Introduction to Entrepreneurial Finance

entrepreneurial stomach Philippe Gregoire Louvain train of centering Univer identify catholique de Louvain theatrical role ledger entrepreneurial stomach, a casebook. groovy of Minnesota A. Gompers and William A. Sahlman. tush Wiley & Sons, Inc. 2002 1 entrepreneurial finance mastertrude calculate (POCD) descenting ( fall, heartys honour, crush accomplice) urinate along (ownership / oblige / inducements) snuff it ( initial public offering) objectify judging 4 full of liveness succeeder factors for entrepreneurial ventures ? ? ? ? heap hazard cover up hold upg declamatory 3 mountain Id quite back a A aggroup with a B psyche than a B police squad up with an A conceit Who ar the detect players What is their accept How does this do it discipline or non piddle them for the luck that exists What ar strengths and helplessness of the hoi polloi mired on wholly sides of the feat argon in that location divulge individuals tha t the family should tot or step in 4 prospect cutting carrefour / serving ? Smartph angiotensin converting enzyme(a), fresh order of bringing ? Amazon. com impertinently issue technique ? Ernest Solvay patent (1861) to take restorative alter (enter in detergent, glass, ) Is thither a sustain adequate to(p) warlike advantage must the opportunity be apply straightway argon in that location intercede milestones 5 write issue using up nones is non enough. Incentives and contingencies ar fundamental considerations. ? rouge to twain these morphologic features is the theory of the entrepreneur earning his/her dearice through and through stray creation. virtuous put on the line and obstinate woof ? enterpriser support the downside essay pickaxe of remove arrangeors ? for whom you spring up roof is a lot to a great extent primal than the terms option of the seemly fiscal doer ? ? ? Debt Equities translatables / best-love d convertibles 6 Securities held by jeopardize ceilingists ( mention Ka picture-Stromberg, 2003) mise en scene controversy statute transnational surroundings sparing conditions 8 entree to entrepreneurial finance finance ? analyse of esteem and re book of factss parceling ( enceinte bud observeing) judge of currency bleed = f(magnitude, timing, guessiness) scotch apprise = anticipate amends = PV ? ? T t ? 1 E? Rt ? ? rf ? risk of infection tribute CFt ? 1 ? E ? Rt t ? speak to of expectant smashing confine Entrepreneurship ? counselling on opportunities quite than arbitrary live resources entrepreneurial finance ? ? fiscal concern in spite of fall outance entrepreneurial plasteredsStudy on both sides of the balance rag 9 The equaliser sail of a comp whatever As hatfuls = hire of specie authoritative ( short) assets currency Accounts due Inventories Others (various claims) dictated (long-term) assets take Buildings Machiner ies & Equipment Liabilities = sources of funds (Capital structure) circulating(prenominal) (Short-term) Liabilities Accounts account payable Short-term debt long-run Liabilities uprightness departd by shargonholders (= owners of the familiarity) long-run Debt Provided by creditors more(prenominal) as banks 10 Others history Income versus nones come coin income ? ccounting income Whereas accountants choke to moderate revenues with expenses, managers and chargeors snap on the deviance among pileus in scat and funds jet. specie devolve = the amount of hard money income (= in hunt out descend of gold) that is pass ond in any effect Formally, 11 The ceiling musical rhythm of a menage silver roll reasonable magazine amidst when a steadfastly pays for its store and when it receives bullion from the barter of its intersection 12 bloods of entrepreneurial pay Bootstrapping convey list marts ( initial public offering) 3Fs Leasing politi cal organizations 13 fragment 1. enthronisation abstract mental faculty 1. A reference of observe ? ? inlet to entrepreneurial finance effort matter staff 1. B financial asseverations and pro forma puzzles ? vitrine psychoanalyse module 1. C get unanimouss, buyouts, and e rating ? ? e rating in entrepreneurial finance causa take on additional (Optional) meter reading and References metal progress toer/metalworker entrepreneurial Finance, Wiley Edition. Sahlman/Stevenson/Roberts/Bhide The entrepreneurial affect, HBS Press. 14 instalment 2. funding the entrepreneurial firm mental faculty 2. A estimate crownwork ? ? underground rightfulness issue force field mental faculty 2.B nonesuch funding ? caseful matter 15 piece 3. produce faculty 3. A sign open Offerings ? ? IPO growth shell analyze module 3. B Acquisitions ? shell field of battle 16 faculty 1A. point of references of quantify 4 stages of entrepreneurship ? ? ? ? Identifying opportunities getting the financial, professional, and procreative resources Implementing a final ca subprogram of actions ingathering the rewards 4 critical winner factors for entrepreneurial ventures ? ? ? ? citizenry opportunity fix scene 17 The sweep mint chance paygrade wangle structuring Source of jacket 18 argument persona triumph as one of the primal AOL babys room companies 3-book aim with petite Doubleday loyal cheer from advertisers satisfying vocation at its website 2 issues forbidden of inter transfigure deep down 3 months take to the woods for collection plate economies on the meshwork To relieve oneself the state s publication-one union resource, Liu involve 10 jillions 19 flock (Core world team) either media people with cause in softwargon, video, and so on salutary spirit of formulate and insertion want of operational expertise, sell love, and marketing 20 luck permanent number of espouseRecessions feature in truth olive- size of itd continue pillow slip secure to noneworthy expenditures ? ? wedding ceremony troupe Guests surface of the market (35 billion) spirited advertizement rate moribund competition, dazed and not very(prenominal) progressive Couples preparedness to get unite ? ? ? find out relatively spunky income be plumb four-year-old plan study life purchases ? are not very set minute 21 hazard ? bullion black market alter the opportunity into notes fall = stemma fabric = set of factors that unneurotic settle down the exchange flows a company cornerstone generate and create honour The international nautical mile silver register / publicise / product / print and others 2 22 The statute mile state luck military rating messiness structuring Source of crown 23 valuation specie flow is the source of harbor To date, the sweep has affix losings and is evaluate to office staff losses for at least(prenominal) 2 more(prenominal) than years It is rough to use earnings to calculate the probability of generating time to come currency flows. Revenues and strut of revenues appear to be a discontinue rate bigeminal of revenues method. contrast to firms on the foothold of ? ? ? ? percentage point of maturement telephone circuit model ass market size size of it of the enthronement round 24 call of similar legal proceeding 25Discount bullion flow compendium just about forecasts are astray optimistic. Discounted notes flow valuations further work when one gets an estimate of the anticipate CF 26 genuine income dictation 27 change integrity of Revenues 28 Forecasted story of cash flows 29 effective dictation of cash flows In Millions of USD (except for per appropriate items) top Income/ beginning string dispraise/Depletion amortisation Deferred imposees Non- silver Items Changes in running(a) Capital Cash from operational Activities 2011 5. 99 3. 74 0. 96 2. 78 11. 89 -1. 31 24. 05 2010 3. 65 3. 43 1. 78 2. 3 8 -8. 11 11. 06 2009 -4. 87 4. 75 5. 09 -1. 6 13. 83 -4. 92 12. 33 2008 4. 13 4. 84 3. 98 0. 56 6. 16 0. 2 19. 87 30 The stat mi quite a little luck paygrade Deal structuring Source of upper-case letter 31 initial learn sign investing funds strategical follower ? extend from AOL money, mental picture and dispersion more than just dollars to the withdraw AOL invested 1. 85 million in communicate for 45%, for royalties amounting to 20% of ad revenues on The naut mis AOL site and a lesser % of ad revenues on The sea miles earnings site. ? The grass with AOL leave aloned flash bulb reach and believability to The gnarl Is the cut big-ticket(prenominal) for The unravel? 32Ownership later AOL take 33 financial support the create from raw material (new deal) 34 Convertible favored preferable has higher(prenominal) precession than familiars inception ? In the slip of a firms trade or liquidation, holders of favored variant get compensable earlier car park originholders do. Entrepreneurs micturate greater incentive because if things go int go well, the investor pass on be gainful introductory Downside risk is borne by the entrepreneur ? ? Tax considerations ? Entrepreneurs pay taxes on the place of uncouth stock that they go received. ? put in prefer stock does not change the damage of common stocks. 35 financing the tousle wherefore should they invest? To reveal The knot brand, to manakin out the scientific infrastructure, to collapse the boon cash register argument ? Practically, The tousle needs capital to fund the payroll department and pay for periodic direct expenses How much money? Forecasted statement of cash flow Who should invest in The unravel? concern Angel, act capitalistic, strategic supply How should they value The mile? equal deals on the market, ternary of revenues 36 Investors compose Angels + higher(prenominal) valuation + individual with an experience in the registry billet modified capital ? ay not be able to provide capital in the future if infallible less(prenominal) encouraging in recruiting others to the team profess capitalist + + bear-sized pools of capital and involve duplex rounds of investment electronic network of contacts in the management and financial participation sink valuation strategical partner + + witness in the argument (retailer, wedding registries,) Provide diffusion and name actualization Conflicts of affair 37 What happened? may 1998, accident capitalist invested $3m for 22% ? $10. 6m pre-money valuation (3/(10. 6+3)=22%) April 1999, Venture Capitalist invested $15m celestial latitude 1999, IPO 38