PART 1: Let’s Talk! (30 minutes)

Please discuss the following open questions.

Important: There are no right or wrong answers to each of these questions! 

The aim of this task is to give you a platform to share and compare your outlook at entrepreneurship and your life philosophy.

1. Entrepreneurship.

What does “entrepreneurship” mean to you?

Nature or nurture: Do you become an entrepreneur, or are you born as one?

When does entrepreneurship start? Is solopreneurship also entrepreneurship?

2. Team building.

What do you believe is more important for building a successful startup: finding a co-founder who complements your background and skills, or who has complimentary personality and motivation?

3. Luck.

Do you believe in luck?

If so, can you foster luck and how can you do it?

4. How the world works.

What is the most important currency in the world and why?

 PART 2: Business Case Studies (30 minutes)

Please read the following three famous stories in modern entrepreneurship. By each case, please discuss the following questions:

1. What were the main inflection (turning) points in this story?

2. What were the main factors for success or failure?

3. If you would have been in the founders’ shoes, what would you do differently?

After discussing every case, you can compare your answers with some suggestions that I made (attached under separate link). 

Important: You can use Google and any other form of searching additional information to help yourself answer the questions.

AIRBNB Story

Airbnb took its beginning in 2007 from the initiative of Brian Chesky and Joe Gebbia. They noticed that every time there is a conference in San Francisco, all hotels are booked, and decided to offer people the opportunity to sleep on inflatable mattresses in their living room. They soon got their first 3 visitors. 

Soon after that, a Harvard graduate Nathan Blecharczyk joined them as a technical assistance. They started traveling from conference to conference throughout the country, making deals with the local flat owners, and offering their space for rental. They sold a few spots every time, but it wasn’t nearly enough to break even. 

In 2009, they were still scrambling and looked for any opportunity to earn money — including selling cereal next to lodging opportunities at the Democratic National Convention.

In the end, they met Paul Graham, the founder of Y Combinator, who accepted them for the 3-month incubation program, which ended with demo day and 600,000 dollars seed investment from Sequoia Capital.

Then, they started talking to people who were the hosts and who wreathe guests. They discovered that many pictures made by the flat owners were terrible. They started sending professional photographers to the locations and quickly noticed that they locations would be picked 2-3 times more often than the others. At that point, they had income of about 400 dollars a week and growing. 

The other day, Benny Boy Manolo’s drummer rented an entire house, which gave the founders the idea that offering the entire properties is the key to success. This was the breaking point which allowed them to collect 7.2 million dollars in round A in 2010 from Sequoia Capital. 

In 2011, they hit 1 million bookings and raised 112 million dollars in round B from Andreessen Horowitz at the valuation of 1 billion dollars, becoming a unicorn. In 2012, they sold more nights than Hilton! In 2013, they raised 200 million in round C from Founder’s Fund and Peter Thiel and in 2014, 500 million in round D at 10 billion dollar valuation. They had 10 million bookings per year at that point. 

Meanwhile, they noted a little scandal that became public and widely discussed in the media: one of the apartment owners found their apartment entirely empty after the guest moved out. They decided to help the lady, despite the lack of written agreement in that respect.

In 2015, they raised 1.5 billion in series E from General Atlantic Hillhouse Capital at 25 billion dollars valuation and in 2016, 850 million from Capital G (Google) at 30 billion valuation — which surpassed the valuation of Hilton, valued at 28 billion dollars at a time. They became second largest American VC-backed company after Uber.

In 2017, they used some of their funds to acquire a high-end Canadian company listing villas around the globe for 200 million dollars.

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Please find some suggestions for the answers HERE.

GROUPON Story

Groupon was established in 2008 by a young hipster, Andrew Mason who invested leftover money from his previously failed business. “Groupon” is a combination of words “group” and “coupon.” 

The first offer by Groupon was half-priced pizzas delivered from the pizza guy who was their neighbor in Chicago. The business soon took off and they raised 30 million dollars in December 2009 (Series B). In April 2010, they received 135 million dollars.

From Chicago, they expanded to other cities and achieved an amazing traction. They were quickly burning money and building a massive database of subscribers, expanding from city to city. 

In 2010, Google concluded that Groupon’s business model well composed with their search engine and offered to buy Groupon for 6 billion dollars (before their second birthday!). They turned down the offer and announced that they would soon go public at NASDAQ at the valuation of 11.2 billion dollars. 

Right before announcing the IPO, it turned out that Groupon had some major problems with accountancy. Instead of over 700 million in sales, they only got 300 million in sales. They also had issues with keeping their senior executives in the company.

Despite this issue, they cleared their image and on December 4th, 2011 they went public, raising 700 million dollars. On the day of the IPO, they reached the valuation of 12.7 billion dollars.

The problems was that once you go for an IPO, you are transparent and obliged to release quarterly earnings reports to public. 

It soon became apparent that clients were tired with Groupon mailing them with offers. Many of them only booked one of two Groupons, and then started trading Groupon notifications as spam and unsubscribed from the mailing list. 

The retention of merchants was also a problem. Groupon was really picky about the options of deals they would agree on, and merchants were tired with it. They also kept rising their cut from the deals toward about 50%, depending on the vendor. 

Within one year from the day of the IPO, Groupon’s stock price dropped by 85% and soon after that, Andrew Mason was fired by the board. The new executive team took over and that allowed Groupon to increase valuation for a bit in early 2014, but since then, it gradually decreased again.

In 2015, Groupon bought LivingSocial, a dying online group coupon company previously backed by Amazon. At that point, Groupon was still profitable but worth 1/3 of what Google intended to pay for it back in the day. 

Today, Groupon is worth less than 350 million dollars. In August 2022, the company laid off over 500 employees — 15% of its ~3,500-person headcount.

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Please find some suggestions for the answers HERE.

FYRE FESTIVAL Story

The festival was founded in 2017 by a young entrepreneur (often considered a con artist as of today), Billy McFarland, together with the rapper Ja Rule as a way to promote the talent booking app Fyre by Fyre Media. The idea met with enthusiasm from investors and the project was launched.

The event was scheduled for two weekends in April 2017, at the same time as the biggest event of the year, the National Regata competition on the island of Great Exuma.

McFarland was targeting the generation of Millenials who enjoy buying experiences rather than just services. Therefore, the organizers put a special focus on promoting the event as a new, hot event comparable to Coachella, Burning Man, and other phenomenal, unique festivals. 

Therefore, they engaged the best media advertising company, Fuck Jerry, and engaged the top celebrities and models to promote the event, including Kendall Jenner, Bella Hadid, Hailey Baldwin, and Emily Ratajkowski. They paid Kendall Jenner alone 250,000$ for posting a single Instagram post presenting the Fyre logo.

This marketing strategy worked out as the tickets were sold out within the first 24 hours which is a great success for the first-time event organizers.

Originally, the event was advertised as taking place on an island that belonged to Pablo Escobar in the past. However, the organizers broke the terms of the agreement and mentioned Pablo Escobar’s name in the TV ads, and lost the deal.

After a hectic search for a new location, the final spot for the festival was booked just a few weeks before the event, at the Great Exuma in the Bahamas. The place was not a secluded island as advertised in the TV ads, but the organizers kept it a secret and retouched the maps of the place so that the remaining part of the Great Exuma was not visible.

Since Great Exuma does not have any facilities such as running water, toilets, or Internet, the festival was a logistic challenge right off the bat. The money was burned quickly. However, as a talented fundraiser, McFarland was able to bring in new investors. He was also supposed for all the accountancy for the festival and didn’t share information with his team members. 

It soon became apparent that the organizers were running out of cash. They stopped paying local workers and drastically reduced the budget dedicated to catering during the event. They also exchanged transport of participants with propeller planes promised in the TV ads with rented, seasoned Boeings 787. They also exchanged luxurious villas promised in the TV ads with leftover tents abandoned after hurricane Katharina. 

In the end, the participants indeed arrived at the island, only to find out that there is no food on the island, and the tents can only host one in every three participants. In the end, they had to call off the festival and organize rescue transport for the frustrated participants back to the mainland. After the event, McFarland was sued for wire fraud and sentenced to 6 years in federal prison. 

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Please find some suggestions for the answers HERE.