? In what development phase is the product or service?
  • Who are the present and the future market clients?
  • What time is needed for stepping on the market? What market share could be achieved? What is the future of the market?
  • What is the financial background of the project? In need of acquiring venture capital, when will be the project ripe for obtaining VC?
  • What are prospects for profit?
  • What kind of management has the enterprise?

The structure of a business plan can be very different, but there are essential parts you have to include:

  1. Managerial summary (written after writing the whole business plan).
  2. General presentation of the enterprise, of the product/service/technology.
  3. Marketing analysis, marketing plan.
  4. Operating plan of the enterprise.
  5. Structure of the business, management structure, presentation of the management.
  6. Financial plan.
  7. Annexes.

 

For defining a good business model suited to your enterprise you can obtain assistance and support from Business and Innovation Centres, local/regional enterprise promotion agencies etc.

Click here to find creative industry support partners  in our country

Click here to access contact details for labeled Business and Innovation Centres in your country

 

How do I establish distribution channels and sales mechanisms when marketing and selling a new creative industries technology?

This is part of the Business Model generation.

A good marketing plan beside the presentation of the market, defines distribution channels and sales mechanisms. The overall steps to follow are the same for any new business, whereby you have to consider the specificities of your business:

  1. Strategic situation analysis.
  2. Defining the overall marketing goals and strategies.
  3. Defining sales mechanisms and distribution channels.

 

For more detailed support you can get in touch with Business and Innovation Centres, local/regional enterprise promotion agencies etc.

Click here to find creative industry support partners  in our country

Click here to access contact details for labeled Business and Innovation Centres in your country

 

How can I estimate long term goals and outcomes for knowledge transfer to a creative industry SME (or for a start-up)?

The estimation of long term goals should be based on actual and realistic rates (Sales, costs...). The projection of revenues, costs and other figures is implemented by introducing updating values such inflation or interest rates every year. A projection to five years should be acceptable.

 

 

What would I need to consider with regard to technology or knowledge transfer?

To consider knowledge or technology transfer you have to consider and define the following issues:

  1. What will be the content of the technology or knowledge transfer?

The first question you have to answer yourself: Why am I intending a technology transfer?

  • Turn-key ready full technology provison for the partner.
  • Starting a joint production
  • Licencing of the research result.
  • Exchange of technical experiences.
  • Handing over the production equipment (or software)
  • For further joint development or research.
  • Defining the content of the licence agreement.
  • Making the licence proposal.
  • Licence negotiation.
  • Financial part of the licence agreement.
  • Financing the technology transfer.

Defining the financial sources for the licence agreement:

  • defining the public support possibilities,
  • elaborating the private financial part.
  • Getting support from a technology transfer organisation

 

For additional support, you can get in touch with the following organisations:

 

 

Where can I get an overview hat European and national funding schemes are available to support creative industries start-ups?

European funding support for CI SMES: 

 

Guide general EU funding opportunities for SME

 

To find partners and exchange on latest funding opportunities:

Click here to sign up for the DigiBIC newsletter

 

What sort of exit strategies should be established for a new creative industries commercial venture or license deal? Where can I learn more about this?

If you're thinking ahead to the day when you'll no longer run your business, think about the exit strategies:

  • Liquidation of the business.
  • Selling out.
  • Acquisition by another enterprise.
  • Initial Public Offering, IPO on the stock market.

 

For support and advice you can c:

  1. Click here to find creative industry support partners  in our country
  2. Click here to access contact details for labelled Business and Innovation Centres in your country
  3. Contact organisations for business support or enterprise promotion in your country.

 

Further information on financing can be found at:

 

FINANCING           

General information on financing can be found at:

 

In creating a start-up, what do I need to know about financing?

  • know the different financial options (grants, loans, equity) and financiers/investors’ criteria
  • know how to approach each source of finance
  • understand the investment process
  • be willing to give up a stake in the business
  • banks may be reluctant to fund young firms due to perceived risks and lack of collateral

 

How do I estimate the financing needed for a start-up? 

Identify at what stage your company is and what is the investment needed for (research, product development, access to market, international development).  You can do this by creating a breakdown of costs.

 

How should I provide a breakdown of costs?

Best to prepare a 5 years financial breakdown of costs and revenues. You need to be realistic but show ambition.

 

Where can I find potential investors?

  • Founders, Friends and Family (so-called “Love money”)
  • If the product is not ready for market, you may turn to innovation grants, incubation facilities or support, seed capital public authorities, technology parks/universities. Click here to find support in your country
  • If the product is ready for market, you can turn to Banks, Angel investors  or  venture capital funds  Click here to find support in your country

 

What is an angel investor?

  • Angel investors are individuals or groups of individuals who have cash and expertise. They can help young entrepreneurs and provide less structure than a formal VC firm. They invest in exchange of a smaller ownership stake and typically without a seat on the board.
  • some Angel investments are made in syndication or through co-investment funds
  • angel investors usually invest locally but have more and more interest in cross-border deals

 

What is the difference between an angel investor and a Venture Capital firm?

  • VC firms offer active participation in the development and management of the start-up. Usually they support an idea with breakthrough that needs large amounts of capital to get off the ground.

 

What should inventors look for in potential investors or potential licensees?

  • For angel investment, inventors should consider the expertise and experience of the investor and what he can bring to the company besides money.
  • Entrepreneurs should look for the right match and consider some characteristics of the VC firm (does the firm know anything about the industry, geographical presence and strategy, specialised stage of investment, how big is their fund, life cycle of the fund, are they willing to support the company in a follow-on round)
  • Entrepreneurs should take a strategic approach and assess the kind of VC firm they should select to pitch, and distinguish between local and global firms, early or later stage experts, industry specialists, and firms with large or small funds. Entrepreneurs should thus perform a background research of the firms (what kind of deals were done, any similar investments, what kind of businesses do they like, how well have their portfolios ‘companies perform…)
  • Entrepreneurs should also pay attention to the particular partner who would become the board member and business partner in the venture.

 

How can an equity investor be approached?

  • E-mails/sending presentations
  • Networking tools (LinkedIn, conferences…)
  • Investment forums
  • Personal recommendation, introduction
  • Investors’ platforms
  • Business Angels’ networks (regional, national, European)

 

MAKING THE DEAL

 

What does a start-up need to consider before a VC deal?

Once the inventor found the right VC for its company, she needs to negotiate the deal (key business terms and legal framework) and that deal depends of the company’s pre-money valuation. This valuation is different if the company is still in the creation process and does not have revenues yet. Entrepreneurs must be careful not to over-evaluate a company when raising a first round of money because they would have problems later when raising a second round if investors want to decrease the evaluation. A very young company will be valorised regarding its potential at the exit.

 

The VC has to be convinced that he can make 5 to 10 times his money in three to five years.

 

What is a pre-money valuation?

The pre-money valuation(what is the company worth prior to the VC’s investment) is a back and forth negotiation between the entrepreneur and the VC. It is based on 3 factors:

  • The amount of capital the entrepreneur is trying to raise
  • The VC’s target ownership (often 20-30%)
  • How competitive the deal is

 

How do I negotiate a licensing deal?

  • Evaluation of the scalability of the technology and revenues expectations (best case, mid case, base case)

 

When is a one off payment preferred, and when are royalties preferred?

Regarding this financing plan, you need to decide whether it is better to have a one off payment or ask for royalties.

It depends on the company’s financial situation. If the company needs cash flow it might be better to ask for a one off payment. If not it can go for royalties or ask for a one off payment and negotiate smaller royalties

 

How can I estimate long term goals and outcomes for knowledge transfer to a creative industry SME (or for a start-up)?

  • Consider the stage of the technology (prototype that requires some further research or development work, or a ready to market) and its scalability
  • Who owns the IP and what is the strategy to further develop the IP
  • Show a large market opportunity and easy to access quickly
  • Need to be realistic but always show ambition, have a vision
  • Have an experienced business team that can bring the vision to reality

Invest time to prepare the pitch: analysis, rehearsal and practise are very important (be ready to answer every number and details you put on your plan)

IPR

General information:

 

Where can I get reliable support on licensing and IPR issues?

Click here to access contact details for labeled Business and Innovation Centre in your country

 

Where can I find out more about patenting?

Click here to access information and training on the European Patent Office website