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MAN 320F - Test 3-FINAL Questions and Answers
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MAN 320F - Test 3/FINAL Questions and AnswersStart up companies usually - Answer -FAIL
What are the 3 top sources of start up funding? - Answer -Venture Capital, State Funds,
Angel Investors
What is the "napkin idea" stage of investment? - Answer -This means that it is the earliest stage of investment possible, the seed stage
The early stage of investment means that - Answer -the early stage of investment means that it may be early on in a company but it still be making some revenue
What is important to note about the seed/early stage? - Answer --this is the preferred investment/company stage
-means invest at the very beginning
Angel investors like to invest "in their backyard", what does this mean? - Answer -this means that they like to invest on things that they can easily check on and have a close look at when need be
What percentage of time do investors think they are not getting a good deal? - Answer -
57% of the time
What is an important idea about investment? - Answer -its not what you start with, its what you end with
What is the track record in investments? - Answer -40% of deals fail, 40% of deals do ok but nothing great, and 20% of deals make up for the other 80% that don't do that well
Where do I get the money to invest? - Answer --pension funds
-insurance companies
-endowments
-foundations
-high net worth individuals What are equity investments made to fund? - Answer -Equity investments are made to fund the launch, early development, or expansion of a young company
Offsetting the high risk, investors _____ - Answer -have the expectation of higher than average return on investment
Who will venture capitalist fund? - Answer -an entrepreneur
An entrepreneur is someone who - Answer -assumes the financial risk of beginning and managing a new business
What does a "perfect" investment opportunity look like? - Answer --an experienced/proven management team
-a great idea/concept that is proprietary
-something that cannot be duplicated
-a product or service that 7 billion humans will buy
-a great rate of return on investment -intellectual property that is protected by patents or trademarks
A perfect investment does not - Answer -exist
What are the 3 laws of business? - Answer -1- it will always cost more than you thought it would 2- It will always take longer than you anticipated
3- things change continuously
What really matters in business and investment? - Answer -MARKET OPPORTUNITY
How do you find the right venture capital?? - Answer --need to talk to allied professionals such as lawyers, accountants, and entrepreneurs (its not just what you know but WHO you know)
-find the venture capitalist who have invested or specialized in your industry
-many large corporations have dedicated VC funds to invest in companies strategic to their core business
What do we need to prepare for the VC? - Answer --an honest business plan with risks, challenges, opportunities, and issues
-what key members you need to hire and where they will come from
-clear strategic goals and what you plan on doing to achieve those goals
-potential customers
-a path towards liquidity
companies are bought, NOT - Answer -sold
What do you do to "get the check"? - Answer --competitive deals get funded because VC's don't want to miss out on what their colleagues view as a great bet -probably giving up majority of the stock
-follow their advice (golden rule)
-By the time of IPO (initial public offering/they can sell their stock to the public now) founders own 20%
-Be ready for the fast lane
What is the golden rule when it comes to investors? - Answer -Take their money, follow their rules
Things to know about VC - Answer --when you make a promise, they will hold you to it and penalties will be stiff
-Most VC's want to make at least 10X their money
-As an entrepreneur remember that the name of the game is not what you start with but what you end with
-VC's will not make emotional decisions (look at the first bullet)
You can lose your money only once but can make it a thousand times
What is the worst thing to happen if you fail in an investment? - Answer -bankruptcy
What are the 6 mistakes negotiators make - Answer -1) Neglecting the other side's problem
2) letting price bulldoze other interests
3) letting positions drive out interests
4) Searching too hard for common ground
5) Neglecting BATNA (best alternative to a negotiated agreement)
6) Failed to correct for skewed vision
Mistake 1 - Neglecting the other side's problem - Answer -- you need to understand the problem from the other side's perspective
-agreement requires understanding and addressing your counterpart's problem as a means to solving your own
Mistake 2 - letting price bulldoze other interests - Answer -- price is rarely the only important factor, don't focus exclusively on it -most deals are 50% emotion and 50 % economics
- you need to try to get compensation elsewhere and let price go when it comes down to
the wire
Mistake 3 - Letting positions drive out interests - Answer --With joint problem solving we can better meet both sets of interests and create something that will be of value to both parties
Mistake 4 - searching too hard for common ground - Answer --sometimes differences can open up possibilities for joint gains and working too hard to find common ground may be detrimental when there is not much in common
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