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Effectual FundingSaras Sarasvathy
The Fuel that Keeps us Going
• The knowledge that we create together and pass on to each other
• I cannot teach you if I do not learn from you
Task based Workshop
3 Tasks
1.Fill out survey individually
Order categories according
YOUR preferences
CategoriesFor each category, tell us in your own words, what it
would take for YOU AS AN INVESTOR to invest in Estar's venture
5 4 3 2 1
5 4 3 2 1
5 4 3 2 1
5 4 3 2 1
5 4 3 2 1
5 4 3 2 1
5 4 3 2 1
5 4 3 2 1
5 4 3 2 1
5 4 3 2 1
5 4 3 2 1
5 4 3 2 1
5 4 3 2 1
5 4 3 2 1
5 4 3 2 1
How well does the venture fit with your...
(for example: skills, objectives, tastes etc)
Any other things (list in order of
importance)
How important is each of the items you listed?
Here, 5 indicates MOST important and 1 indicates
LEAST important
Type of venture (for example: tech, non-
tech, product, service etc)
Market potential (for example: large, growing, specialized,
niche etc)Tasks you want
completed before investment
Task based Workshop
3 Tasks
1.Fill out survey individually
Have you returned your filled out survey?
Please get your labels and stick them on your shirt or
dress
Task based Workshop
3 Tasks
1.Fill out survey individually
Have you returned your filled out survey?
2. Engage in first funding exercise
A = INVESTORB = ENTREPRENEUR
Task based Workshop
3 Tasks
1.Fill out survey individually
Have you returned your filled out survey?
2. Engage in first funding exercise
Fill out responses and hand them in
3. Engage in second funding exercise
A = ENTREPRENEURB = INVESTOR
Task based Workshop
3 Tasks
1.Fill out survey individually
Have you returned your filled out survey?
2. Engage in first funding exercise
Fill out responses and hand them in
3. Engage in second funding exercise
Then fill out responses and hand them in
Workshop Debrief
Myths About Startup Funding
• Of over 500,000 employer firms that get started in the US, how many get VC funding?– less than 1000
• If you do get VC funding, there is a 50% chance you will not be the CEO of your venture the next year
• Most Inc 500 firms get no outside funding• About 2/3rd firms that go public, get no VC funding• So, HOW do startups get funding?
If not formal investors, who funds startups?
Before we tackle this question, let us consider the fact that
YOU DON’T NEED MONEYYOU NEED WHAT MONEY CAN BUY
If not formal investors, who funds startups?
Maybe the question should be,WHO IS NOT YOUR POTENTIAL INVESTOR?
Bird-in-hand
Crazy Quilt Lemonade
Pilot-in-the-plane
Affordable Loss
Start with who you are, what you know and whom you know
Decide up front what you are able and willing to lose
Build a growing network of self-selected stakeholders
Put surprises to work for you – both good and bad
Co-create the future without having to predict it
PRINCIPLES OF EFFECTUATION
Effectual Funding for a Novelist
Bird-in-hand
Crazy Quilt Lemonade
Pilot-in-the-plane
Affordable Loss
‣ You decide what you want to do based on the opportunity you envision
‣ You decide what resources you require to achieve that vision
‣ Then you target those who can best provide the resource
‣ You craft a pitch that will induce them to give you what you want
‣ You decide what you can do based on your means and affordable loss
‣ You ASK anyone who may be interested in helping you co-create the future
‣ You craft a variety of ASKs that allow people to opt in in their own way at their own levels of affordable loss
‣ You are OPEN to reshaping your vision through stakeholder commitments
vs
causal pitch
effectualask
Cocreating the Future
Whatcan I do?
Affordable Loss
Interactwith
other people
Effectual stakeholder commitmen
ts
Who I amWhat I knowWhom I knowBird in hand
Non-predictive control
Co-create
Plan Persist
AdaptLow
High
Low High
PREDICTION
CONTROL
= Non-predictive control
How do you control a future you cannot predict? You co-create it through stakeholder commitments
PlanPersist
Adapt
Art of the Effectual Ask
How do you control a future you cannot predict? You co-create it through stakeholder commitments
Co-create
Plan Persist
Adapt
Low
High
Low High
PREDICTION
CONTROL
You ask them what it would take for them to come on
board
You may or may not know
what they want, but you
don’t care
You estimate what they
want, and you create a quid
pro quo
You try to find out what they want, and try to offer that
Whatcan I do?
Affordable Loss
Interactwith
other people
Effectual stakeholder commitmen
ts
New Means
New Goals
NEW MARKETS
Expanding cycle of co-created resources
Converging cycle of co-created constraints
Who I amWhat I knowWhom I knowBird in hand
Surprise!Lemonade
Who WE areWhat WE knowWhom WE know
Bird in hand
Whatcan WE do?
Affordable Loss
Co-creating the Future
Investing as Asking
• You don’t need money per se to build your venture
• Similarly, you don’t need money in order to invest
Investing as Asking
• You don’t need money per se to build your venture
• Similarly, you don’t need money in order to invest
• Invest your bird-in-hand
Investing as Asking
• You don’t need money per se to build your venture
• Similarly, you don’t need money in order to invest
• Invest your bird-in-hand
• Invest what you can afford to lose
Investing as Asking
• You don’t need money per se to build your venture• Similarly, you don’t need money in order to invest
• Invest your bird-in-hand
• Invest what you can afford to lose
• Become a self-selected stakeholder
The Power of the Ask according to Steve Jobs
Of Wallets and Faces