Masterclass in Entrepreneurship & Strategic Management | Candi Carrera | Skillshare
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Masterclass in Entrepreneurship & Strategic Management

teacher avatar Candi Carrera, Value investor & indep. board director

Watch this class and thousands more

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

    • 1.

      Introduction

      2:31

    • 2.

      Entrepreneurship

      19:26

    • 3.

      History & current state of innovation

      20:02

    • 4.

      Innovative ideas & MVPs

      16:49

    • 5.

      Structuring ideas with Business Model Canvas & Business Plans

      30:03

    • 6.

      Introduction to Incorporation & major laws

      17:01

    • 7.

      Business permit & introduction to corporate formation law

      53:52

    • 8.

      Finance & Bookkeeping law

      22:24

    • 9.

      Commecial Law

      77:39

    • 10.

      Introduction to Strategic Management

      17:04

    • 11.

      Macroenvironment and Market Structure

      28:39

    • 12.

      Strategic Management

      26:32

    • 13.

      Strategy formulation & analysis models (Part 1)

      74:05

    • 14.

      Strategy formulation & analysis models (Part 2 - The multi-product company)

      20:02

    • 15.

      Culture

      39:25

    • 16.

      Introduction to Corporate Finance Fundamentals

      7:29

    • 17.

      Value creation & cost of capital

      41:44

    • 18.

      Understanding Financial Statements

      27:49

    • 19.

      Main accounting & auditing principles

      38:25

    • 20.

      Company Valuation & Equity dilution

      48:42

    • 21.

      IPO & DPO

      17:28

    • 22.

      Cash & Sales Management

      30:12

    • 23.

      Self Management & Conclusion

      20:18

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About This Class

Entrepreneurs need to

  • Understand where ideas come from & how to structure formulation of ideas
  • how to move from idea to company creation & start selling to customers
  • How to position ideas in existing markets & navigate company through changing markets
  • Understand how to raise & manage money to grow company
  • How to manage themselves as a person

In this course you will learn :

  • the fundamentals of entrepreneurship & strategic management
  • Be equipped with legal basics for creating & running a company
  • Gain confidence and become decisive about the ideal way to proceed with your strategic ideas
  • Become fluent in company governance & corporate finance
  • Understand company equity & valuation
  • Reduce learning process for less-experienced entrepreneurs
  • Learn the lingo of entrepreneurs & strategic management
  • Grow into impactful person leveraging 15 years of mentoring entrepreneurs & board directorship experience

Learn from my 15 years experience of mentoring young entrepreneurs, holding senior management positions, growing a business from 50 to 200 million in 8 years and more recently holding various positions as independent board director. This course is also being taught in a Master of Technopreneurship at University level. I hope that the experience and knowledge I will share with you, will allow you to rapidly move ahead faster and accelerate your learning process.

THIS COMPLETE COURSE SHALL GIVE YOU A SOLID START INTO ENTREPRENEURSHIP

Many thanks and I appreciate your interest in my course!

-Candi Carrera

Meet Your Teacher

Teacher Profile Image

Candi Carrera

Value investor & indep. board director

Teacher

My name is Candi Carrera. Born in 1972, I have been a value investor since 2001 with 90% of my personal savings invested in blue chip companies. One of my core principles is to never borrow money when investing in the stock market. I keep the remaining 10% as a permanent cash reserve to buy more stocks when markets get irrational & depressed which happens regularly.

At the age of 50 and thanks to value investing learned from Warren Buffet & Benjamin Graham, I was able to "retire" and live today from the passive stream of income that my value investing portfolio delivers. My personal mission is to help people reach their financial independence by teaching them value investing.

My main attitude as value investor is to buy shares as if I would be buying the whole company... See full profile

Level: Intermediate

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Transcripts

1. Introduction: Good morning, Welcome entrepreneurs and investors. Welcome to my masterclass and entrepreneurship and strategic management. First of all, who am I? My name is Kara. I am 49 years old. And I'm sharing here with you my experience of having been managing leading companies for more than 20 years, including the latest one where I was counting Manager for Microsoft in Luxembourg and running a business of above 200 million of annual revenue. I'm also and you can see this on LinkedIn. Since 3-years independent board director, including a private equity holding in Dubai. And here specifically in this training, I'm also sharing my 15 years of business mentoring young and novice entrepreneurs and startups. And also what you will have here, access to it in this masterclass is in fact a class and I'm teaching at university level in a mouse integral partnership as well. What we will be discussing in this training is we will start from ideation, go to the launch phase. What are the main things that you need to know up to a growth phase maturity face, and even potentially going public with IPO DPO. So the purpose of this training is really that you understand the fundamental, that you gain confidence, that you've become decisive in your decisions as a novice entrepreneur, that you reduce your learning process, that you can benefit from my experience and also that you grew into an impactful person structure of the course. So the main chapter is going to be entrepreneurship and ideation. So the very first start incorporation major laws, strategic management. Corporate finance is also very essential, including things like cash and sales management, where people are not attentive, at least novice entrepreneurs are not attentive to. And then also some tips and tricks from myself and having mentors for many, many years, young entrepreneurs and novice entrepreneurs about the self-management as well, the project in terms of assignments, we will be practicing on a concrete example where I will ask you to do a strategic analysis of one of four potential companies, including a Five Forces model of micro pod and pestle. But that will be discussed in the training in the strategic management part. So in chapter three, and this class, as I said, has been created for you, for novice entrepreneurs, people who want to start their own business, people who want to become their own boss. So hope to see you in the first lesson. Thank you. 2. Entrepreneurship: Welcome back entrepreneurs, welcome back investors. So in this second lecture, as there is in the beginning, I'd like for us to introduce what entrepreneurship and actually means. So the, the term entrepreneur in fact comes from the French verb entrepreneur, which means to undertake. And very often entrepreneurs are. The definition of an entrepreneur is linked to a person, an individual, or sometimes a group of individuals. Individuals who have a new business idea, who want to create something new, want to even have a societal impact. And that's really what the idea is about undertaking something. And so 11 term that I just want to con here as well, which also pops up sometimes is intrepreneurship, which is basically the same, has the same meaning than entrepreneurship is linked to the existing company. So you have this very big companies that are sometimes in their comfort zone. They are not very innovative. So you have some people, or let's say some senior managers in those companies who allow people who they want to foster entrepreneurship inside the company, but as it is inside the company and existing company, they call it intrapreneurship, but it's basically the same. It's entrepreneurship from the inside of an existing company. And very often entrepreneurs are seen as innovators disrupt us. Sometimes even when you look at people like Elon Musk. And again, I don't want to judge now here. I will not have an opinion. I think he has at least ideas that they're gonna be even seen as superstars because they are disrupters and they come up with new ideas of goods and services. But basically the idea of an entrepreneur is really to generate new value by creating a new, new products, new services, coming up with something that's existing company's existing entrepreneurs, existing managers have not thought about yet. When I look at entrepreneurship and I'll try to summarize or take an analogy, how I look at entrepreneurship, basically, I look at it. This is a Roman god called Yanis, where this God in fact has two faces. And I think that entrepreneurs have to have these characteristics, those attributes of not just looking back the past, but also looking into the future. You cannot just look into the future and not look what is going on in your company and how your past performance was. Looking at the learnings. Because I think that there is a lot of things to learn from previous mistakes and bring those in into the future. Let's say decisions, future vision of the company. So I believe that entrepreneurs, they have to strike the right balance between looking at the past, looking at what is going on, but also thinking for the future of the company because otherwise, I mean, nobody else will do it. If it is not the founders of the innovators in the company when they look at entrepreneurship as well from, let's say, more economical perspective. As already said, that entrepreneurship is little bit defined as the process of undertaking something with generating a value through creation potential of a new product, new process, new services, and new idea. When you look at entrepreneurship, as I said from an economic perspective, economies, they look at entrepreneurship as one of the four forces that are part of the, let's say, production process as they call it. The three being lands, natural resources, labor, which could be your workforce, can be also robots, of course, and capital. So capitalists basically money or assets that you bring into the company as, as capital. And that's basically what economists say, is basically that entrepreneurship is really the idea of combining the other three resources, which are land, labor and capital, and doing, doing something out of it. So you can see that entrepreneurship is kind of an energy. It's driving force is the engine that in fact combines the other three resources to have some, let's say, positive outputs, hopefully. So that's really the intention of entrepreneurship. This just the detail. I do not like the term land and natural resources. I prefer to use property, plant equipment because it actually relates back to the balance sheet. But that's now a detailed question to you. I mean, there are many entrepreneurs. I mean, we discussed earlier, I mentioned earlier that maybe some, some entrepreneurs or even considered as rockstars. I mentioned, I think Elon Musk. I'm gonna be showing you a couple of pictures and I'd like you to put a name behind a picture of this people. And at the count of three, pause the course. And after the count of three, you're going to be resuming it. And let's say elaborate on who those people are. So let, let me do the count 123 and please pause now and have thought about who those people are. Alright, resuming back. So solving here, who are those people? You probably have recognized some of them. So on the top-left it, Steve Jobs, you're going to have Jeff Bezos. Warren Buffet, Jack Ma from Alibaba, Jack Welch, General Electric, great personality also in terms of strategic management, the founders of McDonald's, the founder of Coca-Cola. So those are just examples. And if you extend this, there have been huge amount of entrepreneurs throughout, let's say the last centuries. And it's not just now or a century ago that we are looking at entrepreneurship, but you had even big families like the RACI and the Vanderbilt's or Rockefeller's immediately in the middle age, more or less in Italy. There have been a lot of people that have had the energy. And this is how the world has evolved of people coming in with new and new ideas in fact. But those people, I mean, we were looking at people that were entrepreneurs two hundred, three hundred, four hundred years ago, they all had to face similar obstacles. It's true the world was not digitized as it is today, not globalized as it is today. But the obstacles have been very similar for all of those entrepreneurs. And let me, because you're going to see in the s-curve of corporate growth, I want to discuss a little bit what are or where do those obstacles play a role in the S curve of corporate growth? So let's first elaborate. What are the typical obstacles that entrepreneurs will face and have been facing if you look at the lives of those people, well, the first one is typically, very often it's easy to have ideas but then it's like, okay, do I have capital? How, who, or who can help me incorporate the company? And there is so much bureaucracy potentially with the government. I need to do sanitary reporting and this, and that. It's like it's a nightmare to just set up the company. So raising capital, as I said, I didn't have to hire talent and to keep this talent. And obviously it's not easy for startups. And when I'm discussing with young startups, it's not easy for them to hire and to keep talent because today even in 2022, a lot of those talents, they want to work for Amazon, they want to work for Google, they want to work for Facebook and for Microsoft. It's difficult for keeping them. So you need to have, let's say a vision about when you want to bring the company as a founder so that you can hire the best talent and keep that tannin. And it's really not an easy task. I admire the young entrepreneurs who have to deal with this obstacle. Then obviously acquiring customers. I mean, who's going to pay the salary at the end of the month of your salary, but also the salary of employees. It's the customer. I mean, let's be very clear. So if you don't acquire customers, I mean, you may have a lot of cash, but that cash will burn very, very rapidly and you may end up in a situation where you have to shut down the company. You will have also entrepreneurs have to provide leadership and management because people and teams I expecting from you to be the leader or the manager or the person who drives a vision, who sets the agenda for the future for the next years. And last but not least also, not just the people and the teams are expecting this from you, but it's in your interests, are also looking at market structures that competitors, what are the changes that are happening in the market? So that's the kind of thing that you will also have to deal with. When you take those six common obstacles. And I promise you, the Rockefellers, the vulnerabilities, the Dimitri, they had to deal with that as well. When you look at those six miles and we bring in here the S curve of corporate growth. So what is the S curve of corporate growth? S curve of corporate growth is the typical lifecycle that any company and I promised you any company goes through. It always starts with an idea. Obviously the company doesn't exist, then you are in the ideation phase. That's the inception of the company. Then you have the launch phase, company gets incorporated. Then you have the first customers that are being acquired you on a growth phase. Everybody super-happy. The growth is like triple digit growth. Every year you grow to a 103%, 100%, and then a certain moment in time, when the product is more mature, you already have a good market penetration. The company becomes mature. And also at one in time is like Okay, everybody has a product, so what's next? And at that moment in time, if you're not attentive to what is called a strict strategic inflection points, you may end up in a decline. And strategic inflection points, they happen to any company. And again, I promise you, strategic inflection points always come up. And it can come from a situation like COVID, it can. So external factors that can come from a change in regulation because the government has decided to change something that influenced the way how you sell your products. Or maybe you are no longer authorized to sell your product. So those are the kind of things where entrepreneurs, they have to monitor the external environment. That's why we're gonna be discussing about the Pascaline model. And try to be attentive on what could be potential strategic inflection points. And the most important thing here is not to miss those strategic inflection points. And as I told you, I've been working at max of as general manager for the Luxembourg subsidiary for many years. And even myself, I had to look at those strategic inflection points and Microsoft as a cooperation. Think they did a fantastic job. And Steve Bohmer started that, bringing in pivoting the company. So pivoting is really shifting and that's term that is used in entrepreneurship. So pivoting from a software editor to a Cloud service provider, would we have a would have missed that strategic inflection point. I'll probably today, maximum would be in huge trouble. But if you look at the past, Microsoft in the ideation phase has started as with Bill Gates, one of the founders of the company who developed an operating system for the Intel chips to make it very easy for IBM and then for the other ones like HP, Dell, etc. And so we're Apple was much more closed ecosystem. Windows and Office war as software, we're really catch cows of Microsoft and obviously you have new products coming in. But at the very end of the day, at a certain point in time, even for a company that has been so dominant as Microsoft, they came to a moment where competition came in like AWS, Google apps, apple developing their own productivity suite as well. So customer saying, well, we no longer wants to its burden to us, so always have to update the software. Can you count? You just run the show for us, Microsoft please. And this is where the strategic inflection point came. Plus also the fact that I'm not discussing it now here, but also from a cash predictability perspective. You also see more and more companies that want to have a subscription model in terms of revenue streams to have this predictability of cash inflows versus how it was funny Years ago, he was selling the software. You had all the cash now. But the customer potentially will no longer purchase from you from the next three years that was creating a lot of, let's say, fluctuation in the cache predictability, which is also not good because shareholders and investors and analysts and all the stakeholders and liked to have predictable cash inflows and cash outflows. So this is the S-curve, a corporate growth. And when you put now and as I said, this happens to all companies and we're gonna be discussing the next lectures that the cycles of this strategic inflection points, they come in fact more earlier, more and more because just the pace at which new innovations come up is increasing and the adoption and the dissemination of new technology is being reduced. In the past, you had a strategic inflection May be coming up every 30 years at the time of Rockefeller and Vanderbilt. Now, it's matter of after ten years, but stay with me. I'm going to be explaining this in a future lecture. When we come back to the milestones and the obstacles that entrepreneurs have to face when I've listed here, the first one being the incorporation of the company, the second one, obtaining the first round of money of capital. That's typically after the ideation phase, after the inception phase. And you can draw this in the s-curve of corporate growth when you look at obtaining financing, keeping talent, hiring talent, acquiring customers, but also providing leadership and management of the company. That's something that's why my cycle that I was showing earlier. This is something that will happen all the time. It's not something that you say, Yeah, I didn't know and now I can relax and go to the beach for the next ten years. Now, you have to care about your talent. You have to care all the time about your customers and avoiding churn, avoiding turnover and your customers, but potentially acquiring new customers as well. And people are expecting from you to provide continuous leadership and management of the company. So that's why you see here that the obstacles, two to five, I'm drawing them on the whole S curve of corporate growth. That's a continuous, let's say topic that you have to deal with as an entrepreneur. Then last but not least, managing competition and market changes. So I could have drawn the same line like two to five, but I decided to bring it a little bit late. And let me explain. I believe that when entrepreneurs start a company, they have incorporated the company. The company is a growth phase. Initially, most of the entrepreneurs, they don't care about competitors and market changes. Sometimes it's bad wake-up call because law changes and entrepreneurs haven't looked into it. But I believe that managing competition and managing market changes and clean things that can be, let's say, determined or analyze repeatedly, model that we're gonna be discussing in the strategic tools is something that comes. After the growth phase has started, It's not something that I recommend to entrepreneurs to start from the very beginning. It's clear that at the ideation phase before raising capital, you need to understand if there are already ten competitors are doing the same or have the same idea than you. And I may give you a concrete example. Learning platforms. I mean, I like a lot Udemy skillshare skill success. I have been asked not to participate in a new platform. This code invested Pro from California that has not launched yet. But if you are now the 25th learning platform that wants to go after the Udemy is the Skillshare. So skilled successes. It's very complicated. I mean, you need a lot of capital and a lot of efforts and probably some different shades to have the existing customers of those platforms switch to you. Or potentially you buy the takeover, the cost for switching them, but you need to provide value. So obviously in the beginning, of course, you need to look at competition. Otherwise you will be burning unnecessary cache and maybe you idea is bad. But that's part of what we're gonna be discussing the business model canvas and look into this. But afterwards, when the company has launched is growing faster than really, you will need to look at competitors and market changes. And again, I'm not speaking here too much in this training about it. But basically there is an discussing this in the corporate finance training. Basically in, on this curve linked to point number six, what is the incentive for competitors to come in and to exit the market? It's basically the profitability. So if you have an idea that is highly profitable, you're going to have somebody and you're the first one, you're going to have somebody who will copy you, I promise you it's like this. Today, for example, if you are in a market where you have 15 competitors and the average return on invested capital or so the average margin profitability of those 15 companies is like present. You're going to see that some competitors will drop out and they're going to exit the market. And so there you have also like this S curve doesn't profitability. So when profits are high, you're going to have competitors coming in and we want to replicate what you're doing. And when profitability is low, you're going to have competitors exiting a specific market. Look at the airline industry. Very capital-intensive. When margins were high, you had like low-cost coming in because they wanted to capture specific segments and democratizing airlines or flights in fact. So, but again, just understand that here on the S-curve, a couple of God, you have those six obstacles that you can reflect during the curve. So with that, I hope that you understand already what is intention entrepreneurship and what are, what are already the, let's say in the life cycle of a company, what are things that you need to be attentive looking at those six obstacles that an entrepreneur has to deal with. And I promise you, even two hundred, three hundred years ago, the same entrepreneurs had to deal with the same obstacles. They're just not that the world is more digitize, more and more technology heavy, but a more globalized. But basically the problems remain the same for any entrepreneur. In the next lecture, we're going to be discussing the history and the current state of innovation, looking at where innovation is coming from before then in the lecture afterwards, looking at how to structure the ideas and through MDPs, Bismarck can run those kind of things. So thanks for listening in and talk to you in the next lecture. Thank you. 3. History & current state of innovation: Our islands pronounce and investors. So as introduced in the previous lecture we are going to be discussing now are looking at the history and current set of innovation. When we look at history of innovation. And I'm not saying that it's the best way of looking into it because they're going to be discussing in, I think it's in a later chapter, when we look at the neuroscientific process of creativity. And we're going to be speaking about the full scientific paradigm. Well, let's just put that aside for 1 second. But very often innovation is linked, or people link innovation to the industrial revolutions. When we look at humanity for the last, let's say, a thousand years. And we could come back to the Egyptians, we could go back to the Greek, to the Roman civilization. But let's just look back at the last six hundred, seven hundred years. The first industrial revolution happens, let's say late 18th century, start of the 19th century and was in fact initiate it in, shall I say, in Britain, it was not still a United Kingdom. I think. I'm not a specialist on history, but anyhow, where in fact water and steam appearance and that allowed the mechanization of production. And you have the first trains being fuels by water and steam engines. First the first industrial revolution, and then of course that industrial revolution loud to build boats that were crossing the ocean and having engines as well. So really the mechanization of production, the second industrial revolution came like half a century later, more or less so between 18701920, some people relate to it as the Taylorism. Because it's really the idea about becoming much more efficient in managing a supply chain as a division of labor tasks as well. Also the appearance of electric power. And this allows mass production. If you look at Henry Ford, so the founder of Ford Motor Company, so it's automotive industry. Henry Ford was, if you look at the Model T, that was one of the first cars that was built in a supply chain with the intention of being able to have large volumes of production. Very repetitive. And that was really the idea of division of labor. Very specialized people that would do repetitive tasks day in, day out. So that was a secondary loss of revolution. You see that they have been not so many revolutions until now, let's say the last one hundred, one hundred fifty century. What happened then? Third Industrial Revolution is appearance of the transistor, which basically is linked to the n transistors being packed on microprocessors. So it's basically, it's the appearance of electronics. Also programming, programming chips. The whole information technology that started around a thing 1950s and 1960s of the Second World War, which then you had companies like IBM, the first mainframes. So really accelerating calculations that were done manually before, really having the opportunity to do a lot of calculations and having a lot of compute power. And then the fourth industrial revolution that's now since 2016 more or less. There's an interesting book from Charles Schwab called the Fourth Industrial Revolution, where we have seen this industrial evolution is of course building. In fact, every industry evolution is building on the predecessor, is building on a lot of the tech innovations of the 1950s and 1960s where we have now a lot of, let's say, technologies that have exponential growth. If it is DNA sequencing, if it is also virtual reality, artificial intelligence that was born in the 1950s and went through 23 winters, AI winters, and now people are really leveraging artificial intelligence. There is a blurring between the physical and the digital world, as well as what we call cyber-physical systems. So that's the fourth industrial revolution. So what we see is that if willing and if you allow me to link innovation to the industrial revolutions, that the pace of innovation has accelerated. And I'm expecting this will continue. In fact, over the next decades. What is difference or what? Yeah, when you, when you look at industrial revolutions and when you look at commodity technologies, you can look at private car, running water, a fridge, TV, and smartphone, social media. If you analyze how those technologies have been adopted, and this curve shows on US population, what is the penetration of the technology on the US population? So if you read 100%, it means that 100% of the US population has access, for example, to running water. And if you look around in water, it took nearly a full century, nearly 100 years for any American to have access to running water. It's still probably not the case because we know that there are some people who do not have access to running water, even the US. But we can consider here and allow me to say from an economic perspective as a central perspective that More or less everybody has access to running water. But if you look at the graph on the left-hand side, it took nearly a century to have everybody, any American having access to running water. Automobile tube-like 50 years from the Second Industrial Revolution, Henry Ford Model T, removing the horse carriages and being replaced by cars. Up to the 1980s, more or less, where around 80 per cent of the US population hat's a private car. So you see that the speed of dissemination of commodity technology was around 50 years, 100 years. If you look over the last decades, we are now in 2022. If you look back at 2010, you look at new technologies like tablets, smartphones, social media. You see that it took for those new technologies, commodity technologies, tube-like a decade maximum. That's 80% of the US population was having access to this. And this shows you why the pace of innovation is accelerating in an exponential way versus how it was before. Okay, that's good. But what's the consequence for cooperation? Where here in entrepreneurship and strategic management training, what's the consequence for corporations? Are basically corporations, they feel much more pressure. The strategic inflection points. What else? What I was explaining in the previous lecture, the strategic inflection points are coming much earlier. You can just relax for 30 years until the next strategic inflection point comes. Potentially, the next inflection point comes in five years and you're gonna be fully disrupted and you're gonna be going bankrupt because you have missed that strategic inflection points. A new way of looking at, or let's say confirming that this is true, that's a strategic inflection. Points are coming much earlier, is looking. And this is a study that was done by Professor Foster of Yale University and he has been analyzing on the SAP if I found it. So that's basically the 500 largest companies in the US. It has been analyzing the average lifespan of companies on the S&P 500. And you see that a century ago, 1920s, the average lifespan of a company listed on the S&P 500 Index was like 67 years. So like two-thirds of the century, if you look now, it basically has been divided by three. So basically accompany on the S&P 500 has a probability of survival of 15 to 20 years. This shows, and you said this has been continuously decreasing over the last century. This show, this shows what I'm trying to tell you three innovation that as the pace and the speed of innovation is growing exponentially, the companies are feeling that pressure and the strategic inflection points are becoming shorter and shorter and buy that more and more companies are disappearing at a faster pace. This is basically what the study or analysis by Professor fossil from Yale University is saying. And I could expand this to more, let's say dates. I just took two decades here. I took in 1999 before the.com bubble and in 2019 when you look at the largest market capitalisation. So these are not even as a P5 followed, but probably Dow Jones, 30 companies. You see that even in 20 years time, the landscape of the largest market capitalisation has changed. If we look at 1999, you had companies like General Electric, Exxon, Intel, loosened technologies, Nokia, Walmart, those were in the top ten of the largest market capitalisation in the world. If you look 20 years later and you would look today in 2022, you see that we have moved into the big tech area. You have companies like Apple, Alphabet for Google, metaphor, Facebook, Amazon, Microsoft, who are in fact running the show of the largest market capitalizations. And other companies like loosened technologies, I mean, even Nokia. Nokia, as I will not say, disappeared, but it was acquired by Microsoft, it was a failure, etc. But the world has changed for a lot of these companies. And when I'm teaching this training, I'm always saying to entrepreneurs, I think about those companies, the companies that are listed on the Dow Jones 30 on the S&P 500. Those are companies that have easy access to capital. They have easy access to talent because the brands interesting. Nonetheless, they disappear, they potentially go bankrupt. They miss the strategic inflection points. And imagined for an entrepreneur, startup, how difficult it is for them. I'm not saying that You shall stop here and even stop the training and do not move forward with your idea. I just want to be realistic that from the startups that start at the same moment in time, ninety-five percent will die. And this is just more than what you see here. And what Professor, Professor Foster from Yale University was explaining is that already big companies that have easy access to capital, to resources, talent because they have nice brands and everybody wants to work with them. They are challenged to imagine how startups or challenge. But nonetheless. I mean, the entrepreneurs, they have great ideas. They do things. Elon Musk, Tesla heated space x, and those kind of things. Jeff Bezos did Amazon, Jacques Monod, Alibaba. So there are definitely possibilities out there. And you need to believe in your idea, but your idea has to have an impact and really create value or solve a problem for people. And what we're going to be discussing this in the business model canvas and the value prop Canva. When we look at the origins of innovation, you could say, but okay, I mean, I understand that new companies come up, replace older companies, more mature companies like General Electric, Nokia, etc. Where are, in fact ideas? What is the origins of creativity and of innovation? One of the main element is not just individual to have something in their brain, have an idea. We're going to be discussing this in the next lecture. But it's also the academic world. So schools, universities that in fact are fueling innovation. And I mean, I will not go into the details and differences between fundamental research and applied research. But to make it simple applied research, it's innovation that will have an impact in the next, let's say four to ten years, five to ten years where fundamental research may have an impact for only in 30 years time. But that's basically the intention and the target of academia. And I've put here three pictures of large US universities. And I'm going to show in the next slide where you see an amine just looking at companies that have spins off our spin out of those universities where you had students that were at those universities in an environment that was fostering and Nurturing Creativity and Innovation. You see, for example. So the three pictures I took was Stanford University on the left, Harvard in the middle, and University of California. So UCLA on the right-hand side. If you just look at some examples of companies that have spins off or came out, the founders came out of this university is just look, Stanford University. They have been at the inception of LinkedIn, of Shazam of WhatsApp, Harvard, Facebook who losing AirBnB, UCLA, UBA go through lifts and MIT Dropbox for example, Pennsylvania University Space X. So it's true, let's be very honest. There is a lot of us, American influence. Israel has a very vibrant innovation and start-ups system as well, linked to the academic world. But really the Silicon Valley, not just the Silicon Valley in the US, but the Silicon Valley specifically has really an intangible asset of 40 to 50 years, at least what they have created this network of investors, of innovators where this whole innovation creativity is really nurtured in a spirit that actually what people think about new things and what they can do and have an impact on society and challenge, Let's say mature company. So this is just an example where innovation is coming from. I mean, we could extend this to Europe. It's true that if I look at, let's say, large market capitalisation, there is a lot of innovation going on in Europe, but less, I would say the big unicorns, like the LinkedIn's, the AirBNB is the universe. It's very, let's say US driven. But Europe is investing a lot of public money into innovation because we do know, and I'm a European, but we do know that we need to force right, to nurture much more innovation that what we are doing today specifically in her words. And again, I'm not going to geopolitics ever in a world where you have, we'll say, geopolitical tensions about who's going to have the economic leadership between China and the US? What about India and Russia and Europe has to find its own way with its 500 million of citizens and making sure that we also have a global impact through innovation and armies. We serve our own needs through, let's say, European and regional innovation. So that's why a lot of money from europe is going into European innovation as well. And we're not going into the details, but they measure which counters. And we have Switzerland. Switzerland has a lot of international global corporations like Nestle. You have other companies in Switzerland like farmer Rush, for example, rush holding. So there are some very, very big companies in Switzerland, the Nordics as well. A very innovative where for example, Eastern Europe has to catch up on innovation specifically in Europe. Before we switch gears and amigo into where innovation is coming also from a neuroscientific perspective. I just wanted to pause it when second and just show in 2021, what were the biggest unicorns? Unicorns aren't those startups that are, according to external stakeholders, external analysts to the press, very innovative. They're really disruptors. You can look at space x. Space x indeed is disrupting the way how space launchers are being used. Because SpaceX wants to reuse and has been shifting the assumptions of nasa and European Space Agency on launches. For example, you have Biden's with TikTok, which is a new social media with a different way of looking at social media versus for example, the Facebook and Instagram. So again, I don't want to go through all of them, but basically the idea what is happening and this is where innovation is coming from is after the ideation phase, if the company gets the right amount of or is able to raise the right amount of capital through family, friends in the beginning. And then series a, B, C, private equity before going IPO. And we're gonna be discussing initial public offering and direct public offering later on is really the, those companies, they put pressure on existing players. They put pressure and they become new competitors from unexpected places where the existing companies, they have not thought about very often as well. Those companies, they leverage global tools like internet, cloud computing to do a plug and play or to have, or to offer a plug-and-play business model with, I would say not 0 friction, but very low friction in terms of customer acquisition. And last but not least, and this happens also. This is also true for the big tech companies. There is also an effect because of globalization of concentration of some actors. You will, as already said earlier, I think wasn't previous lecture, you will not have 25 companies that will compete against our B&B. There is a network effect that you're going to have one or two players. And it's the same for hyperscale cloud service providers. You're going to have AWS and Microsoft. They own eighty-five percent of the worldwide market. The other ones will be struggling for 234 per cent of market share. And it's, it's gonna be tough if you're not the first or the second one is going to be tough to have a sustainable business model. And this is what we call not just the global concentration, but also the winner takes it all model or approach. So be attentive that if you are not part of this first or second big one, and this is where you need capital intensity and having the possibility to raise rapidly huge amounts of capital to become the number one or number two. Because if you're number three, number four, number five, it's going to be, in my opinion, pretty tough if you want to play on a global scale, of course, if you want to play locally, That's different story, but just think about those, let's say forces that play as well for new companies, new startups, that, I mean, not all of them become unicorns, but they may be competition out there. And so what does it mean to have a concentration and then takes it all models. So with that, let's stop here on the history and current set of information innovation. Sorry, I hope that was useful to give a perspective where we're coming from, why innovation is accelerating now, and what are the different elements and why they're putting pressure on existing and mature companies. In the next lecture, we're going to be very quickly addressing the, let's say the neuroscientific background of innovation. And also how then stopped from going from the idea into structuring the idea to a minimum viable product, but also structuring the idea with business model canvas in the lecture afterwards and then concluding entrepreneurship and ideation. And then in chapter two, we'll go into really incorporating the company. So thanks for listening in and talk to you in the next lecture. 4. Innovative ideas & MVPs: Or rather printers and investors. So in this lecture series, chapter number one about entrepreneurship and ideation. So really discussing the fundamentals, I just wanted to give a perspective on where ideas are coming from, not driven by external Industrial Revolution, what we have been discussing or external unicorns, what really lipid to the brain process around where innovative ideas come from and how then to start structuring them. So if you can, if you would ask your family, what do they think are your friends? Well, you guys are coming from some people who will say, Yeah, I mean, I have this friend, he always has great ideas. It's really what we call a first-time minds. And that person, he or she has a freedom and has the time to reflect on things. And has different way of looking at things versus people that have traditional thoughts on whatever our products, services, processes. You have some people who think opposites to group thinking can call it a deviation or deviators. But you have people who say, Well, if everybody thinks like this, for example, on a value investor, and you have a lot of people who are traders, lot of people who invest into tech companies, into growth stocks. And I'm really thinking differently. I'm looking at the intrinsic value of when I put my money on the stock market. And I buy companies and I read the annual reports and I don't think that a lot of people, I think that 95% of the people that put their money on the stock market, they are in fact growth or technical investors, but they are not value investors. So that's an idea about aviation dialogues. I mean, of course, talking to other people, thinking together about challenges, recognizing new needs of solving or new ways of solving things. That's also something, for example, in companies of the last decade, you hear often about workshops going on hackathons where people really bring other people together and you try to come out and to create an environment where ideation is basically happening. And one of the things that I really like to do, and I'm not sure if this happens to you as well, is giving the time to, to consider different ideas. And I think that in the world that we are today. But I think that COVID has given some reflection to a lot of people, is, I think now people again realize because of COVID that maybe we want to have more time for us. We want to work less and have more time to think and really removing this continuous pressure of executing, executing being heads-down in the operation that don't have the time to reflect on things. And I think also it's where ideas are coming from when you have time to think. So the question is, from, again, looking here at the brain, is really generating new idea. Is that happening really accidentally? Or is there some, let's say, scientific approach to it or scientific explanation to it. If you're really interested in, into where creativity is coming from, I recommend you to read the book neuroscience of creativity by Margaret Bowden, where she tries to structure the approach to creativity. And I'm kind of summarizing here how to look at creativity. Basically, there are three categories of creativities. You have. The combination of activity are going to give you examples in the next slides. Where basically you combine two existing products that solve a specific problem and you bring them together. And that's maybe that creates basically the new idea. The iPhone is basically a combination of creativity. You have an iPod, you have a phone, and a navigator. And basically you put all that together into one single device. Exploratory creativity you're going to be discussing the fourth scientific paradigm, but that's basically explain things beyond what you know and you are unsure what the outcome will be. Just sometimes people say, trial, fail fast, learn fast. Just try things and you're not sure where you're going. You have transformational activity that's really having very radical ideas. And very often those ideas are the ones that also capture Nobel prizes as an example. So that's really not going to give an example. Carbon-14 dating. That's really something that is pretty disruptive. In fact, I will not spend too much time on this, but when you look at it from an entrepreneurship perspective, because you have some time and I've seen people, entrepreneurs who said, well, basically I don't have myself an idea, but maybe I want to solve an issue or a question that somebody else has addressed. And you have people and you have even academic world that is looking into what are the 100 most known and most important problems that have to be solved? And you have less of this and you can then look into what the competitors Is there still, let's say free-space for me as an entrepreneur because nobody is addressing that specific problem. But what, why I'm discussing this here? Because I believe that for that two ways of looking at it. The first one is you got to have somebody somewhere in the world who's addressing the problem that where you think you have the innovative idea? In my opinion, it's maybe unknown to you. So here is a matter of speed of capital intensity. But very probably you are not the first one having a specific idea. But again, it's not enough of having good idea, having good team. There are other things that will play a role in the equation to become successful. And the second one is also because having stated that, a lot of people say, yeah, but can it, why should I then be an entrepreneur? I've seen because new problems up here every time, every year, every decade. If you look at recent new programs like how, I mean, we are discussing a lot about space exploration, space resources, living on other planets than earth is like, how can we produce water? How can you produce an atmosphere? How can we use resources on those planets to fuel launchers to go to the next planets. For example, if you look at electric vehicles, how can we charge those cause much more rapidly than versus how it is today recycling computers because there is environmental pressure also on the compute, on the hardware manufacturers to produce green hydrogen, how to treat cancer? Those were things. If you just look at those five questions, nobody was asking those questions essentially ago. So as society evolves, new problems, new questions that require entrepreneurship, entrepreneurial skills. There are, there will be new opportunities also for entrepreneurs. So I'm not saying that because the list of all the problems that have to be solved exist, there is no free room for new entrepreneurs. There's gonna be room for entrepreneurs because things also evolve over time. And so you remember when we were discussing about the neuroscientific approach to innovation and creativity. I want to give you examples of those three angles and we're going to start with combinational creativity. And some people believe that combinational creativity is like, wow, this is super disruptive. In fact, not it's very basic, very common, but nonetheless, entrepreneurs have been doing, who are entrepreneurs who apply combinational creativity? I've been doing a lot of money with that. Just look at the iPhone. The amount of money that Apple has been doing by combining the iPod for music or phone. And at that time we had those, sorry to say, ugly Nokia phones, ugly BlackBerry phones. Those keyboards and the screens were very small. And Apple was pretty disruptive of combining those things together plus access to the Internet as well. You have things like hadn't show loss. And remember, NAB is Procter and Gamble or Unilever doesn't matter who is the owner of Head and Shoulders shampoo. But basically they come up with the idea, instead of having a shampoo and hair conditioner one or combining both together. Well, that's combinational creativity feels very straightforward, but it works. And intrapreneurs that how those ideas are companies that has those ideas, had those ideas were able to monetize hugely based on cognition, creativity. When you look at exploratory creativity, I said this is going beyond things and you do not know what the outcome will be. And I'm going to take one example which is a pretty, let's say not recent but as an example as being a lot discussed over the last five to six years, linked to the fourth industrial revolution and linked to the use of artificial intelligence and specifically machine learning. And again, I will not go extensively into the conversation when you look at big data, I mean today the digital universe. So the volume of data being stored is growing exponentially. It's huge. The amount of data, just look at how many videos are being uploaded on YouTube every day. So companies are now have the possibility because the cost of storage has gone down exponentially. Companies neuron have to think about what is my cost of saving? Also having to store data. So basically they think about, I'm going to store the data. I have no clue what I will be doing with the data. But I don't have scientists. I don't have humans that are able to understand or to find innovation correlations. Things that are captured in the big data because the human brain is limited in terms of processing power. So let's shift how we look at big data and how we analyze big data. And instead of me asking humans to find correlations and big data, let's go, let's ask the machines. Let's ask artificial intelligence. Let's ask machine-learning, which is programmed by humans and try to find correlations that I have not been thinking about before. There's something that has typically done, for example, in medicine with big data where you can find correlations detecting early diseases were previously a human would not have thought about the correlation between, I don't know, an external environmental attribute versus brain cancer, for example. So this is extraordinary creativity and that's something that's definitely, as we speak over the last five to six years, where people plug machine learning and AI models on big data. You have transformational creativity. I mean, I'm not a physicist, not a specialist on chemistry, etc. But carbon-14 dating. You may have heard about it. It allows, in fact, true, determine the age of any living matter even if the matter has tides. And again, I'll let you read this, but a person called Willard Libby, who he won a Nobel Prize of chemists chemistry in 1960. He used a concept that was developed by physicists search cough are linked to carbon-14. And carbon-14 in fact, is everywhere in the atmosphere. And it can I say, it establishes itself into living matter. And by calculating back, because there is a curve of decay of carbon-14, you are able to, dates, are back date the age of any living matter, even if the living matter has died in the meantime, because carbon-14 is an unstable radioactive isotope. Without going into the details, I'm not a specialist. I'll let you read it up. But that's the kind of transformation creativity where nobody had thought about using carbon-14 dating, living matters. Then wrapping up here when, I mean, in the previous lecture, we discussed about the source of innovation and academia unicorns. And now here I hope that you see like the neuroscientific approach, it combinational creativity, transformational and exploratory, explanatory first before transformational. One of the last things before we switch gears, we go to the next lecture that I wanted to share with you as well. And remember the S curve of corporate growth. After here we're still in the ideation phase. So we have an idea. And the idea, I hope that you have seen various sources of where ideas are coming from. Can be academia, can be startups, can be people that you're talking to doing. Hackathon can just be machine-learning where you have an idea or certainly in time, that idea has to be made tangible. And I'm just speaking here about the idea. I'm not speaking about the business value or the value creation process we're going to discuss in the next lecture with the business model canvas and the value prop Canva. And here you remember that part of the learnings that I want entrepreneurs to have when they get out of this training is also the typical vocabulary of an entrepreneur. An MVP, minimum viable products is not the most valuable player in NBA is read the minimum viable product or MVP, is something that at a certain point in time, investors are potentially prospects that you want to check with them. Are you interested in our idea? Would you buy the idea? You need to build an MVP out of this. And the key criteria for an MDP. And I think this is an, I really emphasize on this also at university level when I'm teaching and I'm giving this lecture, you have to build an MDP does one thing. It can be mock-up, fine. But at a certain time you will have to do more than just a mock-up. It has to be a running MVP. What I've seen over the last 15 years is that some people build MVPs that only focused on functionality. So they add features, features, features, features, features. And I've seen an app in mentoring startups where the founders were focusing and they lost three to four years just focusing on, No, I don't want to go out to the market because I need more functionality and I don't feel comfortable. And I tried to tell him to tell them be attentive because during those three to four years, if you only focus on functionality, there's gonna be somebody else is going to capture a potentially your prospects. So when you build an MVP, you need to decide what is the minimum viable functions and features that you want to have. But also, you can not only have an MVP that has a lot of features, but it's ugly, is not usable, It's not reliable, it crashes all the time when you are shooting it to potential prospects. So think about, when you think about MDPs after the ideation phase at the MDP has to have some nice user experience, some nice ergonomics has to be useful for, can be usable, not useful, usable for potential prospects. Has to have some characteristic of reliability. It cannot crush all the time. And of course it has to have a minimum set of functionality so that people can let say, it resonates how they could potentially use your product or your service. So that's what I'm showing in those two triangles. Really thinking about the right way to build an MVP is having a little bit of everything. The wrong way of building MVPs, only having a lot of functionality. So be attentive to that as an entrepreneur if you think about after the ideation phase of building an MVP. So let's wrap up this lecture and in the next one, as we are coming from ideation, we discussed a little bit the MVP. Now we need more than just the MVP, we need to structure also the value creation process and potentially the business plan before trying to raise money. And this is what we're gonna be discussing in the next lecture. Thank you. 5. Structuring ideas with Business Model Canvas & Business Plans: Alright, entrepreneurs and investors. The last lecture of Chapter number one about structuring ideas with Business Model Canvas and also business plan. And also then concluding before we switch gears and go deeper into also incorporating the company. So we already discussed where we're ideation sits in the s-curve of corporate growth. How we can try to solve problems, which kind of problems exist at problems evolve over time. And also that innovation that is also fueled by industrial revolutions is also changing and bringing up new, new opportunities but also new, new problems. So when turning or when you want to turn an idea into business, It's not just enough to have a good idea and to have capital and to have maybe 23, let's say a team of 23 people which are complimentary to you as a founder, you will need to do more. If we need to find your market, you need to find support. You will probably have to outsource or to have suppliers as well. We already discussed very briefly, building a minimum viable product. You will need to build a financial model and test if your idea and your market allows to have a profitable business at a certain moment in time and start selling it. And you will have to iterate on this as a company grows. And for That's one of the, I mean, when I was part of startup weekends trying to coach startups and how to structure the idea beyond the MVP, what we discussed in the previous lecture. And beyond the ideation phase, when the idea is, let's say fixed to some extent, the MVP is being built. What are the tools that I definitely recommend? And I'm not the only one we're recommending them to really structure more than just the idea. Because there are certainly in time you will need to raise capital and to find your market. And we're going to be discussing here business model canvas, value proposition canvas, and also business plan. The pitch deck and evaluation, assessment and funding is something that we're gonna be discussing it run in the corporate finance chapter. One of the tools or Canvas that are most used for startups. And I really like, and I really recommend using it. And I'm gonna give you in the next minutes the keys to read the Business Model Canvas. This is how this model is. Canva is called Business Model Canvas and has been created by Alexander Osterwalder, is in photo strategic management template and you already see, I mean, the, the course is called masterclass into punishments strategic management. And here already we are touching just after the ideation phase or the end of the ideation phase that you will need to think as an entrepreneur about multiple elements of your idea. And it's not just enough about having a great idea and nobody wants to buy idea. And you do not know how to build the product on where to supply it from. The advantage of the business model, Canva, It's really that it's very visual and it covers basically all the main elements that an entrepreneur has to think about after the ideation phase when you're going into the launch phase. And you have this visual charts are gonna be walking you through those visual, visual, let's say elements are categories that you understand. And I'm gonna give you also the, let's say the priorities with what are the things that you have to start with? When looking at the business model Canva, basically it's divided into four, let's say sub parts. You have on the right-hand side, the customer focus in the middle, the value prop, value proposition. On the left-hand side, Let's say the, I call it the supply chain, the infrastructure. What are the key partners and key activities that you need that are required by your value proposition. And then below, obviously, what I already said earlier, I've been sometimes surprised. Working on mentoring young entrepreneurs. They didn't even know how to structure a business plan. So the financial viability, so the revenue streams and the cost structure as having something. Again, it's not rocket science. The business model canvas will force you to think about it. And that's the advantage of the bisimilar Canva. If you use the Business Model Canvas, you will address all the important elements of your, let's say your idea going into the launch of your company. I recommend and I'm going to give now here in order of things, I always recommend to entrepreneurs to start with the customer segments or the value props. Really understanding who are your customers? What are the things that you're trying to solve? What are, where is your product or service creating a gain or solving a problem, or relieving pain for your buying persona's buying prospects, buying customers. I think this is really critical. A lot of people, I've seen a lot of people that are really focusing on cost structure revenue streams. But they are not addressing correctly why people would buy their products that they have an idea for. So really think about the value prop, which customer segments you will be able to address with your value prop. That's really, I think the main fundamental and that's step number one when you're going to be using bisimilar camphor. If you're interested, there is a subset Canva that actually integrates and drills down more than just the business model canvas. And it has been invented by the same person by also value, which is called the value proposition canvas. So it's really going into the details of the value prop and the customer segment. And let me just elaborate here. The value proposition is you're going to have your customer profile where you need to think about the needs, the pains, and what the customer wants, and then also your value proposition in terms of what is the solution, what are the pain relievers and what is the experience? That when you are in the middle, you're going to have those unique starting points, what is called the USP. So that's really the differentiator. Why, why your value prop will work for which kind of customer? So that's basically it doesn't drill down. You can look it up on the internet. There are a lot of, let's say, elements where they explain or examples how well they explain how the value proposition canvas fits into the business model Canada. But again, the minimum that I want you to use the Business Model Canvas. If you want to go deeper, you can use value prop, Canva as part of the value prop and the customer segments, the business model canvas. Then the second step is really identifying the customer relationship and also the channels. So the customer relationship is really identifying the type of relationship or the company wants to have with their customer segments. Is it a personal relationship with dedicated itself services, automated, those kind of things. And the channels is you want to build up a direct sales channel. You want to have an indirect sales channels, so you need them to build up distributors that will sell for you. But then you have to think, what is the incentive for them to sell on my behalf, or do I prefer to have, let's say the success of my company, my own hands. And not all, I only want to have a direct sales model, direct sales channel to my customers. That's the kind of thing that you will have to think about it because then you already understand now the, the infrastructure part, how are you going to execute your plan? Your go-to-market plan will depend on the choices of the customer segments, the kind of relationships that you're going to have in the channels. Let's give a concrete example. If you are selling, I don't know. Surfer cloths. Your customer segments are aware probably not in the mountains but at beaches. Do you want to have a brick-and-mortar strategy, meaning that you want to have retail shops, so you will need to invest or to rent retail space. Probably close to nice beaches where you can have your surface because of surface are your customer segments or selling directly to them. You could have also, let's say, a way of selling to them that is purely digital because you don't want to have the high investment of renting brick and mortar shops, for example. You could also maybe partner with existing moles that are close to those beaches where you would be a shop in a shop for example. So that's the kind of thing that you will have to think. Obviously, do not forget, what's the value prop and why would customers shift? Maybe if the problem or the pennant they have is already been solved by a competitor, why they would switch to you? What is unique about your proposition? And would they be willing to switch from a to B or would they be willing to come to you? So that's again, starting first with the value problem, the customer segments, you really need to have this clear. Then you have to think about customer relationships and channel. Then of course, an arrow command before going to the infrastructure that you look into the revenue streams, it's like, okay, we have, we have it clear who our customers are, who is the buying persona? What is the value prop, what is a unique value proposition that we have? We know how, what is the kind of relationship we want to have with them is through social media, is that digital is its brick and mortar, shops, whatever. But other kinds of channels, direct, indirect mix of the two. For example, I've been working at Microsoft. We had a mix of managing the top customers directly and then all the rest was managed through partners for the smaller customers. So hybrid models in channels direct and indirect axis as well. Starbucks has the same. They have their own shops, but they also sell indirectly through Nestle, for example. They also have franchises. So that's also a different way of selling for Starbucks to bring in revenues, is that they have a mix of direct versus indirect channels. The revenue streams, how are you going to monetize when the product is killed, the customer segment is clear, the value prop is clear and unique. We need to think about how will the company make the revenue? Is it's, are we doing onetime sales of something of an asset? For example, you are sending the ownership of the physical goods from subscription model. Having, I have no clue success fees, are we having transactional fees? Are renting the assets. For example, I will licensing like the franchise model, the franchisee model, licensing things. So that's the kind of thing that you will have to think. What is the revenue stream that you want to have? The recommendation I'm giving you here is always thinking about cash predictability. Because as I said earlier, if you look at software companies funding years ago, they were selling the assets or at least the perpetual use rights of the assets being software. Now, everybody has switched into subscription fees. And if you look at Disney Plus, if you look at Netflix, everybody's in subscription fee is to have this predictability in terms of cash inflows. So you have to think about the revenue streams and how also the revenue stream is not just how you think about monetizing, but also what is acceptable for your customer segments. Also on other things. And I remember why I added this code, because I had this question when I was lecturing and university is I had a student who asked me, Why, Why do you start with price? So in the sense of with the revenue stream before the cost structure. Because I look at pricing strategy in the sense that I don't want, and that's my call. I don't want the cost structure to influence the price. First. I want first to understand what are my customers willing to pay for my value prop of my hopefully unique value prop. Before looking at cost structure, I believe honestly that if you do a bottom-up approach, you start with a cost structure and you define your pricing on top of your cost structure, you may end up in a situation where you're giving away unnecessary margin, unnecessary profitability, because you have this bottom-up approach. I prefer this top-down approach where basically you try to understand what are my customers willing to pay for something? Look at luxury watches, the huge amounts, the incredible amount of margin that they are doing, and how profitable luxury segments are. Because they know they do not start looking at cost structure and then putting a price on it. They look at what are customers willing to pay for luxury goods, luxury experience. And potentially you end up with 70, 60% of margin. That's why, and I remember I discussed this when I was giving the lecture the first time to my student was asking me, I always tend to start first with, what are my customers willing to pay for my product of my unique value proposition? This is what we are discussing or what, what goes or what comes with pricing strategies. So of course, you need to think that's sometimes products. You may set them too high so customers will not buy. And if you set them too low, we're giving away unnecessary margin or profitability. So try to think on the top-down approach. So understanding the willingness of the customer to pay a specific price, hopefully a premium price. And with that, make sure that all the costs, that's not the bottom-up approach at all, the costs are covered with a reasonable margin. So I have really dislike coming from the top-down but also having the reverse exercise looking at, okay, what are my costs and what is the margin that I'm gonna get out of selling at this price? Enough cause or a Sigma term you need to think if you are fighting with other competitors that are already on the market, you will have to think about what is unique and my value proposition versus competition. Why would customers switch from a competitor to me? And now, what is the price and I'm setting for specifically for that purpose. So that's the kind of thing also that those are kind of other factors that you need to bring into the equation as well. Then moving forward. So we started like step number one is customer segments and unique value prop priority number two, in order is looking at customer relationships, channels. Then priority number three, It's really looking at how you want to monetize. And as I already explained, my recommendations go with the top down approach before the bottom-up. Then number four is like, okay, what are the resources that I need for the company to run the business, to sell the products and services that I'm just having an idea to launch. What are the key activities do I need to supply to build a manufacturing plants to wine? As I said earlier with the surface shop example, do I need to buy or rent a brick-and-mortar shop? What am I keep partners as well. So who are my suppliers? Because maybe I don't want to build a manufacturing plant, but maybe I can find someone who can build this for me, for example. So that's the kind of thing that you will have to think about. And last but not least, the cost structure, of course. Here again, looking at what are the fixed costs or variable costs. And really, we're going to discuss this in a couple of slides, bringing this all together in a business plan. Thinking about how can I scale? Do I have economies of scale? Don't have economies of scope as well. We're actually, my unit price is actually going down because I'm finding those economies of scales and also economies of scope. Here I'm just giving an example. I mean, if you look up a business model canvas examples on the internet, you're going to find a hundreds of them. I just took care of a very I think it was an example from the Gary Fox.co site where he was basically like summarizing what is the Tesla business model canvas. So again, start with customer segments, value prop, and customer relationships channels, the revenue streams, then the infrastructure part of the partners, activities, resources, and landed cost structure. That's at least what I recommend you. Then you have the business model canvas. It doesn't stop there. So you want to go maybe beyond that and you want to open your capital, your equity to new investors, the business model canvas will not be enough. You will have to write the business plan. And again, it's not the purpose of this training to go in-depth into how to run the business plan. But basically I'm just going to show you the main chapters. So the main structure of a business plan, of course, it has to be an executive summary. There has to be vision and mission of the company. What are you as borrowing? As an organisation? You need to have a marketing plan, need to have an operations planning, to have a financial plan. Does this ring a bell? It, this is basically those are parts or categories or domains that are part of the visual business model come back. So basically it's just taking, let's say the bullet points that you have put into the business model canvas, which is a one slider, and describing them a little bit more in the business plan with more details. And that's basically what it's all about in the business plan. At the very end of the day, the business plan has, in my opinion, one very important thing. And I'm not saying that you shall not write a business plan with a lot of Verbit team in it. It does help people when new investors, when they do their due diligence. We're going to discuss it later on when they do their due diligence because they want to potentially put a million or $2 million into your company. Bins. My Canva is not enough. They want to read as well. What is your intention because they will be able I mean, when I do due diligence, I look into also not I mean, not the business model canvas, the minimum viable product, but I look as well. What is the company explaining in the business plan, but that's not enough. I gonna I mean, when when we were discussing your diligence is I'm going to share other things, but I do look very often at what's the core team, What's the attitude and the values, the ethical values, and the behavior of the team. Because I promise you, I can make any business plan look very shiny, very glossy. It's the best one in the world. At the very end of the day, I just haven't destroyed money because I invested into the wrong company. So for me, when investing into, when we speak about venture capitals, so really investing into as a business angel or venture capital is really about the team that's really core. What's the intention of the team and the financial plan? And this is coming back to what I said. I think already couple of lectures before. And I really put a specific emphasize in this masterclass about it. I'm giving concrete examples that I was surprised how young entrepreneurs, they do not know what to put into a business plan. And I'm zooming in here and again, giving you the keys of what are the three main elements that have to be part of a financial plan, that is part of the business plan, and it's an Excel file. It's not rocket science. You will have to decide on how many years, what is the outlook in terms of years? Just want a recommendation I'm giving you here. This is a real example, but I've changed all the numbers and some descriptions so that you cannot read the real figures. But this is a real example of a business plan that's I had to look into and there was a six-year business plan. I tend to say the following. When somebody serves you a business plan for the next ten years. Again, coming back to what I said earlier about the speed of change and the speed of innovation. I think that nobody has a crystal ball and has reasonable idea about what is the business plan will look like in ten years. I mean, here really for startup. I don't mean here for a company like Unilever that has very organic growth, selling food, selling, let's say commodity products. They're probably, you will have an idea about what's the revenue stream, What's the cash stream in the next 1020 years? Very probably. But here we are speaking about a startup. So I believe that a maybe a five-year plan is good average of a business plan and always start with the revenues first. Where is the money coming from? So what is the amount of customers that you want to have? How much revenue will you drive from? You remember when we were discussing the revenue streams or you're selling of the assets. So transferring the property of the assets, how much is coming from recurring revenue stream through subscriptions? Maybe you are renting or leasing your assets. So that's the kind of thing and I've given here, for example, is maybe you're adding consultancy services to it. So that's the kind of thing that you will have to think about in the revenue. So what are the revenue streams? And then you will have to deal also with all the operating expenses. And here you will have to separate between investment. So what are things that you invest in now that will depreciate it over time and you're going to capture the benefits of an investment, let's say 1 million supply chain investment in year one and then it will have the benefit of a five-year-old. So there's gonna be some tax incentives using the accountant for that. But you have to think about depreciation and also put everything that is recurring costs, costs that come with, let's say, the standard operation of the company. And as the company is growing, we need to think about variable costs, fixed costs. So those are the things I'm giving you examples. Here. It's about selling physical assets and you're going to have a cost of goods and services. Because in this business plan, we were supplying we're sub-contracting part of the manufacturing process when external company, if you're selling a product, very probably there are some warranty costs, some, some liabilities that you will have to cover or to have insurances for you will have the manpower. You will have to take into account marketing and sales costs, those kind of things, infrastructure and other expenses. But think about capital expenses, operational expenses and the operational expenses, but fixed and variable costs. Then last but not least, when I have to do due diligence about companies and startups. And I already said that I had the chance to participate in a lot of, let's say, pitch contests, as I call it. And it's not the beauty contest, is, of course, you need to have a nice pitch deck that summarizes the main elements in a, I don't know, 2025 slides and kind of summarizes the business plan, the financial panic of the business plan, summarizes the minimum viable product, summarizes the vision and the mission of the company is really thinking about. And the pitch deck has to be something that is nice. And I'm always saying, because people asked me entrepreneurs, what is making goods versus a bad pitch deck. And I'm always saying, you have the bullet points here. First of all, what is the program that you're undressing? You have in a good pitch deck. And again, of course, you need to think, is this pitched I've been presenting at a startup competition or is this pitch deck being used for series a, B, C funding? Let me put here, Let's put those competitions aside and really look at you're doing, you're writing a pitch deck to raise fresh capital and you're giving away part of your equity and bringing in new shareholders because you want to have, you want to raise that money. So a good pitch deck will explain what kind of problem you're trying to address so that invest in a Stan? Yeah. Okay. I have no idea what they are trying to address. What is the pain points? What is the market size and the addressable markets? What are the customer as the competition? I mean, this is something that is coming out of the business model canvas. What's the product and the services? And also, I believe that the pricing model of it, is it a subscription model at transfer or selling the assets? I always emphasize, I recommend to the people that are pitching to me that they bring in credentials and credentials, bringing credibility. Maybe you already have customer testimonials, very early customers, beta testers. Maybe already you have tangible results. Maybe you already have existing investors that have trusted and I already have put money into the company. If you own a series B, you already have a series a investor. Also, the financial projections, the summary of the business plan that we were just discussing the previous slide, the timeline and the milestones over the next, I don't know, over the next three years where you want to have the company be in 12 months and 24 months and 36 months. And again, let's not be fooled. Even myself, when I was drawing plenary annual plans, I have no crystal ball, but at least it tells you have a plan, gives an intention where you want to be. And you will have to adapt as, as the plan evolves over time. But at least it tells that you are thinking not just short-term, but also longer-term, at least midterm about the company and what is the intention. And one would say the two last things that are very important. The first one is I like to see an asset it already earlier when I invest into companies. And a risk peak here as independent board director into spin-offs, into private equity. Who are the founders? What is the core team? And very important how complimentary or the competencies of the team. What I hate to see in pitch decks is like you have a team of two people. One is CEO and the other one is COO. But CEO of what? Of himself or herself? I mean, I don't have problems with glossy titles, but what for me is important as an investor is that I understand if the team has three people, there is a person found responsible for strategy, there was another person responsible for sales, or maybe for finance. There is another person responsible for engineering and technology or the product, for example, the product design. Because I've seen so many startups where the idea was great, but the team were only technical guys, but there was nobody who was able to sell. All. There were only sellers in the team, but nobody had the ownership. There was no good competent or there were no good competencies in the startup about the technicality of the technical design of the product. And that's already, I mean, with that, if you have this, this balanced, you are kind of already set up for failure. So I really look at what is the core team, but not the titles of the people. I don't care about the types of the people I care about the competency. So please explain in pitch deck who is doing what. And this can be in one word or two words. And then at the very end of the day is what is your ask? And I had situations, for example, I do remember a fitness application accompany. I wasn't mouse mentoring the two founders. It was not clear, in fact, what they asked was at the end of the pitch deck. So that's something that you also have at the variant of the pitch deck is what is the ask that you have towards potential investors? So let's conclude on Chapter number one. And I hope that through the various lectures in chapter number one, you will able to grasp and to get an idea about where innovation is coming from, where creativity is coming from, fueled by industrial revolutions, fueled by the adoption and the speed of adoption of commodity technologies. And also the challenge is that existing companies have to face. And you have seen this through the Professor Foster of Yale University analysis of the biggest SAP 500 company is that the average lifespan is actually being drastically reduced since a century. And also think about the typical obstacles that entrepreneurs have to deal with them. Remember where I was putting those obstacles in the s-curve of corporate growth. Think about those strategic inflection point as well. That I hope that, that was more like the idea of the intention of the last two to three lectures is how to formulate and to structure your ideas using business model Canva, using the business plan, using a financial plan and using a pitch deck, in my opinion, will help you to kick off where the entrepreneur process and then being able to go in pretty occasions, condition and talk to potential new investors, even to your family, france to raise the first, let's say, capital to start launching and operating the business. So let's wrap up here, chapter number one, and in the next chapter a week, as you remember, in the process, we have gone now we are exiting the ideation process, defining the minimum viable product. And now we're going to let incorporate the company and what are the things that you need to know to incorporate a company. But let's discuss in the next lecture. Thank you. 6. Introduction to Incorporation & major laws: Welcome back entrepreneurs and investors. So we finished Chapter number one where we're discussing the origins of ideation, the defining entrepreneurship as well. So in Chapter two, remember we're following a specific sequence by finding the sequence of first of all, ideation, then after the idea is okay with the team incorporating the company and that the leaders of the company, or you as an entrepreneur that Uranus and what are the major segments of law that you need to know before incorporating all while and corporate incorporating the company. So that's basically what are we going to be discussing in Chapter number two? Let me start with introduction of Chapter number two about the legal aspects. So when entrepreneurs, let's say pass the threshold of Okay, we're gonna go from the idea into launching the company. You may ask yourself, why do I need to incorporate the company? In fact, you may have a situation where you prefer to be a freelancer, work as an independent person without having to incorporate the company, which is something that is possible as well. But still you will have to register as a freelancer, probably having to pay some taxes like VAT if you're providing, for example, consultancy services. The idea of incorporating the company and while incorporating the company. And this is what I'm going to try to explain to you specifically in the beginning of Chapter number 2. First of all, the company will be seen as a person, a moral person versus a physical person. And the company will be seen as a connection for contracts. So the company, so the body of the company. And if we define the company as a moral person, the company will serve as a common counterparty for various stakeholders. And those stakeholders, the relationship that you have with those stakeholders is basically through a contract. And the contract can be an employment contract. So you are potentially hiring people and the company will incorporate, company will work as the counterpart to the employee. You may have a contract with the supplier because you are purchasing parts from that supplier or services from that supplier. So again, here the company will act as the connection, as the counterpart for the supplier instead of you as a person. And he'll be the same for investors, would it be the same for customer? So basically the idea is really that the company acts as a moral person and that activity as a moral person is really focused on the connection point, the central point of connection for any kind of contract. If it is upstream for customers or downstream for suppliers or employees, and even for investors, that works as well. Another important element why there are benefits in cooperating company is really to isolate the ownership from the personal assets. So let me explain 1 second here. When you decide to launch the company and you decide to incorporate the company, you have two type of assets. You have the assets that you want to bring into the company as equity, you can bring in a laptop, for example, maybe a car, so that those assets will become part of the startup capital of the company that happens. It's, I mean, you can bring any assets which are non-cash assets into the company. You may need an accountant to value the amount of the assets, but basically you can bring non-cash assets into the starting capital of a company. But at the same time as a founder of the company, what you want to avoid is that there is a mix between your private assets, let's say your house, your private car, which will not be used for the activity of the company that you're incorporating. This is where also the benefits of incorporating a company come with. Because basically, we're going to discuss in the next lecture, you will be able to isolate the ownership and have a separation between you as a person and the company as a moral person. So the separation between, between the two and there's gonna be a clear boundary between the two. And this is an aspect of protection that is very valuable also for founders of companies that there is no mix between. So that basically, if there is any issue in the company that people cannot come after your personal assets. So really isolating the ownership of something important as well. Now I've already said the company by itself is considered as a person. So you as a founder will be considered as a physical person. And the company will be seen as moral or legal person in the eyes of the law. And so the company has in fact a personality in front of a trivial. So people, even it as customers and suppliers, they could go out to the company as a moral person, one cooperating company. So after the ideation phase, what happens very often, it starts with seed funding. So, and again, I'm showing you here a graph that will come later in the corporate finance chapter. Basically the seed funding is either yourself or bringing the seat founding in cash or non-cash capital. But very often is also what we call the triple apps or the friends, family and fools that believe in your ideas. It's only after that you go for business angel venture capitals, series a, B, C, etc. Then you go late-stage mezzanine funding private equity before potentially and hopefully doing an IPO or MDP or direct public offering, an initial public offering on the stock exchange and then going for the secondary market. But more about that in the corporate finance chapter. And as already said, the intention of this chapter number two and in general of this training is really to give you the foundations and hopefully a strong foundation, foundation as an entrepreneur, because you will need to have a minimum of understanding what are the basics in terms of legal aspects and legal, or let's say segments of law that you need to know when incorporating the company, but also after it's as the company will serve as a connection point for various contracts upstream for customers, downturn for suppliers, employees, investors potentially as well. So really the idea of this chapter number two is that you have a head-start in terms of having the right fundamentals in terms of legal knowledge when moving forward. So when, when we discuss when I'm sharing this training at university as well, I'm giving this lecture. I will not send, I think I said in an introduction, we will not have the time to go across all segments of law that applied to entrepreneurs. I'm giving you here some bullet points. The first one that we're gonna be discussing is the business permit and trade license loss. We then are going to discuss corporate and company information loss. We're going to discuss commercial and saves loss. But there are other segments of laws, employment and labor laws, the very country specific, also privacy laws. I mean, potentially have heard, if you are part of Europe, we had this GDPR thing. It's general data privacy, pigmentation regulation that came out a couple of years ago. And so there are many laws that apply to entrepreneurs. What makes it complicated for entrepreneurs as well? Because, I mean, how to deal with all that potential legal exposure. So you need to be a minimum fluent in legal aspects. And we're gonna be discussing in this training. And again, it's not the purpose of being illegal training, it's purpose of giving you a left to right the main elements of an entrepreneur and novice entrepreneurial entrepreneur. So basically what we're going to be discussing much more in detail, our business permanent tree license laws. That's the next chapter. That's a very quick one. But corporate company formation laws, including finance, bookkeeping, corporate tax laws, we're gonna be discussing commercial and says loss. We're going to also drill down into intellectual property law. So those are actually, that's basically the content of Chapter number two. There's gonna be some longer lectures. And I do remember, for example, the corporate company formation law, but also the intellectual property part of one of those lectures in chapter number two will be a longer one. But I think it's really necessary to go through it. If you're fluent in those matters. I mean, you can skip the chapter and go directly into the Strategic Management chapter number three. But otherwise I really recommend you of taking the time and going through those lectures because it will give you some keys to read and understand which major laws entrepreneurs have to deal with. And I said, but we will not cover in this chapter and in this training in general and this masterclass is employment and labor laws because those are very, very specific and also privacy laws because they are really both, I believe they are tied to regional or local, national aspects, while the other ones basically apply. And the main principles apply everywhere throughout the world. When we discussed about law in general, I think one of the key foundations to understand is to understand the legal systems throughout the world. Because basically they have different foundations and the fundamentals are different. And I'll try, I mean, I'm, I'm showing you here in this map that basically you can see through the color-coding. And now I'll let you read it also in the slide deck that, I mean, you do not have law, law systems that are homogeneous, homogeneous across the world. So you see that you have and we're going to discuss, I think it's the next slide. A lot of countries that applies civil law That's more like European influenced, Let's say civilizations. And then you have more common law. That's more, let's say US, UK influenced or Commonwealth countries that are more using common law versus civil law. But then you have also other type of laws. We have, for example, Muslim loss. You have Jewish laws, you have customary laws, you have many different laws. And there are nuances between the various countries. So just be aware. I mean, it's not the intention of this masterclass are said to be illegal training, but just be aware that there is no homogeneous legal system across the countries where potentially a company will operate in. The main, Let's say families of laws are in fact those two here, what we call common law and civil law. Common law is pretty, I mean, if you're in the US, you pretty much know common law. Common law, let's say the main attribute of common law, It's based on. Examples are precedents. So a judge has decided about something in a specific scenario, specific situation, and other judges potentially will rely on that precedent to rule the same or differently based on that. By having said that, I'm basically already expanding a little bit. What is missing to common law, where civil law is, in fact, very strong, is that civil law has the philosophy of trying to think and write, document all possible scenarios in advance. It's what is called codification. And Europe has been very strong at codifying everything possible. So if it is a commercial or labor law, civil law panel law. So they have thought about an enormous amount of things which obviously makes it complex. Because if you try to think in advance on all possible scenarios, I mean, you end up for each segment of law with books that may have like 500 pages just for one specific thing, one specific topic, let's say commercial law for example, or tax law. And this is a disadvantage at the same time of civil law versus the advantage of common law. As in common law, not everything is codified, are coded in advance. Basically, it requires judges, sometimes common sense, decide on how to judge a specific case. And then at the same time, it's also a disadvantage because potentially the judge is some, let's say cultural values, cultural attributes that may give a bad influence on what we would believe would become incense. While it is common sense for the judge, for example, what we see today is that more and more both systems, let's say the boundaries between both systems are blurring. So we have more and more civil law, which looks at precedence, even in civil law systems, which is basically an inference from common law. And we have common law which says, yeah, maybe we can not only work with precedents, maybe we have to qualify a little bit more. So you see like a blurring between the two systems and obviously the world having become much more global playground, economical playground. You see in fact also that expectations from stakeholders or that common and civil law are more predictable as you operate with your companies across various geographies. I'm giving you here a couple of examples. I'm taking you the example of Dubai International Financial Center, which is, I mean, I will explain this later on, but I'm sitting at the board of directors of a Debye private equity holding company. And that company is not sitting in Dubai, which is Sharia law, which is, let's say an Islamic law and I'm not a specialist about it. So sorry for my Islamic friends if they if my statement is not fully correct. But the private equity holding, the legal entity, the moral person, is sitting in the IFC, which is a dubai international financial center. So when I was asked and part of the board of directors of that private equity holding, I wondered what is the IFC because I didn't know exactly how, let's say the various territories were structured in the United Arab Emirates. I found out, and here I'm showing this to you in the red frame that basically the IFC follows UK law. And you can see in the red frame that basically it follows a common law system, which makes sense because they follow the UK, let's say legal system. And UK legal system, as you saw in the world map, is color-coded being a common law, let's say country versus Europe being blue colored, which is basically a civil law influenced, Let's say, territory for the many countries that are part of Europe. So this is an example. So you see that the laws and regulations that apply to Dubai International Financial Center, they say It's basically common law. And we're going to stop here as an introduction for Chapter number two. So I have that this gives you a first flavor of what we're gonna be discussing in the next chapter. But in the next chapters, as I told you, we're gonna go deeper into business permanent trade licenses, which is really the fundamental of everything. Going into cooperate and cooperate formation loss. We're gonna be discussing finance and bookkeeping laws because that's really a very important thing that you need also to know as an entrepreneur. And then commercial loss, where we will also go a bit deeper into intellectual property and everything that is around trademarks, copyrights with some examples, etc. Before concluding. And as I said, it's a cold I had to make here in arbitration. I decided not to go into employment laws and labor laws and not to go into privacy laws and other laws. I believe that with those four, let's say, categories of laws or segments of loss plus introduction I gave, I think that you have a good starting point as an entrepreneur. And then obviously you may need external legal support. Of course, that has a cost that you will have to incur. And that's part of potentially the cost that the company will incur. And very beginning is that you will have to run your commercial contracts, maybe with an external consultancy firm, maybe the first employment contract you will have to run through an external consultancy firm. So let's not be fooled about it. Creating an incorporated company comes with a certain amount of costs, which are not just linked on setting up the cause and bringing in capital and running the operations. There are some administrative aspects, and remember it's one of the first of the six, let's say problems or let's say problems, issues that entrepreneurs have to deal with, which is basically overcoming bureaucracy, but you will not have the choice. If you incorporate the company, the company becomes a moral person. You will have to deal a minimum and understand the minimum, the major segments of law for the territory's and for the product services. So the turtles you are operating and also the products and services that you're selling, but more about that in the next chapters. So thanks for tuning in and talk to you in the next lecture. Thank you. 7. Business permit & introduction to corporate formation law: Alright, entrepreneurs and investors, lecture number two in chapter two. So after having introduced the, let's say, the fundamentals around law systems and having also browse you through what are the segments of law that we're gonna be discussing? Let's go into it. And in this lecture, which will be a little bit longer lecture, we're going to be discussing business permits, licenses, but also go directly into corporate formation, loss. And also we're going to practice with some examples around that. So the first thing when incorporating, accompany and remember one of the six, let's say issues or problems that entrepreneurs have to deal with is overcoming bureaucracy. And it's one of the things. One of the very first things is the regulators, the country, the government will expect from the company to have a tax ID. So that's one of the preliminary requirements for entrepreneurs is to get a tax ID before they can do anything. And the intention of the texts idea is being able to pay taxes on, let's say on the profits of the company. On, let's say hiring employees, you will have to pay taxes. Opening up a bank account would have been necessary as well. And you will not be able to apply for business license and let's say permits, business permits until you have a tax ID. And this not only applies to companies as moral person, but this also applies by taking my own example. I'm independent board director and as my residents, my tax resonance is in Luxembourg. I do have a tax ID for the services I provide us independent board director because I'm getting paid for this. But I need to pay VAT taxes on it and I need to pay income taxes on those kind of things. That's the kind of thing. The very first step is really getting a tax ID. The second thing is after you have received tax ID is depending on what kind of business activity, so what kind of product service you are trying to sell, but also depending on the physical location. So where you are operating as a company and to which customers you are in, which geographies just selling your products and services, you will have to apply for a business license, then potentially also business permits. So why what's the reason for that? First of all, licenses, in fact, are intrinsically carrying competence. And I'll give you a concrete example. If I would decide to become a medical practitioner and I only have an MBA, I have no clue about medicine. It's not just it's not because I receive a tax ID that I can operate as a doctor, as a practitioner, I mean, that's illegal. You can not do those kind of things. You're going to have certain types of businesses, certain types of selling products or services. A doctor is selling his or her competence consultancy, service in advising on health conditions. So that requires, of course, a specific license and having an MBA as I have, is not good enough. The governments, and this is the case nearly in all countries. If you want to become a medical practitioner or a doctor, you will need to show that you have the right competence. Is it a master's degree, is it? I don't know. Ph.d. those kind of things. I take the example, Luxembourg, if you want to open up a restaurant, it's the same. You can just open up a restaurant because you have a tax ID. You will need to show to the Chamber of Commerce that you have a certain amount of experience or expertise, that they give you the license in order to operate a restaurant. So licenses imply competence and also receiving the authorization, the permits for, let's say, operating your company and selling your products and services to your customers, to your consumers. Also remember that the governor and through some specialized agencies, have the authority to execute also controls. So this is what I call permits, imply inspection as well. We were discussing mouth, you're running a restaurant. Imagine if you are selling fresh fish to your consumers, to the people that are coming into your restaurant. I mean, there are some health safety regulations that come with selling fresh fish. So where is the fish stores so that it doesn't develop bacteria? And again, I'm not the expert about restoration, but just be attentive that you may face. If you opening a restaurant, you may face inspections and controls by the foods and let's call it the Food Safety Agency of that counter that where your restaurant is in, just to make sure that you're operating the restaurant in a lawful way. And potentially the governments, they allow themselves if you are running the restaurant in an unheated, the unsaved way, there's risk for the consumers. They're going to remove the business license and the restaurant permit from you. So it just be attentive to those kind of things. Let me give you two concrete examples. I'm going to take European war with Germany and an American one. So there is in the US, the US Small Business Administration. And you see a couple of examples if it is like alcoholic beverages. So if you manufacture, import, or sell alcoholic beverages at a retail location, you will need to talk to specific agency. Well, in this one, in fact, there are potentially two. It's the Alcohol and Tobacco Tax and Trade Bureau in the US, and also the local alcohol beverage control boards. If you are, I have no clue into fishing. We were speaking about fish restaurant, but here it's more like commercial fisheries. So if your business engages in commercial fishing of any kind, you will need to talk to the National Oceanic and Atmospheric Administration, Fisheries Services, which is a US government agency. So they're gonna be probably to each of those business activities, some conditions, competencies that will be required by those agencies before that you get a permit. So you may get a tax ID before, but you may potentially not receive the permanent. So be attentive to this and I'm going to explain to you how to deal with this because it feels complex, but they're going to be the complex factors. On the right-hand side of this slide you see Germany, it's basically the same. You have a ticket example of gambling machines with prices. You will need a specific license for this. You cannot, just because you have a TAC side, you open up a casino. So there's gonna be some, let's say, things that you will need to show that you have a competence and that is set up in a correct way before even you get a chance to open up your casinos. So be attentive to that. How, because this thing is very complex. There are public sites. I've put you here some URLs where you can look into and you have those sides probably for every kind of, let's say country. Specifically in developed countries and probably emerging countries, you have the administration that are publishing this. So how to deal with this? Very often the best advice I can give you is get the support of an external counsel in the country that you want to operate. The opening your, let's say your, your business. And they're gonna be telling you what kind of, let's say permits, competencies you will need. And potentially the law firm, normally you have law firms, big law firm, we specialize in incorporating companies in their country. And they will take care of for you for, of course is going to be a course that you will have to incur. But I've seen setups where, for example, between 5€10 thousand, the law firm takes care of everything and also getting the right permits for you before you open up their business. So I mean, that was maybe quick about business, permanent realized, but there's nothing more to say. So just be attentive that depending on the kind of product, service that you're selling, you will need to show some level of competence or some level, let's say, of criteria. If your bank or your bank adviser, you cannot run this business without any substance. So are also the financial regulator will have some, let's say, expectations from you. So after having received the tax ID, after having received the authorization, the business permits, and the license for, let's say, running an operating and selling the products and services that you have documented that you intend to do. You have now the responsibility of incorporating the company. And by incorporating the company, there are some matters, some things that you have to think about. So first of all, let's define what is corporate loss of corporate law. And there is a very nice article from Harvard Law School. There is called the essential elements of corporate law. What is corporate law that was written in 2009 that I really recommend you to read. I have not found a more updated one, but it's really a nice one if you're interested. It's pretty long one, but nonetheless, it's very nice one. So corporate law is often referred to as company or company formation, or basically corporate law. And those are the five characteristics, attributes that we're going to be drilling down in this lecture. It's about legal personality, limited liability, the transferability of shares, the delegated management under a governance structure that is often called the supervisory structure or board of directors structure, but a manager structure. And then also the let's say, right, fair and equitable rights that investors gets, an owners of the company gets towards the company. So those are the five that we're gonna be discussing. And also one of the things that sometime, because here we have, we have passed the step of ideation, writing the business plan, the business model canvas. We have, and we didn't go into corporate finance now, but we have our first amount of capital to create the company. It can maybe from your own cash account and you have transferred that cash into the start in capital of the company. Maybe it comes from family or from France, where you have your, let's say initial capitals. So your seed funding. But also corporate law is not just about incorporation or company, company formation. Corporate law also tackles the elements and remember the S curve of corporate growth. It covers the elements of not just only launching the company, but also what happens when the company is growing. But because there's going to be situations where, for example, the shareholders will have to change. Also when the company is mature, but also when the company is declining. Or in case there is a liquidation of the company, that the company owners have decided to shut down the company. And it's not necessarily bankruptcy or accompanying going default. It's just that the owners of the company has decided we no longer want to do this. And we just, let's say, liquidate all our assets and the remaining cash will be used for paying off debts and paying off debt and the equity holders at the very end of the day. So corporate law deals with those, let's say parts of the life, of the moments of life of a company it is launch, growth, maturity, decline, and potentially liquidation. So the first of the five attributes that we're gonna be discussing is the legal personality of the company. So as you remember already said in the previous lecture, that the company will be the central connection points for contracts. And the company. Seen by the eyes of law makers, regulators, the government, the company has its own personality is what we call a moral or legal person versus I am a physical person. So the company has by itself a moral personality, legal personality. And remember that the main idea is that imagine, let's take the following example. That you are a shareholder, that you own a company, but you have other nine friend that owned the same company and everybody has ten per cent of the company ownership. If you are hiring an employee, if the company would not exist, you have to imagine that the work contract of that employee would have to be signed by the owners of the company. I mean, that's not scalable and that's why the company by itself has moral, legal personality so that basically the company as a single moral person, science is the counterpart for the employee that you are hiring. And through that you don't need to have the owners all of the owners have to sign that contract. We're going to be just not going to find to delegation of authority. Maybe you will require two signatories to owners out of ten to be signing that contract. That's the kind of thing That's part of the governance of the company. That's really the main contribution of corporate law when we speak about legal personality is that it gives to the company the opportunity to serve as a single counterpart contracting party and enabled to be able to scale. Because as I said, you're going to have upstream contracts with customers. For example, we're going to have downstream with suppliers, investors, employees, those kind of things. So that's really the main contribution that corporate law is giving this moral personality to the company. And by that, the company can act as a single contracting counter-party. Also, one of the things that corporate law gifts to the company is the separation in ownership of the asset. So there's going to be in a gonna be discussing in a visual example it clear separation between the assets that are owned by the company owners, which are privately owned, versus the assets that are really owned by the company. And then they give you a concrete example. If, let's imagine you are as an entrepreneur, you have a laptop. That laptop will be 100 per cent used for, let's say, developing the websites. That will be an e-commerce shop. And that's shop is obviously the main purpose of the company that you're now incorporating. You could bring that laptop into the company as as an asset. At that moment in time, you decide to transfer the assets. That is an non-cash asset, that laptop into the company. You bring it in, maybe you bring in with the invoice, the laptop, how to cancer cause of 2 thousand US dollars to Euros. And with the invoice, you can show that the value of that asset is two k whatever US dollar euros. And then from that moment on, if that asset is carried on the balance sheet, but we're gonna be discussing later on if that asset is carrying the balance sheet of the company, that asset no longer belongs to you as a private person, that asset belongs to accompany as a moral person, there is a clear separation between, between the two. And in which there were many time when the asset is transferred, it allows the company to do what the company wants with that asset. You as a private person that has grown in the asset and has received as a counterpart, a portion of equity, a portion of capital for that. You can no longer solely decide if you have other shareholders with you on what is happening with that asset. If the company decides to sell the assets. That's it basically. So this is an, again, I'm not speaking now here about percentage voting powers, voting rights of a share of voting rights that's come, that is coming later on. But just be attentive to that. There is a clear separation between privately owned assets and assets that are owned by the company as a moral person. And also an element that we're gonna be discussing later on is also what is called entity shielding. So as we have a separation between the assets that are owned by the persons, the private persons that are also at the same time owners of the company versus the assets that are owned by the company. There's also one thing that is called entity shilling is the following. So imagine that you are opening a company and you're taking a bank loan on the company. So the bank isn't external credit or to the firm. And the bank has probably giving you a loan based on the assets of the company is carrying in the balance sheet. So the bank can only claim, and this is where entity shooting comes in. The bank can only claim, let's say, its depths against the assets that are owned by the company and not on the assets that are privately owned by the owners of the company. At the same time, there is, and there's something that is not often discussed also in accounting trainings. And discussing this in my financial trainings about company variation in value investing is the there is a kind of a liquidation protection. Let me explain. If you look at the balance sheet we're going to be discussing later on, if you look at the balance sheet, basically have three parts. In fact, you have two parts. You have the assets on the left-hand side, you have the liabilities on the right-hand side and right-hand side. But if you can the liabilities, there is, there are two portions, the debt holders, so external and internal adept toddlers, which are the equity showers. We're gonna be discussing this later on. We're gonna be discussing ownership of the company. What lot of people do not know is that in case of liquidation of a company, when the assets are sold by liquidates or decided by the owners. Potentially, the external creditors will be paid off first before the owners of the company because first, what is remaining in terms of cash by having sold off all the assets of the company will go first to pay off the debts, pay off the depth of the creditors before what is then remaining after having paid off all the depths of suppliers, employees, bank loans, those kind of things. What is remaining will go to the equity holders or to the shareholders of the company. And so that's also one important element to take into account that legal personality. So those kind of attributes about separation of the ownership of the assets. There is a priority rule that depth told us can be for shareholders of the company. So that gives us supplemental level of protection in case of liquidation of the company. Also the authority elements. That's when something when the company decides to do something about the assets of the company, buying, selling, etc. There is really, the rules are defined through the legal personality and they are linked to the legal personality. They are no longer linked to the private persons that are owning the company. And last but not least, the legal personality also. I mean, there are many situations where you're going to have litigation's, so there's gonna be an angry customer. You're going to have an angry supply against you in an angry employee and you may end up in litigation. Also, corporate law defines the processes and procedures on how to deal with litigation's between customers, shareholders, suppliers, employees. But take those four stakeholders. And that's why also if you look at the contracts very often you have also the applicable jurisdiction that is written down in the contract so that in case there is litigation, the contract already states and if the contract has been signed by the two parties, which jurisdiction is applicable? Let's say it's the I have no clue Washington DC jurisdiction that is applicable or the Luxembourg let's say a commercial courts that are applicable in case of commercial litigation for example. So that's the kind of thing also when writing down contracts, that's the kind of thing that you need to be aware of and also look into. And also if you are the one writing the contract, that also applicable jurisdiction is written down so that it's clear from the very beginning which are jurisdictions you will in which, let's say jurisdictions you will face litigation. The second attributes that corporate law gifts to companies is Arthur legal personality is the limited liability. So we already discussed is that when a company goes, for example, a bankrupt and there is some external creditors, that the creditors can only make a limited amount of claims against the assets that are owned by the firm and those assets are written in the balance sheet. There is an inventory of all of those assets. They have no claim on the assets that are privately owned by the shareholders of the company. And that's something very important because this gives also, let's say, some form of peace of mind, the shareholders, because shareholders know that credit holders cannot come after they are privately owned assets. And this is where we are discussing as a partitioning and I'm gonna be making it visual here through a case study. Let me, let me elaborate here. So here, let's take the following example. We have this lady called Karen. She owns, she's 100% private, owner of a house somewhere in the US. At the same time, she's 20% shareholder of company a. The other 80% is hold by four other shareholders. Everybody has basically 20 per cent, so there are five shoulders with everybody has 20% stake in company a. Let's imagine that there is an excellent credit on. Let's imagine a bank has given a loan to the company for 2 million, or there are still 2 million to be paid off the loan. And at a certain point in time, what happens is a company is not very profitable. They have been destroying cash as the load. They could not turn the loan into profits. The company only currently carries 1.5 million tons of assets. The balance sheet is doesn't carry more than 1.5 million in terms of assets and also obviously in terms of liabilities. But the company now the bank says, Yeah, but guys, I'm seeing that. I mean, you're destroying money. I have claws in when I wrote the loan to you that I can claim at any moment in time the full amount of money that I that you still owe me and you still owe me 2 million. The problem is that the company only has 1.5 million of assets in the balance sheet. So the question yet you may now wonder, is, can the excellent credits or go after, for example, this real estate, Let's imagine this real estate is worth 1 million. So it would it would definitely cover the remaining 0.5 million, which is difference between the claim that the external creditor has against the maximum amount of assets that the company a has currently? The answer is no, and this is where the shielding mechanism and the asset partitioning. So remember the separation of ownership is that the private real estate of Karen is owned by Karen as a private person. It's not owned by the company because carbon is added not to bring in the real estate and to give the realtor as a warranty to the company in case something would go would go south with let's say the company operations. So the 0.5 million residual claim cannot be done by the creditor through company a to Karen. Or maybe this works the same way for the other shareholders. So the excellent credit can only make the claim on the assets that company a owns. That's basically it. And this is where the shielding mechanism, this limited liability and this acid partitioning plays a very important role and gives confidence to the shareholders as well. I would say here, you would say Yeah, but that's unfair. For example, the excellent credit would be a bank is unfair towards the bank. And I'm saying yes or no. But why did the bank give a loan to company a that was maybe too risky and the amount was too high. Maybe they should have limited the amount of money that they were borrowing to company a instead of being maybe familiar and just giving 0.5 million. So that's a risk that the external creditor took. That's not a problem of the shareholders. It's going to be the problem of company a. That's for sure Maybe company a has to be liquidated. I mean, depending on how the clauses of the loan have been written. But again, if if the excellent credit though was, allow me to say stupid enough and took too much risk on giving too much money versus the, let's say, the assets and the forecast and profitability. That's a problem of the external creditor. You see how this works and I hope it's clear for you also this shilling mechanism as partitioning or separation of ownership between privately owned assets by the shareholders and assets that are owned by the company as a moral person. So let's switch gears here. This one is a little bit more complex about, let's say, shares because basically when we speak about companies. I mean, except if you have a sole owner, a single owner of the company. But normally you're going to have various what is called shareholders. But first of all, let's define what is a share assurance. In fact, as already, you can guess it's an indivisible unit of capital of the company. So it expresses ownership. It expresses the ownership relationship between the company and a person, which is called the shareholder. But also remember that the shareholder can be a person, physical person, but you can have companies that are owners of companies. Take a concrete example. Blackrock as a, let's say, as an investment funds, is owner of other companies. They are owners of Berkshire Hathaway, Warren Buffett's company, owners of Microsoft. So remember that the ownership relationship between a company is not only with physical person, but it can also be with other moral persons. And the, when we speak about share capital, we refer in fact 100% of the shares of the corporation. So from that, of course, so this indivisible unit of capital that is called a share, and it can be determined in number of shares, percentage. Obviously, the shareholders are the person's physical persons or more persons that are reduced and by the corporation has a legal owners of the totality of the shares of the company. There is one single shareholder, or maybe part of the company. In the previous example with Karen, I was saying that there were five shareholders and each seller was having a 20% stake in the company. And sometimes we also refer to shareholders, equity holders or stockholders as well. So those are synonym is basically the same. What is the, the, the things that copyright law is expecting on transferability of sheriffs and also towards what are the expectations that corporate law has against the company related to shareholders? Well, first of all, the company has a moral person that has shareholders has to keep registry of who are the owners and how many shares, those owners of the company, and this is required by corporate law. The second problem as well, Let's say the second expectation that corporate law has against the company as a moral person is that the company needs to be able to continue. It's an operating its business, even if the owners of the company change. So on the first problem, you can deal, you can solve this expectation. So corporate law expecting, so government regulators expecting from the company to keep a registry of who are the owners of the company. You can deal with this by keeping a shovel or Registry and assigning the ownership or the accountability, sorry, the accountability of updating this registry to a specific person. So you are allowed to do this, to insource this, but you can also outsource this to, and there are going to show you in the next slide, there are companies that are specialized in managing this for big corporations. But this is something you will need to do. Just one very quick, Let's say detail here. You have anonymous owned companies in the other called inc incorporated companies in Europe, for example, you have an anemia, which means anonymous companies, where the Articles of constitution do not reflect who is owner of the company. In limited liability company is very often the articles of constitution show who is owner of the company and how many shares. The managers of the company, we don't call them shareholders, but we call them, I mean, they are owners as well as shared as well, but it's not called shares is called sum, sometimes social parts of the company or social shares of the company. That's now a detail. But just keep in mind that in various types of companies, the articles of constitution do not tell you who are the owners of the company and limited liability company is very often the articles have Constitution show who are the shareholders of the company. So I was speaking about the registry and the registrar which is the owner of the registry, the shareholder registry, while you have a company that is very well known, which is called computer share, they are listed on the Australian Stock Exchange. The ticker is CPU. In fact, one of the largest. I think they are the largest registrar for the very big corporations. And you need to imagine when you are a company like Microsoft, like Amazon, like Google, Alphabet, every day your shares are traded in and tried it out. I mean, you better have an automated process and somebody who keeps track of the millions of small shower changes that are happening every day. And this is where you have even a specific company called computer Sharp? Probably not the only ones. I'm sure they're not the only ones, but this is one of the biggest ones in the world. They keep track of all those changes in terms of shareholders. So that was the first problem. So what corporate law is expecting from the company as a moral person is to keep a register. So Registry and somebody owning or has the accountability to update this registry. The second problem is now, or the second expectation a corporate law has against the company, the newly created company, that the company needs to be able to operate even if the owners change or want to change. Here we come back to the principle of transferability of shares in the ownership. But basically, what, what can happen is that, Let's take the example of Karen's company. You have five shower as a non shareholder wants to get out of the company. The other foreshadows want to stay in the company. It's not because one of the shell is wants to get out that the company will stop working. So there are some specific processes and this is expectation or where corporate law kicks in is that even though there is a shallow who wants to sell his or her shares, let's imagine it would be carrying, carrying on Switch House wants to sell her 20% ownership. Basically, the company needs to continue operating. That's basically what the transferability of shares, expectations and possibilities are drafted. In fact, in corporate law, obviously this depends on jurisdictions as well. So you're going to have two types of transferability of shares. The first one is companies that are not publicly listed, companies, which are called private companies. And we're going to give you, are going to give you examples in the upcoming slides. And you have companies that are free, whether she has a freely tradable. And those are companies that are listed on the New York Stock Exchange, on Euronext, on the Australian Stock Exchange, on the Japanese stock exchange. I mean, you get the points. So they have the shares of freely tradable on those public markets. This is what we call secondary market, but you may have companies where you need transferability of shares, but those companies are privately owned. And when, specifically, when he's thinking about private companies, you may have, when you did a series a, series B round of funding. You want to have as founders, some specific clauses. If you have brought in the Series a funding a new investor in and doesn't even investor wants to get out and that new investor was earning 20% of the company. You may want to have the opportunity that the investor wants to get out, but they need to make you the proposal. First proposal to buy the shares at a specific price. That's the kind of thing that you can agree upon when the investor comes in. So you're going to have I will not read them here because it would take too much time. But you have typical clauses when you do, when you bring in new external investors in a series, a, series B, series C around a founding, which are called right of first refusal riser, first, right of first offer of founders, right of first offer, or potentially free transferability. So those are the kind of clauses that you will find in a term sheet that you will find in a shareholder agreements between new investor coming in versus the fairness for example. So you will need to be attentive to this. And again, it's not the purpose of this masterclass to go into all the details, get yourself help from an external legal counsel. But just be aware, that's the intention of this course. Just be aware that transferability of shares, you may want to protect yourself as a founder or you may want to protect yourself as an investor towards existing foreigners. So think about those kind of things. So maybe I'm going to ask you here, give me examples or think about examples of public and privately owned corporations. So maybe pause 1 second here of the master class and thinking about, you know, companies that are publicly listed, probably, yes, and they're gonna give you examples in the next night, but do you know companies that are privately owned, which are where the shares are not freely tradable. Just give it a thought one seconds. The examples I want to give you here, on the left-hand side, you have publicly listed companies where the shares are freely tradable. And on the right-hand side, you have privately owned companies where the shares are not freely tradable or nothing. So Udemy, they went on stock market a couple of, I think a couple of months ago. I'm not sure if 100% of the shares of freely tradable. Maybe it's just, I don't know, 80% of the shares that are freely tradable and 20% are still owned by the founders or private equity investors. Kellogg's and Nestle. Those are companies where a big portion of their shares are freely tradable. Remember when the shares are fully tradable, what I didn't mention when introducing the topic, I was not stating per default that 100% of the shares are freely traded. But for some companies it's the case. For other ones. It's maybe just 80% of the shares that are freely tradable off, 50% of the shares that are freely tradable. Thinking about Rushmore, for example, where 50% is owned by the family, 50% is freely tradable. Privately owned company has Skillshare, hasn't gone public yet. Ferrero, which is an Italian family, Owens, sweets. Oh, pastries and chocolates business and See's Candy, which is fully owned by Berkshire Hathaway. So by my friend Warren Buffett and Charlie Munger was a privately owned companies, so forth, one delegated management on the board structure. What corporate law also expects from companies or from a company as moral person, is that the shareholders give some of the main authority of corporate affairs, of corporate operations to some kind of supervisory body that is sometimes called the board of directors, sometimes called the supervisory board, sometimes it's called the Board of Managers. Just for the ease of keeping it simple here, we will only speak about board of directors, but sometimes you have a board of managers when it is limited liability company. Board of directors is basically a corporate governance structure where all or most decisions, with some exceptions which are very reserved decisions. But most of the decisions are in fact delegated to the board of directors. And the board of directors basically carries four basic features. The first one is that and we're going to be discussing T1 versus tier two governance models. But there is a separation between the kind of decisions or let's say what is called the Reserved matters of board of directors, which are topics and subjects that are really reserved to the decision of the Board of Directors which operation managers cannot take. Without the approval of the board of directors. The board of directors will be elected and dismissed by the shareholders. And also, very often the board of directors in most cases are different from the company shareholders. The company shareholders delegates the, let's say the governance and the, let's say the major decisions to the Board of Directors. And also what happens very often. Always the case. Sometimes you have a sole shareholder. And shareholder, in fact, doesn't need a board of director because any sort of shareholder resolution basically represents 100% of the power of the company. But very often what happens is that you're going to have a board of directors and the board of directors has to have some complimentary skills and competencies. 8. Finance & Bookkeeping law: Welcome back, entrepreneurs and investors. In this next lecture, we will study in Chapter number two where we're discussing after the ideation phase, really the incorporation of the company. You have been discussing corporate law and now we're going to look into the fundamentals of finance and bookkeeping law. It's not the corporate finance chapter that will come later on, but he is really setting the fundamentals, what are today, the accounting standards that company I have to face. In fact, before we go into discussing what is IFRS, US gap, local gap, just want to make a very quick introduction about the word accounting in fact, comes from the frozen accounting records that we have with that historians found were more than 7 thousand years old. When in fact they will records at the tiny Mesopotamia, which is basically today Iran, Iraq, which was one of the very ancient civilizations where they were in fact keeping a record of expenditures, goods received, the goods traded, and remember, before the appearance of money, people who are bartering so they would potentially sell, I have no clue crops for cow, for example, or they would sell cheese for bread. And obviously it was always complicated to say, how many pieces of bread do you need for a certain amount of cheese? This is where in fact, money came. The appearance of money facilitated traits. In fact, in those civilizations, one of the major milestones so we had during the Roman Empire. So we have the first double, double entry bookkeeping that was pioneered by the Romans and we are coming back. What is double entry bookkeeping is, for example, you credits one account and on the other hand, you debit an account. So the balances are always cans are always balanced out. And in the Medieval and Renaissance periods or around 15th century, we have this guy called Luca Bartolome or the peculiar partially, I haven't, I'm not sure what is the right Italian accent. So he was going beyond the initial double entry bookkeeping system of the Romans. And we could say basically it was really the appearance at that time of accounting. In the medieval ages. The purpose of accounting and bookkeeping is really preparing information for various stakeholders. As we had when we were discussing the various stakeholders. What's the purpose of company? You remember, if you don't remember, go back to that initial lecture. We were discussing that the company is in fact the connection points for various contracts can be for customers and stakeholders, for employees, for shareholders, for suppliers. But basically it's a little bit the same for the purpose of accounts accounting and bookkeeping is really preparing information for various stakeholders. It can be tax authorities, that can be shareholders. Can we potentially new investors that would like to invest into the company, but also for management employees, customers and suppliers, or even for banks mean we were also discussing about a bank loan at that moment in time where maybe the bank was giving up too high bank loan to the Karen, if you remember the exercise or the example that we were discussing. And so the intention also of accounting and bookkeeping is really to try to keep and to record the information as factual as possible. But nonetheless, and that's something that is, and I've been discussing this also in one of my last webinar. We were rehearsing financial statements is really, a lot of people believe that accounting is perfect science. It is not. An accounting requires interpretation. Just look at the example. You have bought an investments or shares of another company. How do you value that's investment that assets? So always keep in mind that the best accountants will never give you a precise information and 100% accurate. There's always going to be a certain risk because there is interpretation but also sometimes simplification. You're going to see they're going to be differences also in the way how various regulators, various, let's say authorities throughout the world. They use different standards and those standards potentially give allow certain room and space for interpretation. So that I think that's really the important thing to keep in mind that accounting is not a perfect science. And the intention and typically the general use at those various stakeholders such as customers, suppliers, shareholders, new investors potentially are doing with the financial reporting is really to take better decisions. Even though, as you just heard 30 seconds ago, that accounting is not a perfect science. Even though accountants tried to be factual, there's gonna be some room for interpretation and some room for simplification. But nonetheless, intention is really supporting stakeholders if it is buying, selling a holding, equity or debt instruments. When they have to exercise rights, if it is a shareholders, they want to know what are the profits of the company and how does profits want shall be allocated. And we're going to discuss as well also the role of statutory auditors. So the role of external audit and internal audit in trying to increase the accuracy of the accounting records and financial reporting. One or one or two of the most important elements that people are asking for as well. And that will structure the way how financial reports are done is first of all, being comparable between time periods. And this is and again, I'm not going into the details here. There's more like rater to a corporate finance or investing course, but I'm going to say here, but what people expect when they read the financial report is to know if our to make sure that the financial report is consistent from one year over the other year, from one quarter to another quarter. If there would be changes. In fact, the company has to disclose this. This is basically done. I mean, it's not the purpose of this course, but if you would go into a financial report, let's take US listed public company at ten K, ten q reports. So let's look at the ten K report, which is the annual audit report. If they are accounting changes from the previous year, they have to be written down. And the people who are going to read the report, you will see that there has been a change in the accounting policies are in the treatment of some, let's say, accounting figures. It's mandatory. The company has to mention it explicitly. And of course, the second need is really avoiding a distortion, avoiding an incomplete view on the company. So basically, all things should be recorded in the accounting systems. And again, it's not the purpose of this course, it's on the financial statements correspond nonetheless. For example, when I do analyse, look at financial reports, I always look into if they are off balance sheet item. So items actually that should be recorded in the balance sheet, but the company has decided for a specific reason not to record them in the balance sheet. So they're considered like off-balance sheet items. That's like, I will not say it's per default is gonna be fraud or somebody is trying to cook the books. But I mean, I will pay attention to this. So I always prefer not to have off balance sheet items. And really this point of incompleteness in the financial reporting. I will quickly mentioned it a couple of minutes ago. So basically, if you look worldwide and let me start first with a publicly listed companies that are listed on the New York Stock Exchange, on Euronext, on Japanese stock exchange, etc. So all the big stock exchanges in the world, mostly you're going to have companies that will either report through IFRS, international Financial Reporting Standards. And the, let's say the standardization body is called a USB. So International Accounting Standards Board, I've put you the URL if you are really interested in it. And then you have four US listed companies. They in fact do not use IFRS, but they use US GAAP. Us, GAAP means US generally accepted accounting principles. There are the, let's say, a standardization bodies called the FASB, the Financial Accounting Standards Board. And again, here you have the URL if you want to go a little bit deeper into that, let's say into that organization. Third that I mentioning in this slide is that I was just mentioning that IFRS and US GAAP is used mostly for publicly listed companies, which you may have. You may have companies, privately owned companies that are not listed on a stock exchange where those companies will report or structure the financial reporting following locally accepted accounting principles. So this is what we typically call local gap. And I'm gonna give you a couple of examples later on we are going to show you the lux Luxembourg gap and also the Spanish gap. But you're going to have this probably for any country in the world. And this again, those companies, I mean, companies that structure their financial reporting and they follow local gap. It's basically because they are not publicly listed companies, but privately owned companies. Just coming back 1 second about IFRS and US GAAP because I think it's important for you to understand that basically. And I read it quickly mentioning that IFRS is really the international standard for financial reporting with the IASB. So the International Accounting Standards Board being the body of normalization for IFRS. And I put it the statistic of February 2020, probably it has even increasing the meantime, we are now mid 2022. But you said that already two years ago there were more than 120 countries through Europe, through Asia, through South America that were in fact following the IFRS standards on US GAAP. Let's be very clear. Us these companies, they follow US GAAP, and they do not follow IFRS, and it's mandatory for them if they are listed on the New York Stock Exchange, they have to follow and they have to report. In US gap. And then you have the, as already said, the normalization and standardization body, which is called the FASB, the Financial Accounting Standards Board, which is a US body. Again, it's not the purpose of this course. This is an extract of another course about financial statements. And I'm just showing you a very quick summary that I was mentioning it a couple of slides ago that's between IFRS and US GAAP, there are differences. The one that is most, let's say, known to people is when you read, I'm just taking the example of a balance sheet. If you read a balance sheet in IFRS versus a balance sheet in US gap, in fact, the order, the sequence is inverted. So if you look at assets in US gap, we'll start with short-term current assets and it will, from the top, it will start with casual, sorry, with cash and cash equivalents. That's the most liquid and short-term asset. And it will go down to very illiquid, intangible, long-term assets, let's say for example, goodwill, intellectual property. If you look at the liability side of the balance sheet, still in US gap, it's going to start first with credit toddlers are like bank loans, suppliers, those kind of things. Accounts Payable does That's the supplier part, maybe employee's tax authorities and then it will go to longer-term adapt like very long bank loans that are beyond 12 months, then you have equity. So paid-in capital, retained earnings, those kind of things are retained losses. If there are losses, if you look at IFRS, it's actually the other way round. So you have assets on the left side and liabilities on the right-hand side, same like US gap. But in IFRS, you will have in the asset side, the very long-term non-current assets on the top, and cash and credit, cash and cash equivalents. We'd be at the very bottom on the left-hand side of the assets, on the liability side the other way. And it starts with equity and it goes back to then non-current debt, so long-term debt, and then it will go to very short-term adapt. In fact, like accounts payable for example. The other, there are other differences I'm just making here. I'll let you read. This slide is a little bit of a complex slide, but in the way how inventory, for example, if you produce goods, how you calculate inventory, how you value inventory, you have various options in IFRS and US GAAP, you can only do first-in-first-out for example. So the difference is, I will not go into the details of it, but just be attentive that IFRS and US GAAP, there are differences between the two. This is an example of a, I've put you the URL back to the IFRS list of standards. There are some big four companies like Deloitte, for example, who produce very nice synthetic documents about the overview, what is IFRS? And you see here, for example, the various categories just need to be aware that the older, let's say accounting standards. And now they're all called, while they all called, the new ones are called IFRS, for example. But just be aware that there's gonna be some references to ISO standards and other ones to IFRS. But basically it's all IFRS. Then one of the things that's also, as an entrepreneur has to be very clear to you, is who dictates what's kind of accounting standards you have to follow. The, basically the law decides this. If I look here at the example of Europe, clearly states that for European countries, companies that are listed on stock exchanges, they have to follow the set of international standards called IFRS. And that's it, full stop. So you have to be compliant with this. And this is laid down in a European directive, which is basically a European law. If, if I look, for example, at Luxembourg is companies that would not be listed. So privately owned company not listed on the stock exchange. You have here on the left-hand side, and I've put the URL below the link to the official journal of the Luxembourg government. So it's a, what we call a local regulation. So it's low. But it's a little bit lower in hierarchy on the norms of you have Constitution, laws, regulations. So this is considered to be a regulation. But the regulation, and this is an extract from September 2019. The regulation states, what are the, what is the chart of accounts? So what is a class one? When you have a financial account that is prefixed with one, it's an equity account when it is, for example, an account of category three. It's gonna be an inventory account. If it is 67, there's going to be income statement related accounts. One will be cost, the other one's gonna be revenues. So that's the C6 and C7 that's laid down in law regulation. Another example of a local gaps. So remember, if you are publicly listed, there's gonna be, let's say 100 per cent chance that you're gonna be aided through IFRS, US, GAAP doing your financial reports. If you are not a publicly listed company, depending on the, let's say on the local standards, you may need to follow local gap. And for example, here I'm giving you the example of Luxembourg, but also on the right-hand side in Spain where you see again, and I've put here as well, again, the link to a Spanish website. You'll see that there is a general chart of accounts with the numbering of what is category ten, account category 11. And you see it's basically the same like in Luxembourg. Third-party accounts or class for accounts, etc. So you have this nomenclature or taxonomy, this numbering system of accounts that is laid down regulation. And in the US, it's basically the same. And I've put here again, a link to the Treasury Department. I think it's a sub agency of the treasury department where they describe it's the Bureau of the fiscal service. They describe the US standard general ledger. The general ledger is like the big journal. And what are the numbers? The account numbers that US companies have to follow? And you see it's pretty similar to Europe. You see, for example, that everything starts with one thousandths, is really assets, cash receivables, liabilities or 2000s. Revenue is 5 thousand, expenses is 6 thousand, etc. So they have also taxonomy and they have or chart of accounts where you ask that US companies have to follow that you as accountants have to follow. So we don't start from scratch and just keeping in mind that regulators structure this. So this is defined by law. And when so, I hope that you understood that it is either IFRS, US, GAAP or local gap. But now is the question, when you look at the financial reports, how do you know what Stan the company is following? And I'm giving you here are two examples. One European publicly listed company, which is Mercedes-Benz, Daimler. And you see here this is an extract of their financial report. You see in fact in the red frame that they are stating that the accounting policies applied in the consolidated financial statements comply with the IFRS required to be applied in the European Union as of December 31st doesn't have 20. So this is an extract, as you can already see, that closes the financial fiscal year 2024 Mercedes, and they state that they follow IFRS. And you see this as part of the chapter. You may remember, what is the purpose and what is the need for accounting and financial reports. One of them is consistency and comparability between fiscal years. And here are ready, they say, this is part of the chapter is called the significant accounting policies. So if there will be changes, so not all, not only the significant accounting policies they have to say which accounting standard they follow. In the red frame, you see that they follow IFRS, but there would be changes, for example, there will be new IFRS standards that apply to them. It's the case here, IFRS 17 on insurance contracts. I do remember a couple of years ago we had IFRS 16 changing the way how leases are accounted for to make it very quick. Leases when you want not owning the building, but you will leasing the building initially before that change of IFRS 16, it was only accounted in the income statement. And IFRS 16. So the IASB so the International Accounting Standards Board has been asking that also lease, long-term lease liabilities and assets that are not owned by the company should sit, in fact, in the asset and liability side of the balance sheet. So that's a change in accounting policy that is not driven by the company that repos under IFRS, but that is driven by the standardization body, ESV. But such a change and the impact of such a change has to be described in a significant accounting policies for the company, specifically here for publicly listed companies, a US company, Kellogg's. So as already said, typically US public listed companies, they do not follow IFRS, but they follow US gap. Here again, you see in the red frame. So they say the preparation of financial statements and conformity with accounting principles generally accepted in the United States of America. So this is, this states, they do not write the acronym of US GAAP. This clearly states that the accounts are prepared and they follow US GAAP, let's say taxonomy and the US GAAP standards. This is basically it for the finance and bookkeeping part of the law. So I think you just need to understand that depending on where you operate, depending where you incorporate the companies, they will have to follow certain taxonomy of accounting standards. And specifically, if you are publicly listed, chances will be very high that it will be either IFRS for most of the world. And if a company gets listed or your IPO in the US that you will have to follow US GAAP at that moment in time. But just be aware of what is a frame. That's when you incorporate a company, that you will have to report your financials, but you need to keep in mind that it will follow a certain standard with that in the next one that's going to be longer one. We're going to be discussing commerce laws. I think that's an important segment of law. Very important family of laws are going to be discussing. What are the laws that structure, let's say the commercial interactions between customers, suppliers, and the company that you're incorporating. Talk to you in the next lecture. Thank you. 9. Commecial Law: Welcome back. In this last lecture of Chapter number two, we're going to be discussing commercial loss. And as already stated during the conclusion of the previous lecture, I think it's a very important segment that entrepreneurs will have to deal with even more than the finance and bookkeeping part. Because probably entrepreneurs will outsource this to a professional accountant, incorporation of the company. Probably you're going to outsource this also to law firm and also asking the law firm to get to the right business permits and trade licenses. But commercials is something that you as an entrepreneur will have to deal extremely often. You're going to have situations where you will have to refer back to commercial loss. I think it's good to be fluid on this and as already stated, is gonna be a little bit longer lecture related to commercialize because we're going to depict what kind of commercials and apply to companies. So first thing is really understanding where commercial law is coming from. So basically a commercial appears around the 16th century in Italy. And it's really a body of law that applies to, let's say, the relations and how people and companies shall behave, how they engage in commercial transactions, how they engage in traits in fact. And commercial law in fact, is a group and has many branches, group of laws and it's a big family of lawyers and includes many branches. A couple of those that we're gonna be discussing are contractual law, intellectual property law, competition law, consumer law, international trade and tax laws. But there's gonna be more. You may also end up depending on similar to the business permanent trade license. We have specific industries where you have specific laws that have been written for that industry. This happens, for example, in the media and telecom world, while you even have specific regulators, at least in the US, in Europe, for example, you may have regulatory bodies for giving licenses to Telco operators. So it goes with the business permit, but there's gonna be also specific law that is describing how that environment in fact works. So the main difference between copying and commercialize really that corporate law deals with the governance and the regulation of the company. But the commercial or really focuses on everything, on all the aspects that come from, let's say, buying and selling products and services, or it is called commercial trading. Vm. As already said, the commercial loans to the ones that are going to be discussing and as ready, I'm showing this here on the right-hand side is going to be our red, red line that will be helping us to navigate through the five section is going to be intellectual property law, contract law, consumer law, competition law, and tax law. So let's start with intellectual property law, also sometimes called the actual property, or abbreviated IP. Ip in fact, refers to the creations of the mind, such as invention or artistic works, designs, visual elements, symbols, sometimes brand names, also images. There's going to be used in a commercial activities. And intention of the intellectual property law is right to enforce and protect the rights of the people that are inventing or have created and own those inventories. Because at a certain point in time somebody has created something, but they can transfer the ownership of that creation, probably for a certain amount of money to somebody else. So it's not just about protecting the creators, but also the owners of inventions. And in intellectual property law is you're going to in fact have typical, typically four areas you're going to have and we're gonna be discussing, and then we're going to be exercising with concrete examples. You're going to have copyrights, trademarks, patents, and trade secrets. Let's start with copyright law, which is a subsection of intellectual property law. So the intention of copyright is really protecting the owner of work. If other people potentially would like to copy presented, display the work of the ulna without his or her permission. This applies not just to literature. So two books can be applied to computer software, can be applied to advertising, to art. And if somebody would breach this is called the copyright infringement. That's a vocabulary. Remember that also part of the intention of this masterclass is to give you a little bit of vocabulary that you become fluent with that kind of vocabulary. So typically, if there is a breach of an intellectual property of a copyright, you will speak about a copyright infringement that we've been unauthorized use of copyrighted works. There's gonna be also two typical rights that come with copyrights. One is the economic rights. Which is in fact allowing the owner of the copyrights. So let's say the work that has to be protected is really deriving financial rewards from the use of the work, potentially about other people. So you could potentially license a copyright to somebody and say, I allow you to use it, but you have to pay me €1 thousand per month, for example. And the second one is the moral rights that protects the non economic interests of the author. So there's really claiming the authorship of the work and potentially opposing changes to work that could harm the reputation of the owner of the creator of the work. So remember, it's not just the creative, but potentially also the owner. In most of the countries. I mean, the foundation of copyrights. And again, I'm not a legal specialist, but they have been laid down by the burned. So that's a city in Switzerland Convention of 1886. And you have an, I'm putting heels of the URL of the WIPO, which is a word, Intellectual Property Organization. So most, let's say entrepreneurs, at a certain point in time, they have to think when they build something, they want to protect a creation. If n for which countries, for which territories they are going to register the copyright. And one of the most easy ways of doing it is using the WIPO, which will then potentially, let's say for a certain cost, It's crazy cause, but we'll give you, will register the copyright for a lot of countries throughout the world. And an example is basically this training, this masterclass. There is lot of content that I've created myself. There are also other contents why I'm referring to external sources. We're gonna be discussing this if that is a infringement or not of intellectual property. But basically this course is copyrighted. So I'm not allowing somebody to take the exact same content and producing it are monetizing it without my consent. So that's a very clear example of copyrights and I don't have to reduce. So that's basically also what the Berne Convention says. I do not have necessarily to reduce it to prove that I own or that I have created the content of this masterclass. And also one of the things that is very important to know. And here again, a little bit similar to the legal system difference that we saw when I was showing you a map. In fact, on copyrights, the term. So when you register a copyright, how long that copyright remains, let's say protected. And you have famous examples of copyrights that expire after 50 years. Sometimes happens for artistic works like music, for example. In fact, there are differences between countries and you're going to have some countries where after 30 years it becomes the copyright is in fact voided. So there is no copyright on the piece of work, whatever it is, literature, art, et cetera. And for some countries like Mexico, it goes beyond 100 years. So it was century because also there is a value that comes with the time. So the cupboard is very fresh. There's going to be probably a lot of monetization opportunities. But if the work that is copyrighted is 100 years old, well maybe it doesn't carry any financial value. There is nothing at stakes. Then it became, the copyright becomes in fact obsolete. So that's about copyrights, trademarks. So the intention of trademarks is really signs. So like words, phrases, symbols, or designs. And you can already think about big brands. Think about Nike. Think about the Apple logo, the three stripes from the sports apparel company, Adidas or the, or you call it the swoosh, I think from NYC, that's a symbol. Or when NYC says, just do it. So that's the kind of trademarks that also those companies they want to protect. And a trademark is something that really distinguishes a specific good or specific surveys. If I put the Apple logo and I do not say that it's above or below. You're going to recognize that it's an apple trademark. If I put the Nike swoosh and you immediately recognize that this is nice. So really the idea is to protect those elements like words, phrases, symbol, or designs. We are not speaking here about the book. We're really speaking about short sentences, like just do it for Nike for example. And I'm making are any publicity here for Nike. The process basically there are two options. You can file a trademark application with the local Trademark Office, or you can use again, the WIPO system to file trademarks as well. I will not go into the details of it. But really there are ways of protecting your trademarks. And again, if you are a company, a startup, and you are building something very specific, like, I don't know, a logo, a symbol sentence that describes what you're doing. You will have to protect this very probably otherwise you're going to end up in trouble at a segment of town and somebody will steal this away from you. Those are examples of trademarks, and I was specifically here mentioning the following. I mean, my my family name is Kara. And what I'm trying to show you here is, in fact that trademarks can be limited to industries. If I just look at the career of brands, I mean, I can prove that I'm not infringing any trademark calling myself carry because it's my family name. If I decide to create a certain product called Coursera, I probably will be allowed up to certain extent to do this. Here you have watchmaker tag hire, who has specific category of watches that is called carrier. You have Porsche, which is a German automobile, luxury automobile sports or luxury automobile that has these 911 Carrara models you have carry genes, I think it's an Italian company. You have this Clara toys as well. And none of them are in fact in trademark infringement. And why? Because here the trademark is limited to an industry-specific, let's say scope. So watches, automotive cars, genes, so apparatus, fashion and toys. And with that, in fact, you see also that the logos are different even though the name Kara is being used in those of, by those four different companies, but it will not be considered an infringement because trademark can be limited to specific industries. And so here you have examples and again, it's not the purpose of this training, but some of you may have already followed other trainings I do about value investing. I'm a value investor as well and I believe I've become a better value investor being a business person. I believe I've become a better business person being a value investor. And here you see like the top 25 brands, I do use this Interbrand global brands listing that comes out once per year. It's very interesting to read. This is marketing agency and they analyse the power of the brands. And here's see, I was speaking about the Apple logo, which is today the highest value. It's intangible brand with nearly what is it foundered and 8 million US dollars, just what the apple is, what you see on number 11, the swoosh from a, from a Nike on position number nine, you CBM from McDonald's. So you clearly see that those are remarkable trademarks and you can immediately relate to them. And what they represent, that's really the power of marketing. And this is giving you examples that those logos are in fact protected. That's those are all trademarks. I'm going to give you an example of a trademark infringement. This is a real case when I was preparing this masterclass for teaching at a university first time. So you have on the, I don't know if you recognize those symbols and of course explain them. But here we really have two companies. One of them has been in fact, attacked for trademark infringement. So on the left-hand side, you might have recognized the Chanel logo, which is luxury. Is it's just clothing. I think they have perfumes as well, but I'm not a specialist in that area. That's the official channel logo. And on the right-hand side, it was a Chinese company called zoo. And this is the logo that they have been using. And in fact, Chanel has been raising the lawsuit against zoo for trademark infringement. And I enjoy it's now remember x2 is in fact a Spanish Chinese Jubilee year. And they said, no, sorry, that's, we believe that there isn't infringement. Because remember this industry specific trademarks are how you can have like a career or brand that is really separated between industry without having a trademark infringement. Well, here they were saying, it's really, I mean, the logo is very close to our channel logo. And on top of that, if Julia, I mean, it's, it's in the luxury area as well as if it is perfumes potential, also haute couture. So this is going to be potentially confusing of fooling customers. And Zoom may benefit from this, according to Chanel, trademark infringement to increase their revenues because it appears very similar to the Chanel brand. And it may, let's say interferon, impact the good reputation that Chanel. Chanel shareholders want to keep. Remember that's also one of the intentions of trademarks, is also to protect the reputation of a specific brand. And again, here you have it here. But basically Xu the Chinese are Spanish Chinese julia they lost, in fact, they lost the lawsuit against Chanel. Chanel was, let's say, considered to be in it's fair, let's say right to fight against this logo that was really confusing for customers. Then we have patent law and we're still in intellectual property law. We have patent law. So patterns are basically inventions that something else and writing a book. That's not necessarily an invention that's more copyrights or a visual, a logo like the Apple. Apple, the Nike swoosh, or the McDonald's yellow M. That's not a copyrights, That's a trademark. So that's sine or the just do it of NYC. That's a word. Sentence. Patterns are really about inventions and is really about products or process that provides a new way of doing something. And, or potentially offers a new technical way, our new technical solution to problem and the intention of patterns is really the patent owner has specific, let's say rights. And mostly the exclusive right to prevent other people from copying or commercially exploiting the invention of it. And it means that the invention that is protected by a patent cannot be used, commercially used, by somebody else, or sold or distributed without the patterns are not consent, similar to trademarks, similar to copyrights. Patents can be licensed, mortgage, or assigned. So you could say, I have invented something, but I'm just an R&D company. I don't have the scale and the distribution channels to sell this or to distributed throughout the world I going to license. So let's say there's gonna be companies who are willing to subcontract, not some co-driver in the sense, pay royalty fees, for example, or monthly fee, an annual fee for the use of the patterns. And potentially, you can potentially salad as well. Patterns typically also have territorial rights. So you have to think about in which country or region you operate and make sure that the pattern has been fired and granted for the territory as you're operating in. Normally patterns as well are limited in time similar to copyright. You cannot have a pattern. That is an idea. Remember for example, in the pharmaceutical industry, I mean they live from through patterns. You cannot have a pattern that is everlasting for 1 thousand years. So patterns also carry a limited amount of time before they fall under, let's say, public usage. This is an example because I wanted to make it very specific. Our pattern looks like. So. Here you see this is on the left-hand side, a US patterns. On the right-hand side. This is a pattern that has been followed through WIPO, the world intellectual property organization. And you see in fact those are technical designs and they describe things. Um, I mean, I mean, the companies, I'm sitting at the board of directors, we also create patterns and we find for patterns that are then let's say accepted. And this gives us a certain, let's say ownership. And then we have the possibility to potentially of selling it, license, licensing it, etc. An example of a design, patent infringements. So here we are not just about the sign, which would be a trademark, but really about design that carries certain characteristics. For educational purposes, I'm not flagging Skechers of being systematic design patent infringer versus Nike. I'm just copying information that is publicly available. And in 2019, Nike filed a lawsuit against rival companies, Sketchers, and claiming that they were infringing Nike design patterns. So not just the visual of the shoes. And you have below. I've put the URL to that you can read if you're interested in it. You have the Nike models on the left hand side, the blue one and a white one. Probably the blue one more for man's opera, the white one, I do not know. Maybe for women, I do not know, whatever. And on the right-hand side you have the, According to Nike, the sketches, models that were according to Nike, considered as a design patent infringement. Let's be very fair. They do have indeed similarities. Let's be very transparent about again, I'm not here. The one that decides about the outcome of the lawsuit was interesting in this lawsuit is that indeed so the Nike has filed a complaint In the US District Court at the Central District of California, September 30th, 2019, and claiming that Skechers had a coping strategy and they had people testifying, so witnesses testifying. And apparently there was one I've put it in the red frame here that indeed was commenting and apparently is not just Nike, but also Adidas, which also a very big sports apparel brand in the world, which is basically the Nike competitor. That apparently the witness was testifying. Indeed, that's management, senior management of Skechers was claiming Asking the sketches designers indeed to do exact copies of what's competitors like Nike and Adidas? Wondering again, I leave it to the courts. I'm just reading what has been testified here by a scatters co-operate witness. Alright, so trade secrets. Trade secrets, as we already discussed, we had so copyrights, trademarks, patterns, and then we have trade secrets. Trade secrets protect business practices, formulas, designs, or processes using a business. And they are designed specifically to provide a competitive advantage to a business. Just think about a trade secret. What is the most well-protected formula of a, let's say, drink company in the world, you have an idea in your mind or Yan's is Coca-Cola, That's correct. That's trade secret. So the trade secret is something that is considered commercially valuable because it's secret. And that's the difference between a trade secret and patterns. A pattern is something that becomes public and by that it becomes protected. You have to imagine that Coca-Cola does not want to lay down a patent on its secret formula. The formula has to remain secret. And that's the idea of a trade secret. So it will only be known to limited amount of users. And it's going to be subject to, let's say, protection measures to keep it secret, potentially also, if the trade secret would have to be maybe share it with, I don't know, a bottling company. That bottling company will probably have to sign a confidentiality agreement with the Coca-Cola for so that's the kind of thing where patterns would not fly. That will not be the right vehicle to protect. That's, let's say whatever formula, process, business practice that really has value to the business has to remain secret, cannot be filed as a pattern because everybody can read patterns. That's basically the idea. And assets trade secrets are protected also without registration per default. But you have to setup as well as a company appropriate steps. And this can be non-disclosure agreements or non, non compete agreements with various stakeholders. So that's the kind of thing that you will have to think about. As already said, one of the most known examples and the most, let's say a valuable secret formulas is really the secret formula for Coca-Cola drink. And you see here I think they have moved the secret formula to new volts. I think it's in the Atlanta, either headquarters or they have a museum in Atlanta. I actually also wants visited. It's, I think it's the, in the world of Coca-Cola in Atlanta. I'm City. And here this is an example of a trade secret. So this has to be protected and only, I think it's just three people who have access to the secret formula and imagine them breaching the secret formula. I mean, they will, they will go to jail. They will face an enormous lawsuit and they have to pay millions and millions of consequences if they would breach the confidentiality around it. And I was discussing earlier about this training, so this drilling is copyrighted, but you remember, I mean, at least for the content that I have created. But a lot of, I mean, there is a certain portion of this. A training which is in fact public information that I've brought in by referencing the sources, for example. Now I had, I had this thought process like by doing this course and using like this picture here of the Coca-Cola, of the new vote of Coca-Cola. Am I breaching something? Am I breaching any trademark? I mean, you have seen I've been using the Chanel logo. Is that a breach of a trademark? I was showing the Nike shoes. Is that an infringement of a design patterns? And the answer is no. The reason I'm giving you a concrete example, if the intention is of educating, teaching, as long as you show the sources, it will not be considered an infringement of copyright or trademark. And this is where, in fact, US Constitution, Let's say, describes that fair use of, let's say, content, trademarks, design patterns. It's more trademarks, copyrights in the sense of promoting progress of science and useful arts. So it allows indeed, authors to enforce the copyrights in all cases. But at the same time, there is the Copyright Act, Section 117 which says, but if it is in the tension of teaching, well then it will not be considered an infringement of copyright. So before we go into the examples, so keep this in mind. And again, it's like for the counting part of things, you probably, I mean, if you creating something new, you will probably have to work again with a law firm to say, how do I protect this? What's the cause of protein protecting this? You as law firm helping me. Can you take care of the filing of this pattern, for example, or laying down this trademark or copyright. So that's the kind of thing that you will have to think about. Or are you going for a trade secrets and you're going to protect the trade secret through, for example, nondisclosure agreements with if there would be stakeholders that you will have, like partners that you will have to deal with this trade secrets. Let me give you here an example, because intellectual property is not just one thing, it's not just designed patterns. I mean, if you look at the Nike shoes, indeed, they were claiming a design patent infringement, but they were also the way how the shoe was designed could have been considered trademark approach to trademark. And I'm going to give you a multivariate example of intellectual property. I'm asking you here. So, you know this brand Star Wars, maybe our fan, maybe you hated and you're a Star Trek fan. I don't know. You hate science fiction potentially. But do you have any clue since the release of the first Star Wars movie in 1977, Lucasfilm that is now has been acquired by business and basically the IEP that was carried by Lucasfilm as a company, Lucas has sold and transferred the ownership to this name. So Disney is now the owner of the patterns that trademarks and copyrights. I don't believe that there is any trade secrets. So any guess how many patterns have been reduced? That's how many trademarks on how many copyrights? Maybe pause here, write down three numbers, and they're going to resume now. What are the values behind those three question marks? So Star Wars carries in fact, 188 were just at patterns. 1138 registered trademarks and 3,952 registered copyrights. Probably the music or for example, from a trademark, may the force be with you the term Yoda or Skywalker or Darth Vader. Some visuals for example, the Star Wars fonts, how Star Wars is written. There's gonna be also protected. So there are a lot of things. The movies, there are some books, probably you see the amount of patents, trademarks, and copyrights is huge. Now one of the questions that of course comes up is, if somebody doesn't infringements, who's gonna notice it? Well, normally those companies, they do have lawyers that work full-time at screening the Internet screening, any kind of media, social media to see if the use automated tools as well. Artificial intelligence to detect if there is an infringement on patents, trademarks and copyrights. And you see as well, for example, if you publish videos on YouTube. You use music in your video. Youtube will tell you where this is copyrighted by this person and will tell you, Are you allowed to do this or not? All these will notify the person that you have potentially, that you are potentially using music that you do not own, for example. But you just see the amount of patents, trademarks and copyrights are the brand like Star Wars caries since night or has generated since 1977. Okay, Let's wrap up here on the intellectual property law. Let's go into contract law. I think you understood that. And basically intellectual property is what is basically intangible value that exists in your company. So now we'd have to look into the contract law. So contract law is again, another branch of the commercial law. And it really tries commercial law to structure, to regulate the creation. And also I will call it enforcement. But how contracts between your company and one or more parties are in fact followed, are structured, are respected, and those contracts are enforceable by law. You may recall, I think was in the first lecture, in the introductory lecture of this chapter I was discussing about typically you're going to have a certain point in time and contracts, you're going to put in your contract and your contract template, which jurisdiction, which courts are applicable for that contract. For example, if you are a, I don't know, a Dutch company incorporated in the Netherlands, you will very probably if you're working with a supplier, if you're working with a customer, you will probably make sure that in your terms and conditions of your commercial contract, it's going to stay probably that an in litigation will be ruled by a Dutch commercial code, for example. So that is, you know, that and when people sign a supplier signs with your customer, signs with you, they agree that in case of litigation it will be the courts where you are headquartered that will apply. Why do we need the contracts? And you remember that the intention of a company is to be the main objective of companies to be the central points of contracts. Because the company carries moral personality. And without contracts, it would be difficult for sellers and buyers to make any commercial transactions because without that, you would not have clear defined performances or performance metrics. What is expected, how much money you have to give for a specific product, for a specific service, or for specific transaction. So really the contract lays down the main elements. And also, let's say litigation clauses in case of a dispute or breach of contract between parties. And the typical requirements that we're going to see, we're going to find in, let's say a contract template is gonna be the offer and the acceptance. What constitutes the acceptance of a product or a service? The capacity and legality. So all the elements required for various agreements, date, signature, pricing may be taxes on it. What already stated a couple of seconds ago. What happens in terms of dispute, breach of contract remedies? Maybe you want to have some penalties. So for example, if you are the customer and you are buying a specific goods from somebody, and that specific good has a certain timeline. You want to have this good for, let's say, the end of August 2022. What happens if your supplier does not provide that? Maybe you want to put some penalties into the contract. And this penalties may write down or lay down that's for every day being laid on the delivery of this good, there's gonna be a 1% penalty on the price or 1% discount on the price. So that's the kind of thing that contracts in fact lay down. Of course, you will have to think what are the clauses that you want to put into the contract. And you will have to see if you aren't getting the contract, if you're the supplier. And I mean, the customer has a stronger position than you, so you need to look into that. There is not that this balance between the 21 of the things that is also important when looking at contracts. And this comes back also a little bit into, let's say accounting standards is really one of the steps in terms of revenue recognition. And it's not because you sold or that you have booked a contract, that you can already start booking the contract as revenue in your financial accounts. So you need to think about. A couple of things. First of all, is there a link between the contract with a specific customer? So what is this payment schedule? What is the substance? How does a proven look like? What are the performance obligations clearly identified? So if the performance obligation state that the product is delivered in years time, you cannot book now in your financial accounts, the whole amount. You have to determine as well as the price of the underlying transaction. What is the amount that the customer would have to pay for exchanging the goods or services. Are there any warranties or refund liabilities? Example, if you are the supplier and you have to deliver a one for money worth around a million US dollars, certain products and services. But the same time you have the liver dumps, you could book the 1 million at the same time. Your customer has a one-year refund window if there is any issue on the products that you have delivered. So potentially you will have to book a liability. And let's imagine that the liability would be at ten per cent. So that's the kind of thing that you need to keep into account. And your accountants will of course, look into how does revenue recognition look like? Because that's really, I mean, there have been a lot of scandals where companies have been, let's say, respectfully, over emphasizing revenue recognition while they were liabilities and they want to book into the liabilities and the same fiscal period, for example. So there are the costs, for example, there's a certain amount of financial accounting standards and practices and they have to be followed. So just be attentive that it's not because you get you have an order intake of 1 million that you can already book it as revenue. So there's some various things that osteo account and it will ask you for and this will also, they're going to rely on contract with your customer, for example, is laid down to understand how revenue recognition is happening. One of the most important things, and we're coming back to one thing I said earlier about accounting policies is accounting policies have to remain consistent from one fiscal period to another fiscal period. If you decide to do a change in how you recognize revenues, this has to be written down in the accounting policies and express in the financial report. And obviously, you cannot go back and forth. So in you're wondering this near to changing it and your 3ds are no. Well finally I come back to what I was doing in year one. That is really very bad practice. And this will not increase the level of trust that external stakeholders will have about your company. So keep this in mind. The really, the intent is really to have that consistent in how you also recognize revenues. Were already discussing a bit about refund liabilities. But if I look at a lot of products in Europe, for example, those products come with a warranty if the product breaks. Let's say for example, in the first year IN the product goes back to the supplier and potentially you, they have to replace it. Or I mean, this happens with laptops, for example, and have a one-year warranty. I mean, if it is shown that it's not something you did not break the laptop on purpose, but really that the laptop I don't know to fire or really there was no was not starting. And you can prove, reasonably prove that. I mean, it's not linked to any manipulation that is linked to you. Well, then the warranty, warranty kicks in, and potentially the supplier has to swap it at no cost. Sometimes it's part of the cost that is given back. I mean, it depends from one product to the other. And potentially also the warranty also describes what's the amount of time for replacement. So this can be for Caspi air parcel. I was taking the example of laptops, those kind of things. Then you have a refund liability. So warranty is not necessarily a refund warranty could be just that you replace the good, for example, or even the service that you're providing. A refund is really, I don't wanna replacement. I just want to get my money back so that in fact, the supplier is offering to the customer the right to return the product and get a full or partial refund of the amount paid if the product or the service is the service, sorry, it's not complying with, let's say the performance expectations that were, let's say promised to the buyer. So let's about contractual law to make it simple. So keep in mind that again, you will have a they feel the supplier to look at contract template that you will get. But if you are the entrepreneur, you will have to have specific terms and conditions, general terms and conditions, general commercial conditions. And gets really the advice from external law firm that will help you draft a valid contract template where, let's say payment schedules, performance metrics, warranties, those kind of things, are known in advance. So because that will impact your financials and it will avoid you any kind of bad surprise or think about contractual law as an important element as well. The next, the third category or subcategory of branch of commercial or is consumer law. First of all, in consumer law, there are certain amount of terms that you need to know. First of all, what is a consumer? Consumers, any individual who purchases goods or services sold by corporations, by companies, by manufacturer, so by retailers, consumer goods are, and I mean, we're speaking about consumer law. Consumer goods are in fact assets, personal assets that purchase primarily for individual, personal, family, or household use. So here we are speaking about B2C, business to consumer. We are not speaking. Consumer goods are goods that are used for professional use. And warranty we're discussing is really what expresses the performance promise. The promise generally speaking, of the product or the service, and what isn't at, let's say, and the typica 10. Introduction to Strategic Management: A comeback entrepreneurs and investors. We finished earlier chapter number two, which was really about all the legal elements that you need to know as an entrepreneur. And again, it wasn't the purpose of going deeper, just really touching upon the main segments of law that you need to know as an entrepreneur. So chapter number three, we're gonna be discussing strategic management. You may ask yourself, you may wonder, why are we speaking about strategic management? So coming back to what I said in the very beginning of this course, which is basically we're gonna go from ideation to maturity of the company you, so you remember, you see it here. Refreshing everybody's man on the S curve of corporate growth where it starts with an idea, the company gets incorporated. Now after having raised the first money or having brought in the first money, we are in the phase where the company will grow, the company will become mature and potentially a certain moment in time decline. One of the things that we need to set very clearly here is that when you have an idea, and I think I mentioned it already earlier in one of the starting lectures whenever discussing about where ideas come from, that chances are high that you will not be the first one having that idea. So a lot of ideas are in fact not new. And the functioning of markets or developing a new product for markets. What entrepreneurs often forget to do what they overlook is really looking at existing competition. What's the market structure? If there are external factors that's potentially influence that. Let's say segment as the segments of the market that they want to sell the products or services. I'm not saying that as an entrepreneur you cannot have an idea that nobody else hadn't before, but chances are high that you will not be the first one having that idea. But as I said, it's, it comes down to and boils down to execution, good execution. You may have people who hadn't good ideas, but the timing was wrong. It was too early even, and consumers were not ready to buy those products, are those services. So timing is essential. And I think if you look for the very big unicorns, very big corporations, they often get the timing of launching new products and new services, right? So just be attentive before you go into a market, before even you spent money on it. I have a thought, have a look at MIT the 23rd in a row whose launching this and what is different in my products and services. Why people who will switch customers will switch to me from existing competitors. Or maybe I'm, the idea that I have is really revolutionary and we'll really shift company the way how people perceive a specific product or specific service or serve, let's say, or solve problems that have not been solved before. So you may be the first one launching and are having this idea. But keep in mind that very probably will not be the case. It probably has already developed something similar to what you are doing, but maybe not in your geography may be exactly what you are trying to solve or to bring in terms of value to your potential customers and our prospects. So on the escrow of corporate growth, one of the things that I also mentioned earlier, and here's specifically strategic management is important to understand is that you may have companies that are, the first one is launching an idea. And if the profits of that company, of those companies are very high, you're going to see competitors coming in. And the reason why competitors come in is that profitability in the market is very high. And what happened as well, when do you see competitors exiting a specific market is when profitability goes down. We can discuss about airlines. Would you now, if you would have the capital, would you be launching an airline? How we look at the profitability that you can expect from the airline, how to differentiate. So that's the kind of thing that you need to think about when you are thinking about launching a product and or service, depending of course, on how much capital we have available. What is the competitive situation? Do you already have competitors that are on the market? Or if you're the first one, how long can you be the only one launching a new product and your service before other people see that you have very high profits and they will try to copy you. Of course, if the margins are bad, you're going to see competitors exiting. And it's limited to the current conversation that is going on in some industries that are for the time being not very green or sustainable, or that are very capital-intensive where you see in fact competitors, or let's say company shutting down the operations because they aren't able to make a profit from their operations. And on top of competitors that entered or that exits during the lifetime of your company, you also need to think either one, you're launching a new product. You are delivering new services to a specific market, specific customer segments. But you're going to have external factors that will influence the corporate growth. You may have. We were discussing about taxes in one of the previous lectures. If the government, local government, where you operate, decides to raise the taxes drastically on specifically the products or services that you're selling. It may be an issue. Let's imagine that you are selling e-cigarettes. Well, you're going to be probably challenged by external factors and external effect that can be also an external study on external perception. That is giving negative feedback on your product or your service. There's gonna be political external factors like government changing. Let's imagine from left to right. And this is going to be substantial changes in the way they deliver specific business permits for your goods and the services, and all the services that you are setting. So you need to keep in mind that it's not just about, you cannot live alone in your ivory tower. You're going to have, first of all, competitors, but you're going to have also external factors that will influence how you land on how you market your goods and services. Then you may have also global economy. I mean, now we have very high inflation. We have challenges on the supply chain as well. The central banks or European Central Bank, if it is the Federal Reserve in the US, are raising rates, interest rates really to cool down the economy because, because of the COVID, there was too much cash that was printed out, too much money that was printed. You may know that money has been disconnected. The US dollar has been disconnected from the supply of gold. So basically you can print as much money as you want. So that's the reason why we have now one to two years later. So high inflation because you have issues on the supply chain. But also at the same time, there has been so much money available. And the cost of, let's say borrowing money has been extremely low with even sometimes negative rates. External factors including global economy, societal pressure, people who want to buy green things, sustainable thing. So that's the kind of thing that also has an entrepreneur you need to think about not just competitive, competitive landscape competitors, but also those macro, economical, and external factors. So when we look at strategic management and we bring this back to the s-curve of corporate goals so that you see that I'm using this consistently. So after the ideation, the launch phase, we have incorporated the company. Now, if mean if you are the founder of the company, you need to make sure maybe you have people in your team that can take care of planning, but also just thinking about strategy. And there's gonna be a lot of challenges. I mean, from the lounge to the maturity phase, you will have to scale your operations. The operation will become more complex. You will have to recruit people. You need to retain talent. You, as we already discussed, if profitability is high, you may see competitors coming in, how you defend yourself against those competitors. You may have changes, societal changes, external elements, new technology, Function services that appear that are potentially disrupting what you're doing. I'm thinking here now directly of a concrete example which is a commod