Entrepreneurship and Small Business Development

Entrepreneurship and Small Busin" rel="nofollow">iness Development Presentation Fin" rel="nofollow">ind out how many slides / how long we have - 7 min" rel="nofollow">inutes / whats the layout of the slide i.e. only a few words and illustrations? Do we defin" rel="nofollow">ine what is a high growth company i.e. what is a gazelle or unicorn? Gazelles as they are fast movin" rel="nofollow">ing in" rel="nofollow">in short period of times and have annual growth of 20% in" rel="nofollow">in sales such as google - Unicorns with start ups with a value of 1 billion dollars before IPO (in" rel="nofollow">initial public offerin" rel="nofollow">ing where you take company to stock market), they were myths until recently such as Uber/Airbnb they have value of more than 1 billion dollars and private. 1. What traits and motivations of entrepreneurs are beneficial to creatin" rel="nofollow">ing a high- growth company? Traits are split in" rel="nofollow">into 4 - opportunism / proactivity / creativity / vision with flair. There is an ability to live with uncertain" rel="nofollow">inty and take greater risks, need for in" rel="nofollow">independence and achievement. These 4 are for high growth companies. Successful Entrepreneurs create their own opportunity, lin" rel="nofollow">inks with proactivity. Can make complicated connections and connectin" rel="nofollow">ing fields of knowledge that seem not to be related / brin" rel="nofollow">ingin" rel="nofollow">ing in" rel="nofollow">in new perspectives to solve issues which is lin" rel="nofollow">inked to creativity. Elon Musk? Ability to live with uncertain" rel="nofollow">inty and take greater risks / need for in" rel="nofollow">independence / need for achievement are supported by motivations for entrepreneurs. Motivations - antecedent in" rel="nofollow">influences e.g family(much more likely if in" rel="nofollow">in the family) /gender(women have a lower rate of entrepreneurs as they have harder route to fin" rel="nofollow">inance and so hard to succeed) / ethnicity / education (dropped out of school and no qualifications ISN’T always the case such as high tech companies and high growth companies, owners have good education - Elon Musk was in" rel="nofollow">interested in" rel="nofollow">in computer science from a young age / pg 41 ‘Musk brin" rel="nofollow">ingin" rel="nofollow">ing model rockets to school’, studied at queens uni kin" rel="nofollow">ingston, uni of Pennsylvania on scholarship as pg51’Ive league school openin" rel="nofollow">ing additional doors’ shows opportunism from young age / Musk had dual degrees) / religion / national culture (some countries are more in" rel="nofollow">individualistic such as USA, you do a lot for yourself AND low uncertain" rel="nofollow">inty avoidance where in" rel="nofollow">in the USA the risk isn't great if you go for entrepreneurship). - Situational factors such as unemployment or immigration / economic opportunity. Lin" rel="nofollow">ink Elon Musk to any one of these motivations. Page 44 ‘Musk fostered an in" rel="nofollow">intense in" rel="nofollow">interest in" rel="nofollow">in Silicon Valley’ so much so that he left South Africa for good to go to Canada as his route to the states. Page 52’As the weekend approached he would turn his house in" rel="nofollow">into a nightclub.’ Rented a 10 man house at Uni of Pennsylvania and on the weekend turned in" rel="nofollow">into a nightclub, he was proactive and creative from a young age. Page 53’ I was payin" rel="nofollow">ing my own way through college and could make an entire months rent in" rel="nofollow">in one night.’ Page 54’I really like computer games, but if i made really great computer games, how much effect would that have on the world?’ This shows the Musk had a bigger vision at a young age, to impact the world in" rel="nofollow">in a positive manner that he willin" rel="nofollow">ingly gave up pursuin" rel="nofollow">ing his dream in" rel="nofollow">in the gamin" rel="nofollow">ing in" rel="nofollow">industry, even though he had a gamin" rel="nofollow">ing in" rel="nofollow">internship under his belt. Page 55’ I like to make technologies real that i thin" rel="nofollow">ink are important for the future.’ This was his vision with flair, he really did want to shape the future. Zip2 Musk first start up - gettin" rel="nofollow">ing busin" rel="nofollow">inesses on the in" rel="nofollow">internet Page 61 ‘Musk often explain" rel="nofollow">ined the concept through Pizza sayin" rel="nofollow">ing everyone deserved to know the location of their closest pizza parlour and turn by turn directions on how to get there.’ This lin" rel="nofollow">inks back to traits as the ideas was creative and origin" rel="nofollow">inal. He struck a deal with Navteq, a GPS company and got the tech for free - proactive. Page 93’He always works from a different understandin" rel="nofollow">ing of reality from the rest of us. Musk’s goals can sound absurd in" rel="nofollow">in the moment, he certain" rel="nofollow">inly believes in" rel="nofollow">in them, and when given enough time, tends to achieve them.’ Shows entrepreneurial characteristics such as bein" rel="nofollow">ing creative and havin" rel="nofollow">ing a vision that nobody else can see, and with this can create a high growth company such as X.com. Page 113’The company would gain" rel="nofollow">in an edge over the competition by buildin" rel="nofollow">ing better and cheaper engin" rel="nofollow">ines.’ Shows here that not only was Musk creative with SpaxeX, but he did it extremely well and successfully. Page 115 Pete Worden a retired airforce general describes Musk ‘ He was a visionary who really understood the rocket technology.’ Not only is there vision with flair but Musk has the knowledge and the creativity to support his vision. Creativity - Page 165’Tesla had produced the fastest, most beautiful electric car the world had ever seen almost from thin" rel="nofollow">in air.’ Page 215’SpaceX can undercut its US competitors - Boein" rel="nofollow">ing, Lockheed Martin" rel="nofollow">in, Orbital Sciences on price by ridiculous margin" rel="nofollow">in.’ Lin" rel="nofollow">ink back to traits. SpaceX keeps 90% of its operations within" rel="nofollow">in the firm to save money and gain" rel="nofollow">in competitive adv, Page 227’Cost savin" rel="nofollow">ings for homemade radio are dramatic, droppin" rel="nofollow">ing from between $50-100k for in" rel="nofollow">industrial grade equipment used by aerospace companies to $5k for SpaceX’s unit.’ Page 228 ‘SpaceX has transferred some of its equipment and techniques to Tesla so Tesla can make lighter stronger cars.’ Page 295 ‘Like Steve Jobs before him, Musk is able to thin" rel="nofollow">ink up thin" rel="nofollow">ings that consumers did not even know they wanted.’ Page 257 ‘Dragon 2 will be able to land anywhere on Earth that SpaceX wants by usin" rel="nofollow">ing the SuperDraco engin" rel="nofollow">ines and thrusters to come to a gentle stop to the ground.’ Meanin" rel="nofollow">ing reusin" rel="nofollow">ing spaceships and savin" rel="nofollow">ing more costs. Cost efficiency Page 275’Tesla would make up for its lack of r&d money by hirin" rel="nofollow">ing smart people, who could outwork and outthin" rel="nofollow">ink the third parties.’ Tesla created networks of chargin" rel="nofollow">ing stations Page 301’Musk in" rel="nofollow">insisted that Tesla owners would soon be able to travel across the US without spendin" rel="nofollow">ing a penny on fuel.’ External sources: Passion for work, or love of one’s work, has been identified in" rel="nofollow">in a qualitative analysis by Locke (2000) as a core characteristic of great wealth creators, such as Michael Bloomberg, Bill Gates, Ken Iverson (Nucor), and Mary Kay Ash (Mary Kay). These entrepre- neurs confronted opportunity and challenges with fervor and ardor. Their enthusiasm for a type of busin" rel="nofollow">iness—their zeal for work—was so in" rel="nofollow">intense that they worked through fin" rel="nofollow">inancial barriers (Gates and Iverson) and challenges to their new products and their new ways of marketin" rel="nofollow">ing (Ash). Smilor (1997) suggested that passion is “per- haps the most observed phenomenon of the entrepreneurial pro- cess” (p. 342), and Bird (1989) noted that entrepreneurial behavior is “passionate, full of emotional energy, drive, and spirit” (pp. 7– 8). This lin" rel="nofollow">inks to opportunism, by bein" rel="nofollow">ing enthusiastic and takin" rel="nofollow">ing the risk and confrontin" rel="nofollow">ing challenges. Tenacity has been identified consistently as an archetypical entrepreneurship trait because the busin" rel="nofollow">iness start-up process in" rel="nofollow">involves confrontation of formidable barriers to market entry. Entrepreneurs have visions of the companies they want to build that in" rel="nofollow">include images of growin" rel="nofollow">ing busin" rel="nofollow">inesses.communication of the vision is as important as vision content alone for motivatin" rel="nofollow">ing high venture performance. Entrepreneurs may communicate their vision through their behav- ior (Bandura, 1986); however, an entrepreneur’s vision can in" rel="nofollow">inspire more directly through speeches, pep talks, and written presenta- tions (Tichy & Devanna, 1986). Communicated vision may help align entrepreneur–employee goals. Lin" rel="nofollow">inks back in" rel="nofollow">into vision with flair. Reference: The Relationship of Entrepreneurial Traits, Skill, and Motivation to Subsequent Venture Growth J. Robert Baum and Edwin" rel="nofollow">in A. Locke 2. Answer the two related sub-questions: a. What types of fin" rel="nofollow">inance are available to high-growth firms (i.e. the gazelles or unicorns)? Do we need to state pros and cons of each type of fin" rel="nofollow">inance? Bank Loans (more for small or medium sized firms which are already established and don't in" rel="nofollow">intend to grow) where term is fixed and can be matched to companies in" rel="nofollow">investment. Company need to have good cash flow(does firm have enough customers or physical asset) to pay in" rel="nofollow">interest and meet capital repayments and this loan is secured again" rel="nofollow">ins busin" rel="nofollow">iness or personal assets. High growth firms may not have these personal assets to secure again" rel="nofollow">inst the loan. (shows why this fin" rel="nofollow">inance isn't always available to high growth firms). Gov grants which are usually free and given out at EU, national and regional levels but long and complicated application procedures. Private equity - equity capital not quoted on stock market. - Venture capital which is a subset of private equity in" rel="nofollow">investments that support pre-launch, launch and early stage development phases and typically large amounts of £2mil plus. Busin" rel="nofollow">iness angels in" rel="nofollow">invest smaller amounts normally up to £1mil and operate in" rel="nofollow">in less formal ways that venture capitalists. Busin" rel="nofollow">iness angels use own money and normally successful entrepreneurs. Venture capitalists access to more funds. Both VCs and BAs are available to busin" rel="nofollow">iness with growth opportunities and they get a share in" rel="nofollow">in the busin" rel="nofollow">iness but no in" rel="nofollow">interest or capital repayments and they may offer support and access to network of busin" rel="nofollow">iness contacts…unlike banks with loans and overdrafts. Banks in" rel="nofollow">interested in" rel="nofollow">in cash flow via stock controls and firms needs to repay in" rel="nofollow">interest and VCs in" rel="nofollow">interested in" rel="nofollow">in return rather than security and pay attention to quality and experience of entrepreneur. Crowdfundin" rel="nofollow">ing - entrepreneurs raise small amount of capital from late numbers of ppl and sin" rel="nofollow">ince 2009 11.7 million ppl have used this platform to back a project and $2.6bil has been pledged. Initial public offerin" rel="nofollow">ing which is the first sale of companies share to public leadin" rel="nofollow">ing to stock market listin" rel="nofollow">ing also know as flotation. Difficult runnin" rel="nofollow">ing public company as managin" rel="nofollow">ing short term goals of shareholders vs long term goals of company / volatile stock prices Elon Musk argues stock price and performance of company not lin" rel="nofollow">inked/ slower decision makin" rel="nofollow">ing. External sources: Interestin" rel="nofollow">ingly, contrary to the current promin" rel="nofollow">inence given to sources of entrepreneurial fin" rel="nofollow">inance from busin" rel="nofollow">iness angels or venture capitalists, in" rel="nofollow">internal fin" rel="nofollow">inance in" rel="nofollow">in the shape of retain" rel="nofollow">ined earnin" rel="nofollow">ings and debt fundin" rel="nofollow">ing are the most frequently used fin" rel="nofollow">inancin" rel="nofollow">ing options for high growth companies (Vanacker and Manigart, 2010). The most common type of fin" rel="nofollow">inance applied for is a bank loan (40% of firms in" rel="nofollow">in the sample). Forty-nin" rel="nofollow">ine percent of HGFs apply for bank loans, compared to 39% of other firms (this difference is statistically significant). The second most common form of fin" rel="nofollow">inance is bank overdrafts, which 26% of firms apply for. However, in" rel="nofollow">in this case HGFs are significantly less likely to apply (18% compared to 27%). As bank loans tend to be offered on cheaper in" rel="nofollow">interest rates than overdrafts, this suggests that HGFs may in" rel="nofollow">in fact have access to less expensive capital than other firms. It may also reflect the greater reliance of other firms on workin" rel="nofollow">ing capital, rather than growth fin" rel="nofollow">inance. Significantly, venture capital seems to be used by a very small proportion of HGFs with just 4.8% attemptin" rel="nofollow">ing to access venture capital. The figure for the overall SME population was 1%. This suggests that while more significant for HG-SMEs, sources of equity fin" rel="nofollow">inance are not a domin" rel="nofollow">inant form of fundin" rel="nofollow">ing for most HGFs, despite the perception within" rel="nofollow">in the policy community (Brown et al, 2014). One of the key research questions in" rel="nofollow">in this report is whether HGFs are able to access fin" rel="nofollow">inance as easily as other firms. The analysis above (in" rel="nofollow">in particular, table 3.2) suggests that HGFs who apply for fin" rel="nofollow">inance fin" rel="nofollow">ind it no harder or easier to obtain" rel="nofollow">in than other firms. However, the relationship may be more complicated than simple statistics allow us to analyse. HGFs are likely to have particular characteristics, such as a size or sector, and these characteristics themselves may confound any relationship. This survey done by LSE. Reference: Fundin" rel="nofollow">ing issues confrontin" rel="nofollow">ing high growth SMEs in" rel="nofollow">in the UK, Ross Brown and Neil Lee Between £10,000 and £2m can realistically be raised from one angel, although more has been achieved Sourcin" rel="nofollow">ing angel in" rel="nofollow">investors might require more searchin" rel="nofollow">ing than fin" rel="nofollow">indin" rel="nofollow">ing venture capitalists (VCs), but private in" rel="nofollow">investors are more prepared to back an early stage busin" rel="nofollow">iness Angels may be found through in" rel="nofollow">industry contacts, but a more structured approach is via busin" rel="nofollow">iness angel networks The process is less formal than with VCs – angels often know their sector well, and so make in" rel="nofollow">instin" rel="nofollow">inctive decisions. You are likely to have a closer in" rel="nofollow">involvement with your in" rel="nofollow">investor as they look to add value to your busin" rel="nofollow">iness It usually takes between three and eight months to raise fin" rel="nofollow">inance, sometimes more G Owner-managers will often be expected to give up at least 20 per cent equity Regional Venture Capital Funds provide ‘equity gap’ fundin" rel="nofollow">ing of up to £500,000 VCs back high-growth strategies, such as acquisitions; product or service launches; new premises; or national, European or global busin" rel="nofollow">iness expansion An exit through flotation or trade sale is expected within" rel="nofollow">in three to five years VENTURE CAPITAL PROS Some in" rel="nofollow">investors can add valuable skills and open doors for your busin" rel="nofollow">iness Investors may provide follow-up fundin" rel="nofollow">ing as your busin" rel="nofollow">iness grows CONS An estimated 95-98 per cent of fundin" rel="nofollow">ing proposals are rejected by VCs Medium-sized to large in" rel="nofollow">investments are more attractive than smaller in" rel="nofollow">investments ANGEL FINANCE PROS Angels often in" rel="nofollow">invest smaller sums than VCs, so may suit newer busin" rel="nofollow">inesses As well as funds, they may be able to offer skills, contacts and experience Investment occurs in" rel="nofollow">in most busin" rel="nofollow">iness sectors and at all stages of development G Can be quicker and less formal than venture capital in" rel="nofollow">investors CONS Angels in" rel="nofollow">invest in" rel="nofollow">in only a very small proportion of the in" rel="nofollow">investments they are presented with – more than 90 per cent of in" rel="nofollow">investment opportunities are rejected at the in" rel="nofollow">initial screenin" rel="nofollow">ing Many angels expect close in" rel="nofollow">involvement with the busin" rel="nofollow">iness they in" rel="nofollow">invest in" rel="nofollow">in, which not all busin" rel="nofollow">inesses fin" rel="nofollow">ind desirable Reference: NO-NONSENSE GUIDE TO FINANCE FOR HIGH GROWTH COMPANIES How did Elon Musk get fin" rel="nofollow">inance for his high growth companies? Page 62 ‘Errol Musk gave his sons $28k for this start up’ Zip2. Page 66’Mohr Davidow in" rel="nofollow">invested $3mil in" rel="nofollow">into the company.’ Elon received this sum from a venture capitalist firm. Page 86 ‘X.com raised $100mil from backers in" rel="nofollow">includin" rel="nofollow">ing Deutchse Bank and Goldman Sachs.’ X.com, later known as paypal was Elons onlin" rel="nofollow">ine fin" rel="nofollow">inancial in" rel="nofollow">insatitiion, the first of its kin" rel="nofollow">ind, wirin" rel="nofollow">ing money to one another and after the merger with paypal go even bigger. This in" rel="nofollow">invention of this displays creative and opportuntisic traits, exploitin" rel="nofollow">ing a massive gap in" rel="nofollow">in the market. Here its also clear that the site was funded by bank loans along with Elons own money. For Tesla, Musk himself was the angel in" rel="nofollow">investor, in" rel="nofollow">investin" rel="nofollow">ing in" rel="nofollow">into the concept of high speed electric cars Page 154 Tarpennin" rel="nofollow">ing a founder of Tesla said ‘You need angel in" rel="nofollow">investors to have some belief and it wasn't a purely fin" rel="nofollow">inancial transaction for Musk.’ Due to Musk’s engin" rel="nofollow">ineerin" rel="nofollow">ing knowledge and in" rel="nofollow">interest in" rel="nofollow">in electric cars, the 6.5million dollar in" rel="nofollow">investment made him the largest shareholder and chairman, with a further 9million once the prototype was made and again" rel="nofollow">in with 12million more coupled with 40 million from other VCs Page 161. Tesla was on the verge of bankruptcy and VCs cant construct debt deals so Musk bluffed to the in" rel="nofollow">investors. Page 209’ Musk told the in" rel="nofollow">investors he would take another loan from SpaceX and fund the entire round himself - all $40million himself.’ This tactic worked and in" rel="nofollow">investors came through, hours before Tesla went bankrupt. This lin" rel="nofollow">inks back in" rel="nofollow">into entrepreneurial traits creatin" rel="nofollow">ing a high growth company, showin" rel="nofollow">ing Musk is creative in" rel="nofollow">in terms of gettin" rel="nofollow">ing fin" rel="nofollow">inance. Lin" rel="nofollow">ink this back to busin" rel="nofollow">iness plan as this was Musk’s plan to receive fin" rel="nofollow">inance via bluffin" rel="nofollow">ing. Page210 ‘NASA had backed SpaceX to become a supplier for the ISS(in" rel="nofollow">international space station). The company received $1.6billion as payment for twelve flights to the space station.’ Page 253 ‘SpaceX received $2.6 billion to develop their capsules and ferry people to the ISS by 2017.’ This from Nasa - lin" rel="nofollow">ink back to state? Tesla IPO Page 291 raised $226 million, company’s shares shootin" rel="nofollow">ing up 41%. b. How does the busin" rel="nofollow">iness model or busin" rel="nofollow">iness plan of an entrepreneur contribute to an entrepreneur’s access to fin" rel="nofollow">inance or to the venture’s success? Busin" rel="nofollow">iness plan writes down what busin" rel="nofollow">iness model is and gives numbers whereas the model is somethin" rel="nofollow">ing we just discuss. A busin" rel="nofollow">iness model is a way of creatin" rel="nofollow">ing and capturin" rel="nofollow">ing value e.g how do you make money by supplyin" rel="nofollow">ing product / service. Venture capitalists want a high profit margin" rel="nofollow">in when lookin" rel="nofollow">ing at a busin" rel="nofollow">iness model. Busin" rel="nofollow">iness plan and access to fin" rel="nofollow">inance - stakeholder uncertain" rel="nofollow">inty where banks provide fundin" rel="nofollow">ings and evaluate busin" rel="nofollow">iness plans as require collaterals and good cash flow / VC in" rel="nofollow">invest for capital gain" rel="nofollow">in so they will place great emphasis on product and opportunity / busin" rel="nofollow">iness angels in" rel="nofollow">invest own money and are more in" rel="nofollow">involved than VCs. VCs have contractual provisions which is givin" rel="nofollow">ing certain" rel="nofollow">in amounts of fundin" rel="nofollow">ing after meetin" rel="nofollow">ing requirements or to protect again" rel="nofollow">inst agency risk. Busin" rel="nofollow">iness Plan and venture’s success - creates common frame of reference for in" rel="nofollow">internal parties, useful when settin" rel="nofollow">ing up company together and havin" rel="nofollow">ing to agree / complexity of busin" rel="nofollow">iness tasks is beyond what is comprehensible by boundedly rationale in" rel="nofollow">individuals / complexity of busin" rel="nofollow">iness task and to cooperate with external parties / reducin" rel="nofollow">ing uncertain" rel="nofollow">inty with respect to success of busin" rel="nofollow">iness and mean of reducin" rel="nofollow">ing behavioural uncertain" rel="nofollow">inty regardin" rel="nofollow">ing true motivations and in" rel="nofollow">intentions of in" rel="nofollow">involved in" rel="nofollow">internal and external parties, adverse selection is prior to transaction or contract leads to asymmetric in" rel="nofollow">info and moral hazard is post and occurs when one person take more risk as someone else bears the burden of those risk, to deal with this Banks specify collateral and VC contractual provisions. Elon Musk Busin" rel="nofollow">iness plan? How it helped him succeed and gain" rel="nofollow">in fin" rel="nofollow">inance? 3. How do in" rel="nofollow">incubators, clusters and the State contribute to entrepreneurial success? Incubator - organisation that creates a supportive environment that is conducive to the development of new firms. They provide starts up with shared office space / shared support services to reduces overheads / professional busin" rel="nofollow">iness support and advice / network provision be in" rel="nofollow">in in" rel="nofollow">internal or external (all companies outside in" rel="nofollow">incubator that provide support for start ups on behalf of the in" rel="nofollow">internal in" rel="nofollow">incubator). Successful in" rel="nofollow">incubator - in" rel="nofollow">incubators main" rel="nofollow">intain" rel="nofollow">in a spirit of entrepreneurship by enablin" rel="nofollow">ing founders to retain" rel="nofollow">in significant shares of ownership / they offered preferred rates and terms from the best service providers, allowin" rel="nofollow">ing entrepreneurs to enjoy econ of scales / they offer preferential access to network of companies which is the main" rel="nofollow">in determin" rel="nofollow">inant of success. Network in" rel="nofollow">incubator - have mechanism, to foster partnership amongst start up teams and other firms, facilitatin" rel="nofollow">ing a flow of knowledge and talent across companies and forgin" rel="nofollow">ing marketin" rel="nofollow">ing and technology relationships between them. This means start ups have to be related.This is how successful networked in" rel="nofollow">incubators work, by havin" rel="nofollow">ing a portfolio strategy. - They also combin" rel="nofollow">ines best of two worlds, the scale and scope of large corporations and entrepreneurship spirit of small firm. Connections help to recruit talent / expert advice / learn from other start ups. - Two critical characteristics which are networkin" rel="nofollow">ing is in" rel="nofollow">institutionalised e.g. advisory board of external experts and the preferential access not preferential treatment, this is to main" rel="nofollow">intain" rel="nofollow">in entrepreneurial drive. Climate KIC accelerator / in" rel="nofollow">incubator is a large EU acceleration programmes focussed on climate impact by clean tech commercialisation. Many different locations which means start ups can contact or gain" rel="nofollow">in more from others due to the franchisin" rel="nofollow">ing of the acceleration programme. Adv of clusters - economies of agglomeration which is the benefit that firms obtain" rel="nofollow">in by locatin" rel="nofollow">ing near each other. Gives access to specialised in" rel="nofollow">inputs and employees / access to in" rel="nofollow">info with the existence of repeated relationships and community ties fosterin" rel="nofollow">ing trust facilities/ complementary products for buyers and marketin" rel="nofollow">ing complementaries / access to in" rel="nofollow">institutions and public goods with education and train" rel="nofollow">inin" rel="nofollow">ing of employees and advice from experts / performance measurement and in" rel="nofollow">incentives with greater competition in" rel="nofollow">in clusters there is limited opportunistic behaviour due to repeated in" rel="nofollow">interaction and the importance of reputation, so you need to be able to collaborate with others / larger markets for products / access to fin" rel="nofollow">inancial in" rel="nofollow">institutions as suppliers of funds are more aligned with demands of companies in" rel="nofollow">in clusters / regional lock in" rel="nofollow">in - these adv attract more companies and region becomes larger and more successful and region gets locked in" rel="nofollow">in tech. Clusters attract companies, expand and become valuable. Cluster is successful when it doesn't focus on one thin" rel="nofollow">ing but in" rel="nofollow">in fact when they respond to the need of consumers. Clusters and in" rel="nofollow">innovation, perceivin" rel="nofollow">ing and respondin" rel="nofollow">ing to opportunities - perceive new buyers needs faster / perceive new tech, operatin" rel="nofollow">ing and delivery faster / flow of tacit knowledge and unplanned in" rel="nofollow">interaction / rapidly source new components, service and machin" rel="nofollow">inery. From this is clear that the competitive pressure in" rel="nofollow">in a cluster is high. Problems of clusters - too tech myopic and in" rel="nofollow">introspective / low in" rel="nofollow">investments in" rel="nofollow">in radically new tech / risin" rel="nofollow">ing labour and property costs / in" rel="nofollow">increasin" rel="nofollow">ing congestion. Detroit. External sources: More specifically, clusters facilitate new busin" rel="nofollow">iness formation and the growth of successful start-ups by lowerin" rel="nofollow">ing the costs of entry (e.g. by providin" rel="nofollow">ing ready access to suppliers or low-cost access to specialized in" rel="nofollow">inputs, offerin" rel="nofollow">ing an environment in" rel="nofollow">in which the costs of failure may be lower), enhancin" rel="nofollow">ing opportunities for in" rel="nofollow">innovation-based entry (as a stronger cluster environment will allow local entrepreneurs to develop and commercialize new technologies more rapidly) and allowin" rel="nofollow">ing start-up firms to leverage local resources to expand new busin" rel="nofollow">inesses more rapidly. Fin" rel="nofollow">inally, strong clusters are often associated with the presence of in" rel="nofollow">innovation-oriented local consumers, thus providin" rel="nofollow">ing in" rel="nofollow">increased opportunities for entry in" rel="nofollow">into differentiated market segments. As a result, entrepreneurship is a particularly important channel for cluster-driven agglomeration, and may therefore be crucial for the role of clusters in" rel="nofollow">in enhancin" rel="nofollow">ing regional performance. Reference: elgado, Mercedes, Michael E. Porter, and Scott Stern. “Clusters and Entrepreneurship.” Journal of Economic Geography 10.4 (2010) : 495 -518. Elon Musk and clusters/in" rel="nofollow">incubators/the state? He didn't use gov or the state to fund his spaceX Falcon 1 rocket as it took too long, used his own money through the sale of Paypal after it went public, earned in" rel="nofollow">in excess of $100 million dollars. Talk about Silicon Valley - lin" rel="nofollow">ink it in" rel="nofollow">into hub for in" rel="nofollow">investors, VCs fundin" rel="nofollow">ing for Musk’s high growth company. Page 289’Jan 2010, department of energy struck a $465million loan agreement with Tesla.’