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Chapter I: INTRODUCTION Research Topic: Factors contributing to a successful start-up and mistakes to avoid when opening a business of undergraduates in National Economics University Background: Start-up is now a term of familiarity among modern citizens The most popular definition of the term is as follow: “A startup is an entrepreneurial venture which is typically a newly emerged, fast-growing business that aims to meet a marketplace need by developing or offering an innovative product, process or service A startup is usually a company such as a small business, a partnership or an organization designed to rapidly develop scalable business model Often, startup companies deploy technologies, such as Internet, e-commerce, computers, telecommunications, or robotics These companies are generally involved in the design and implementation of the innovative processes of the development, validation and research for target markets While start-ups not all operate in technology realms, the term became internationally widespread during the dot-com bubble in the late 1990s, when a great number of Internet-based companies were founded.” - Wikipedia So, the history of start-ups dates back to almost 20 years ago and it was a craze back then in the USA, but only now does it gain popularity and exposure all over the world (especially in Vietnam) In recent years, the economy has witnessed a surge in the number of start-ups which attracts a huge proportion of the population (including economists, the labor force, passionate entrepreneurs, …); And there are reasons for that To begin with, entrepreneurship satisfies common human needs of becoming well-known and the urge to something worthwhile Under the influence of mainstream media & social networks, the rare successful start-ups are being promoted while most failure has been ignored Inspirational speech, game shows for start-ups, society encouragements (Lower cost to start a company Much lower risk than before Lower barriers of entry) all molds up a culture where entrepreneurship is being popularize, respected and admired Consequently, start-ups have become a trend among millennials with many unable to “make it big” or even worse: losing money in the process As finance majors it is in our best interest to find out more about the problem and gain a more analytical view on the subject Rationale: 3.1 Starting-up is a new and fascinating topic: Start-up trend has come into Vietnam in recent years and it is still a new, strange and fascinating subject Many people, or more specifically, students at university desire to their own start-ups but they not really know about it so it leads to some failures 3.2 Reasons why students start-up: Students from around 17 to 22 years old have time, youth, passion and especially creation, they want and are willing to embark on new things Moreover, for the group of students mentioned in the topic, students of National Economics University, they are economics students, so they are more likely to aspire to apply their learning to reality It is easy to understand if they crave for jobs related to their studies Purposes: The study aims to indicate factors contributing to a successful start-up in order to help undergraduates in National Economics University who want to open a business to ensure successful startups in the future The study also shows some problems that entrepreneurs usually have to deal with and points out some mistakes that most entrepreneurs make so that they can avoid and learn from it Scope: Nowadays, enterprise occupies very important role on Vietnam business development so the start-up is already promoted by the government However, start-ups have become a trend among millennials with many unable to “make it big” or even worse: losing money in the process The youths who head this vocation are lack of experiences so they are easily failed There has been research more general about this problem with their scope on the world as a whole or Western countries So, to provide a more practical perspective, this study mainly centralizes around the Vietnamese economy, especially undergraduates in National Economics University, since they are a focused group that is most likely to start a new business 6 Research Questions: (phải sửa 2-5 câu hỏi) What are the factors contributing to a successful start-up? What are the resources you need to launch a start-up? What are the key features does your start-up have that will help your start-up stand out among others? What is the range of the market that your start-up focus on? Who are your potential customers? Who are your competitors in the same field? What are the common mistakes that proves to be detrimental to a new start-up? How have others attempted to solve the mistakes before, and why did their solutions succeed or fail? Research methods: - Online case study Easy to collect data and analysis existing businesses through the internet Giving a more in-depth perspective on the reality of start-ups - Unstructured Interview Spontaneous and informal interview will be conducted with NEU undergraduates that have successfully established their own business Minimal guiding questions will be prepared in advance to make sure the interviewee stays on point 8 Tentative Report Outline: I Introduction Background Scope Purpose II Methodology Case study a Selection of subject for case study and reasons b Data of importance Unstructured Interviews a Meet the entrepreneurs b Interview Records III Findings Factors of success a Reasons behind these factors b Execution of aforementioned factors Common Mistakes a Reasons behind mistakes b Ways to avoid IV Conclusion V Reference and Appendix Chapter II: LITERATURE REVIEW Definition of start-up: a Minimum viable product (MVP): Minimum Viable Product (MVP) is a development technique in which a new product is introduced in the market with basic features, but enough to get the attention of the consumers The final product is released in the market only after getting sufficient feedback from the product's initial users Ash Maurya, author of Running lean, said that A Minimum Viable Product is the smallest thing you can build that delivers customer value (and as a bonus captures some of that value back i.e gets you paid) Marty Cagan, a partner at Silicon Valley Product group, supposed that it's the smallest possible product that is valuable, usable and feasible for the consumers In conclusion, an MVP is a product that has the minimum set of features to prove the most essential hypothesis for a product b Founder: Founder is one who establishes something or formulates the basis for something Startup founders are, quite simply, people who found startups They register a business (maybe) and create something that might turn into a business at some point, or even turn it into a business successfully c Angel Investor: Angel investor is an individual who invests his or her own money in an startup company A Harvard report by William R Kerr, Josh Lerner, and Antoinette Schoar provides evidence that angel-funded startups are more likely to succeed than companies that rely on other forms of initial financing The paper by Kerr et al., found that angel funding is positively correlated with higher survival, additional fundraising outside the angel group, and faster growth measured through growth in web site traffic d Incubators/ Accelerators: They are accelerated start-up organizations that provide legal, professional, space and startup advice All for the purpose of helping startups get customers early, investors * Startup Incubators: Incubators bring in early-stage companies to develop their idea with assistance in the form of office space, resources and access to experts in the startup ecosystem In exchange for this assistance, the investor or investing group will receive a percentage of equity in each company There is usually no time limit for participating; each company is brought along at its own pace, usually until it becomes self-sufficient enough to begin operating independently * Startup Accelerators: Accelerators imply a more expedited process, and that is what you get Companies that gain acceptance into an accelerator program are looking for resources and guidance to catapult them to their next milestone Programs last just a few months (usually three) before companies are set off on their own again, and investors will offer up investment capital and act as mentors in exchange for a percentage of equity in the company This percentage is generally less than what would be requested from an incubator e Technology adoption life cycle: The technology adoption lifecycle is a sociological model that describes the adoption or acceptance of a new product or innovation, according to the demographic and psychological characteristics of defined adopter groups The process of adoption over time is typically illustrated as a classical normal distribution or "bell curve" The model indicates that the first group of people to use a new product is called "innovators", followed by "early adopters" Next come the early majority and late majority, and the last group to eventually adopt a product are called "Laggards" or "phobics." For example, a phobic may only use a cloud service when it is the only remaining method of performing a required task, but the phobic may not have an in-depth technical knowledge of how to use the service Role of start-up: It’s well known that startups play an important role in the economy As pointed out by the Kauffman Foundation : “Without startups, there would be no net job growth in the U.S.” In the past, when there is no definition of startups, the economies were dependent more on natural resources than human resources After the appearance of startups, they change the economy Especially over the past decades, the role of startups in economic development has become the primary factor in the growth of economies Creating wealth and sharing : When starting-up, entrepreneurs invest their own resources and attract capital from investors This mobilizes public wealth and allows people to benefit from the success of the businesses It results in wealth creation and distribution which is one of the basic imperatives and goals of economic development Creating jobs : When a person set up a business, it means that there’s one less job-seeker, and it also provides more job opportunities for others Balanced regional development : If a new business that locates in a less developed area, it can creates both direct and indirect jobs It also can leads to infrastructure improvements and services improvementsto the area GDP and per capita income : A business can contributes to increasing the GDP and income per resident, which helps the economic growth Standard of living : They not only creating jobs but also developing and adopting innovations that lead to improvements in the quality of life of their employees, customers, and other stakeholders in the community Entrpreneurs always try to offer better goods and services at a lower cost Exports : Any growing business will eventually want to get started with exports to expand their business to foreign markets This is an important ingredient of economic development since it provides access to bigger markets, and leads to currency inflows and access to the latest cutting-edge technologies and processes being used in more developed foreign markets It also helps balancing the trade of a country 3 Phases of start-up: Startup Phases is a concept that serves a crucial role in providing the entrepreneurs with a sense of direction when navigating a new business; And since startup phases is a relatively untouched field of research, it is being conceptualized differently among experts, scholars and entrepreneurs These variations of meaning often lead to some overlap in qualities and characteristics of the phases In order to resolve this problem, having a more in-depth description can bring more clarity to these tangled concepts These are the detailed definition/characteristics of startup phases: Phase 1: Ideating Forming and theorizing a scalable product or a service idea with initial revenue models for how it would make money This is usually done by one person or only a vague team; no confirm commitment or no right balance of the skills in the team structure yet Phase 2: Concepting Defining mission and vision with initial strategy and key milestones Establishing a team of two or more core founding people with balanced ownership or having an extended team compared to the original one with more commitment (stock options and/or cash compensation) Phase 3: Committing Committed and skills balanced team with shared vision, values and attitude that has the ability to develop MVP without dependency on uncommitted external resources; or have already experiencing and successfully developed an initial product/service Have an existing signed shareholder agreement between founders, with milestones, committed time and money usage Phase 4: Validating Acquired the ability to demonstrate initial user growth and/or revenue (initial traction) Has the potential to continue attracting additional resources (money or work equity) for future prospect of revenue In the process of looking a clear market validation to move into scaling Phase 5: Scaling Transitioning the leading model into a more heavily growth-centric one Can and want to grow fast Putting a heavy emphasis on KPI based statistics, closely monitoring these stats and expand business by improving in quality and implementing processes Have the ability/potential to attract significant funding Phase 6: Establishing Achieved great growth, expectation to continue strong is high Attain financial and labor resources easily Continues to grow and often tries to culturally continue “like a startup” Founder/Investor either exit(s) or continue business as usual While these definitions are codified specifics to guide and help forming an overall persective on the subject, startup phases are ambiguous in nature and if necessary can be redefined to suit ones’ situation External & Internal factors affects to a successful start-up: a External factors: After they prepare financing, find a suitable location and organize a potentially successful business strategy, they must turn to external factors to effectively predict their future First and foremost, the global economy is one of the biggest external factors that will, at some time, affect their start-up Market fluctuations based on politics, terrorism attacks, wars They need to find out about the market before they start Secondly, local or federal changes in the laws can have a direct impact on their business if the service or product becomes highly regulated or prohibited For instance, cigarette manufacturers learned this lesson when public smoking was banned in many areas Government regulations such as those that influence the environment or communication are beyond their control and could affect their business Finally, while they may spend a good part of their profits on marketing in the hopes of favorably influencing trends, some may lose their control An increase in technology used by customers may be built into their strategic planning, but they cannot have plan for the widespread use of social media that could affect b their business Internal factors: There are a lot of internal factors needed will be discussed below Firstly, for a successful start-up, it is necessary for students to have a positive attitude Every start-up begins with the passion about business, but they also need to be prepared because starting a business will be accompanied by a lot of risk, students not only should be enthusiastic but also must not be afraid of challenge In a word, it is vital for them to be passionate, ambitious, confident, willing to and have serious thinking about the job Secondly, starting a business requires them to have adequate knowledge and skills Being students of National Economics University, they are well-equipped with foundation knowledge of business, but the more important thing is that how they apply it in reality If undergraduates apply wisely what they learned to business, they will be successful Otherwise, they will fail Besides, if they have the experiences of working as an employee, as a manager, or doing business in the past, it is a huge advantage No matter which job it is, it can be simple, or complex, or not related to their following start-up, whatever, as long as it involves business and management because learning is never the same in real life, as much practical experiences as possible Thirdly, the fund is an extremely important factor Undergraduates - for whom studying is still the main thing and earning money is secondary priority - have not much capital Their capital is usually accumulated by themselves, or borrowed from their parents, family members, relatives and friends If they still need more, they can borrow from banks or raise funds from sharks Borrowing money from relatives usually only makes a small loan but it is safer while money from bank is a bigger number but students need more responsibility However, every method has its own advantages and disadvantages so students should consider carefully about their economic potential and select the appropriate Finally, the choice of co-workers should also be taken into consideration Those whom students business with are those who will go from the beginning to the end with them during the process so it is crucial to find a right team The person whom they should work with should be enthusiastic, honest, sociable and mentally fit with them If they find suitable co-workers, the work will run much more smoothly and effectively Start-up problems: Starting a new business can be interesting and exhilarating, but we all have to face lots of problems during that process Knowing the problems and challenges can help you to avoid it, prepare for the upcoming difficulties Lack of fund: The major reason that leads to the failure of many new start-ups is lack of cash “A 2004 U.S Bank study said that 79 percent of small business failures cited “starting out with too little money” as one of the reasons for the business downfall.” A new owner of a start-up is often feels too optimistic about getting profits But without an adequate cash flow, slowly sales or a market’s downturn can put an end to the business before it has any chance to gain profits Lack of knowledge about marketing: A common problem to the new start-up is that they spend a huge amount of money on advertising on social media without having a specific target or goal The cost of advertising is very high and expensive, if start-up’s owner have no clear marketing target, it will be a waste of money to create advertisements which may contain incorrect messages or have them appeared in publications that don’t concentrate on the business’s target market Do not have a right team “23% of startups cited an inadequate team as a contributing factor to their failure.” Working with a group of highly persistence, diversely, and motivated, highly skilled people is important for startup to be success It’s neccessary that the team is gathered around a vision and has agreed with the startup’s long-term goals, in order that everyone stays on the same page as the startup start to grow Poorly Priced Products, Services: “For a wide variety of reasons, founders sometimes release products that don’t fully appeal to customers, which was the case for 17% of startups that shut down because of a user un-friendly product.” Although you may be competing with the big stores, you will not be able to charge the price of godđs like these stores The national and international companies may obtain products at rock-bottom prices because of the sheer quantity of goods they orders and thanks to exclusive supplier contracts Pricing your goods and services too low can delay the process of turning a profit Instead of erring in this way, list fair retail prices, and make sure your start-up excels in customer service You also should have a convenient location and hours TENTATIVE WORK PLAN : Time N o Work: Literature Review Responsible Coordinator Week Wed Definition of startup Duc Huy All members Roles of startups Linh Chi All members Phases of startups Bao Lan All members External & Internal factors Huong Huyen + Minh Hieu All members Startups problems Viet Hoang All members Conclusion All members All members Final edition All members All members Thu Fri Sat Sun ... Vietnamese economy, especially undergraduates in National Economics University, since they are a focused group that is most likely to start a new business 6 Research Questions: (phải sửa 2-5 câu... correlated with higher survival, additional fundraising outside the angel group, and faster growth measured through growth in web site traffic d Incubators/ Accelerators: They are accelerated... significant funding Phase 6: Establishing Achieved great growth, expectation to continue strong is high Attain financial and labor resources easily Continues to grow and often tries to culturally continue