Lecture 7 Flashcards
Investors uncertainty problem
Investors do not know which entrepreneur will succeed
New ventures have no track record
Seeking funding means to convince investors with: Narratives, Signalling, Networking, category positioning
Narratives: what makes a good entrepreneurial narrative?
Building legimiatcy with stakeholders
- Must be convincing and in line with business model
- Must be palpable for different stakeholders
- Must work in different settings: start -> grow -> established
Grounding Narratives
Why is the venture needed and why is it likely to succeed?
Channels for delivering Narratives
Investor-directed presentation
Customer-directed presentation
Internet page
Social media
Networking
Building strong and weak ties
Getting access to knowledge
Gaining credibility through networking
Social capital perspective
Larger networks increase the opportunities
Strong ties: direct, personal contact
Weak ties: indirect connection, less personal
Signalling
Signals are pieces of communication or observable behaviour that gives clear and trustworthy indications of quality of a ventures hidden attributes
Costly signals
Costly signal are impossible or very difficult to send to ventures with low quality attributes
Often, Signalling is not simple
Costly signals might not be available to an entrepreneur
Investors miss or misunderstand signals
Seemingly costly signals turns out to be costless
Firms fail despite providing costly signals
More doubtful signals
Being energetic in a presentation
Well designed website
Verbal claims
Signal portfolio
Investors does not only send out one signal, they send out multiple in a portfolio. This is important because two reasons:
costly signal are unavailable and
there are uncertainty of the quality and credability of the venture.
Insights from Aristotle
Ethos claim - why the speaker is credible
Logos claim - explain what the speaker can do and how and why it can be successful
Pathos claim - evoke emotions
Ethos and Pathos are the biggest for entrepreneur
Category Positioning
To reduce complexity, the human brain sort objects into narrower or wider groups
Audiences use categories to make sense of firms and products
category positing allows firms to indicate attributes they claim their product has as well as distinctive, providing information to customers/ investors
YOU WANT OPTIMAL DISTINCTIVENESS (NOT TOO SIMPLE BUT NOT TOO COMPLICATED)
OPTIMAL DISTINCTIVENESS
People should not be confused by the product
People should not be board of the product
Optimal distinctiveness is somewhere in the middle (Tesla model S)
