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This Reading takes a deep look at the venture capital (VC) industry in the United States. VCs have a unique perspective on opportunity evaluation, deal structure, new venture support, and exit strategy. Their work at all stages of the entrepreneurial life cycle offers many lessons to company founders, even those whose ventures are not backed by VCs. This Reading follows the chronological cycle of VC activity from the entrepreneur's vantage point: deal evaluation, deal pricing, structure and terms, working with VCs once the deal has been signed, and exit. The topics of deal pricing, structure, and terms are treated in particular depth through a detailed examination of a term sheet -- the contract that sets out the terms of the VC financing.

Describes the formation and rapid growth of a drug testing company. The company needs to decide whether to enter the painkiller testing market, in addition to growing its drug treatment center business. The associated teaching materials provide students the opportunity to weigh the attractiveness of alternative mechanisms for financing the company's expansion.

Sodexo was founded in 1966 to provide food and catering services to businesses, schools, hospitals, and other institutions. When the French space agency, a client, asked the company to organize cleaning and maintenance for its base in Guyana as well, it was an early sign that Sodexo could extend its reach into previously unconsidered areas. Companies have outsourced so many functions for so many years that managing and coordinating the work of their suppliers has become a significant challenge. Some of them realize that working with a single integrated provider such as Sodexo--which now manages everything from employee cafeterias to HVAC systems, landscaping, incentive programs, and employee benefits--is far easier. Over the past decade Sodexo has diversified broadly and globally while observing four basic rules: (1) Be true to the business model. Almost all Sodexo's services can be provided by an individual or a team and don't require capital investments in property or serious machinery. (2) Make people happy and productive. An orientation toward the needs of the individuals who actually use the company's services guides choices about what Sodexo will or will not do. (3) Help clients execute strategy. Direct dialogue with top management differentiates the company and demonstrates that its offerings are not just commodities. (4) Rely on employees, not subcontractors. Sodexo owns the businesses it's in and works hard to motivate and develop its employees.

Almost 120 million people in the European Union are classified as at risk of poverty or social exclusion. Although many companies offer low-cost products and services, they have largely ignored the needs of these consumers. In this article the founder of Grameen Bank and his coauthors describe how five leading companies, working through the not-for-profit Action Tank, have developed "social business" models to serve the bottom of the pyramid in France. Those companies include Danone, which works with the French Red Cross to provide low-income parents with affordable and nutritious food for children aged six months to 24 months; Essilor, which provides easily affordable reading glasses to poor pensioners; and Renault, whose project Mobiliz aims to resolve transportation issues for poor people. In rural areas without public transportation, that involves a network of "solidarity garages" that repair damaged or broken cars at a nominal cost. A social business has three characteristics: It seeks to alleviate social problems; it must be run sustainably; and any profits must be reinvested in the company rather than funneled back to shareholders. Unlike a low-cost business, a social business determines up front who will be eligible for its offer and strives to maintain high quality in its product or service. The spillover effects of creating one may in the long run be as commercially valuable as the profits of a low-cost business. Those effects include uncovering opportunities for innovation in new markets, motivating employees, and enhancing the company's reputation.

Two-thirds to three-quarters of large organizations struggle with execution. And it's no wonder: Research reveals that several common beliefs about implementing strategy are just plain wrong. This article debunks five of the most pernicious myths. (1) Execution equals alignment. Processes to align activities with strategy up and down the hierarchy are generally sound. The real problem is coordination: People in other units can't be counted on. (2) Execution means sticking to the plan. Changing market conditions demand agility. (3) Communication equals understanding. E-mails and meetings about strategy are relentless--but executives change and dilute their messages. Only half of middle managers can name any of their company's top five priorities. (4) A performance culture drives execution. Companies need to reward other things too, including agility, teamwork, and ambition. (5) Execution should be driven from the top. It lives and dies with managers in the middle--but they are hamstrung by the poor communication from above. Redefining execution as the ability to seize opportunities aligned with strategy while coordinating with other parts of the organization can help managers pinpoint why execution is stalling and focus on the factors that matter most for translating strategy into results.

As established markets become less profitable, companies increasingly need to find ways to create and capture new markets. Despite much investment and commitment, most firms struggle to do this. What, exactly, is getting in their way? The authors of the best-selling book "Blue Ocean Strategy" have spent over a decade exploring that question. They have seen that the trouble lies in managers' mental models--ingrained assumptions and theories about the way the world works. Though these models may work perfectly well in mature markets, they undermine executives' attempts to discover uncontested new spaces with ample potential (blue oceans) and keep companies firmly anchored in existing spaces where competition is bloody (red oceans). This article describes how to break free of these red ocean traps. To do that, managers need to: (1) Focus on attracting new customers, not pleasing current customers; (2) Worry less about segmentation and more about what different segments have in common; (3) Understand that market creation is not synonymous with either technological innovation or creative destruction; and (4) Stop focusing on premium versus low-cost strategies.

For professional services firms, the only way to address clients' most complex issues is for specialists to work together across the boundaries of their expertise. When they do, their firms earn higher margins, inspire greater client loyalty, and gain a competitive edge. The author's research shows that the more practice groups involved in a client engagement, the greater the average annual revenue the client generates. And the more cross-specialty work professionals engage in, the more work they will subsequently get and the more they'll be able to charge for it. But although the financial benefits to the firm of multidisciplinary collaboration are clear, the benefits to individuals accrue slowly--and the downsides are immediate. The organizational structure, compensation systems, and cultures in many firms favor "rock stars, not the whole band." Moreover, learning to collaborate effectively is difficult. Both individuals and firms can encourage the kind of collaboration that lands high-value client work. Professionals, for instance, can reap the benefits sooner by establishing themselves with an influential colleague who can help them build connections to specialists across the firm. And leaders can take steps to lower the cultural and structural barriers to cross-disciplinary work.

When executed well, annual gatherings of an organization's high-level leaders are worth the effort and expense. But for many companies, the leadership summit is a numbing series of presentations and sessions in which information flows only from the top--and not all that coherently. By applying the appropriate techniques before, during, and after the summit, C-level leaders can seize this rare opportunity to harness the collective knowledge of their frontline executives. Before the summit, it's crucial to clarify roles and responsibilities (a director, who oversees planning and owns the agenda; a design team; a content editor; and so on), define a clear set of objectives for the summit, design the event around those objectives, and prepare attendees for productive conversations by giving them reading material in advance. During the event, a variety of low- and high-tech approaches, from color-coded 3 x 5 index cards to instant polls, can capture the thinking of attendees and communicate it upward. And various exercises can help attendees connect in ways that lead to genuine collaboration after the event. After the summit, organizers should track commitments made during the event and equip attendees with talking points and pithy presentations that help them discuss with their employees what happened at the summit and how to turn the results into action.

Achieving best practices in corporate governance has been hindered, the author writes, by a patchwork system of regulation, a mix of public and private policy makers, and no accepted metric for determining what constitutes success. He proposes Corporate Governance 2.0: not quite a clean-sheet redesign, but a back-to-basics reconceptualization built on three core principles. They are: (1) Boards should have the right to manage the company for the long term. This would mean an end to earnings guidance, a variation on the staggered board, and exclusive forum provisions. (2) Boards should install mechanisms to ensure the best possible people in the boardroom. This would require meaningful director evaluations and a consideration of shareholder proxy access. (3) Boards should give shareholders an orderly voice. Instead of defending the corporate bastion at all costs, directors should guarantee a reasonable process whereby shareholders get to decide.

Sales reps have long been taught to seek out a senior executive who can single-handedly approve a deal, but unilateral decision makers are now rare. Today most purchases are made by groups of individuals, all with different roles and priorities, and all with veto power. As a result, getting deals done has become an increasingly painful and protracted process. But innovative suppliers are finding ways to drive consensus in diverse buying groups, say three authors from CEB, which has been researching the impact of this buying shift. Those suppliers prime group members to find common ground by creating shared language and perspectives around problems and solutions. They identify internal champions for their offerings at the customers' companies; motivate those individuals to become active advocates; and arm them with the skills and materials needed to win over fellow decision makers. Accomplishing all this requires some novel approaches, such as social-media mining, customer "learning tours," and inventive diagnostic tools. It also calls for a new level of collaboration between sales and marketing. But given today's pressure to drive consensus, suppliers that don't align the two functions as a single team will be trounced by those who do.

Four types of psychological distance can separate you from your goals: (1) social (between yourself and other people); (2) temporal (between the present and the future); (3) spatial (between your physical location and faraway places); and (4) experiential (between imagining something and experiencing it). Success depends on bridging those gaps. For example, skillful negotiation requires considering the interests of other parties as well as your own (which narrows social distance). Effective time management means accurately predicting which commitments will be most pressing in the future (temporal distance). Inspired leadership involves not only appreciating and incorporating different people's goals, but also anticipating how they will change over time (social distance and temporal distance). And profitable product management means using imperfect information to figure out how to meet distant customers' changing needs (social, temporal, spatial, and experiential distance). None of this is easy to do. But, relying on more than 15 years of academic research and her own work with students and executives, the author has found that leaders who recognize and understand the effects of psychological distance and then use two specific strategies to reduce (or sometimes increase) it can improve their outcomes in many professional scenarios.

The actor, producer, director, and mother talks about adjusting to fame at a young age, developing rapport with other actors, how her industry has changed, and the foundation she has established to teach resilience and mindfulness to children.

The past year has brought a rush of interest among academics in how sensory inputs influence consumers on deep, non-conscious levels--and companies are starting to put these findings to use. One example is Dunkin' Donuts: In a highly successful campaign in Korea, an atomizer released a coffee aroma in public buses whenever the company jingle was played, increasing visits and sales in nearby stores. Another is BMW, which mikes engine sounds through a car's audio system in order to enhance the sporty feel. Every consumer company, experts say, should be thinking about how to use the senses to create and intensify brand personalities. This reprint contains two additional Idea Watch articles. "Not As Global As We Think" provides visual depictions of "connectedness" on individual country and aggregate levels, revealing that the world is not flat after all. "Why a Dutiful Spouse Can Boost Your Career" describes a new study showing that employment outcomes--income, number of promotions, and job satisfaction--are boosted by having a conscientious spouse.

A new series of experiments reveals that empathy tends to make marketers more egocentric.

Today we use far fewer materials to get the same things done--manufacture a PC, for instance, or produce a ton of steel. But with that efficiency has come an exponential increase in overall demand for resources.

"Thin political markets" are the processes through which some of the most complex and critical institutions of our capitalist system are determined-e.g., our accounting-standards infrastructure. In thin political markets, corporate managers are largely unopposed-because of their own expertise and the general public's low awareness of the issues. This enables managers to structure the "rules of the game" in self-serving ways. The result is a structural flaw in the determination of critical institutions of our capitalist system, which, if ignored, can undermine the legitimacy of the system. This article provides some ideas on how to fix the problem.

The past few decades have seen an increasing role for the private sector in poverty alleviation. The variety of names used to describe these initiatives-corporate social responsibility, social enterprise, base of the pyramid, impact investing, not-for-loss business, and corporate philanthropy-obscures the similarity among them: they all sacrifice economic profits in return for social impact. This article uses economic theory to develop a cost-based taxonomy of private sector initiatives in poverty alleviation by taking into consideration which costs are being subsidized. This highlights the incentive effects, allowing the donor to increase the efficiency and impact of the initiative.

Can innovation and entrepreneurship stimulate economic growth in diverse communities, or is it only effective in a few unique places like Silicon Valley? This article identifies the salient components, behaviors, and linkages that characterize Silicon Valley and explores how these characteristics apply in a diverse selection of economic communities in Europe, Asia, and Latin America. It focuses on the role institutions-such as governments, universities, major corporations, and NGOs-play in shaping such communities. It provides insights for government policy makers on how to enhance their region's innovation potential, and offers strategies for entrepreneurs and venture investors as to how to leverage the benefits of clusters of innovation, wherever one is located.

When it comes to agility, startups have an edge over large corporations-whereas large corporations sit on resources which startups can only dream of. The combination of entrepreneurial activity with corporate ability seems like a perfect match, but often goes unused. This article examines how large corporations from the tech industry have begun to tap into entrepreneurial innovation from startups. Prominent examples are used to inductively derive a set of four models commonly used to engage with startups and to describe their characteristics, challenges, and rationales. While corporate equity is the key mechanism behind more established models, newer approaches replace equity with shared technology to connect both worlds with fewer organizational costs. This article presents a typology of corporate mechanisms to engage with startups that balance speed and agility against control and strategic direction, to map the ways companies can bridge the gap between themselves and the startup world.

Can a one-time incentive induce workers to commit to short- and long-term training to remain competitively employable? A one-time offer of $60 was given to workers who finished two courses within 4 months. It had a remarkable, positive effect on training participation during this period, and a sustained effect beyond it, but this only occurred when two psychological techniques were used to increase commitment to training and to shape perceptions of the incentive. These results have practical implications for companies and governmental organizations wanting well-trained workforces to sustain growth in competitive environments.