Summary of Entrepreneurial Finance of Leach/Melicher Sixth Edition. Chapters are chosen on the basis of the course Entrepreneurial Finance at the University of Twente. Moreover, the lenght of a chapter is chosen on the basis importance and lenght.
Inhoud
Chapter 1: Introduction to Finance for Entrepreneurs ........................................................................... 5
Section 1.1 The Entrepreneurial Process ............................................................................................ 5
Section 1.2 Entrepreneurship Fundamentals ...................................................................................... 5
Section 1.2.1 Entrepreneurial Traits or characteristics ................................................................... 5
Section 1.2.2. Opportunities exist but not without risks ................................................................ 5
Section 1.3 Sources of Entrepreneurial Opportunities ....................................................................... 5
Section 1.3.1 Societal Changes ........................................................................................................ 6
Section 1.3.2 Demographic Changes ............................................................................................... 6
Section 1.3.3 Technological Changes .............................................................................................. 6
Section 1.3.4 Emerging Economies and Global Changes ................................................................ 6
Section 1.3.5 Crises and Bubbles ..................................................................................................... 6
Section 1.3.6 Disruptive Innovation ................................................................................................ 6
Section 1.4 Principles of Entrepreneurial Finance .............................................................................. 7
Section 1.4.1. Real, Human, and financial capital must be rented from owners ............................ 7
Section 1.4.2 Risk and expected reward go hand in hand .............................................................. 7
Section 1.4.3. While accounting is the language of business, cash is the currency ........................ 7
Section 1.4.4 New venture financing involves search, negotiation, and privacy ............................ 7
Section 1.4.5. A venture’s financial objective is to increase value.................................................. 7
Section 1.4.6 It is dangerous to assume that people act against their own self-interests ............. 8
Section 1.4.7. Venture character and reputation can be assets or liabilities. ................................ 8
Section 1.5. Role of Entrepreneurial Finance ...................................................................................... 8
Section 1.6 The Successful Venture Life Cycle .................................................................................... 8
Section 1.6.1 Development Stage ................................................................................................... 8
Section 1.6.2 Start-up Stage ............................................................................................................ 8
Section 1.6.3. Survival Stage............................................................................................................ 8
Section 1.6.4. Rapid-Growth Stage.................................................................................................. 9
Section 1.6.5. Early-maturity Stage ................................................................................................. 9
Section 1.7 Financing through the venture Life Cycle ......................................................................... 9
Section 1.7.1 Seed Financing ........................................................................................................... 9
Section 1.7.2. Start-up Financing..................................................................................................... 9
Section 1.7.3. First-Round Financing ............................................................................................. 10
Section 1.7.4. Second-Round Financing ........................................................................................ 10
Section 1.7.5. Mezzanine Financing .............................................................................................. 10
Section 1.7.6. Liquidity-Stage Financing ........................................................................................ 10
1
, Section 1.7.7. Seasoned Financing ................................................................................................ 10
Chapter 2: Developing the Business Idea .............................................................................................. 11
Section 2.1 Process for Identifying Business Opportunities.............................................................. 11
Section 2.2. To be successful, you must have a sound business model............................................ 11
Section 2.2.1. Generating Revenues ............................................................................................. 11
Section 2.2.2. Make Profit ............................................................................................................. 11
Section 2.2.3. Produce Free Cash Flow ......................................................................................... 11
Section 2.3 till 2.5 are not important ................................................................................................ 11
Section 2.6. Screening Venture Opportunities .................................................................................. 12
Section 2.6.1. Qualitative Screening.............................................................................................. 12
Section 2.6.2. Quantitative Screening ........................................................................................... 12
Chapter 7: Types and Costs of Financial Capital.................................................................................... 12
Section 7.1: Implicit and Explicit Financial Capital Costs ................................................................... 12
Section 7.2: Financial Markets .......................................................................................................... 12
Section 7.3 Determining the cost of Debt Capital ............................................................................. 13
Section 7.3.1 Determinants of Market Interest Rates .................................................................. 13
Section 7.3.2. Risk-Free interest rate ............................................................................................ 14
Section 7.3.3. Default Risk Premium ............................................................................................. 14
Section 7.3.4. Liquidity and maturity risk premiums..................................................................... 14
Section 7.4 What is Investment Risk? ............................................................................................... 14
Section 7.4.1. Measuring Risk as dispersion around an average .................................................. 14
Section 7.5 Estimating the Cost of Equity Capital ............................................................................. 15
Section 7.5.1. Cost of Equity Capital for Public Corporations ....................................................... 15
Section 7.6 Weighted Average Cost of Capital .................................................................................. 16
Section 7.6.1 A Life Cycle-Based WACC Example .......................................................................... 16
Chapter 9: Projecting Financial Statements .......................................................................................... 17
Section 9.2 Beyond Survival: Systematic Forecasting ....................................................................... 17
Section 9.2.1 Forecasting Sales for Seasoned Firms ..................................................................... 17
Section 9.2.2. Forecasting sales for early-stage ventures ............................................................. 17
Section 9.3 Estimating Sustainable Sales Growth Rates ................................................................... 18
Section 9.4 Estimating additional financing needed to support growth........................................... 18
Section 9.4.1 The basic additional funds needed equation .......................................................... 18
Section 9.5 Percent-Of-Sales Projected Financial Statements .......................................................... 18
Chapter 10: Valuing Early-Stage Ventures ............................................................................................ 19
Section 10.1 What Is A Venture Worth?’ .......................................................................................... 19
Section 10.2. Basic Mechanics of Valuation: Mixing Vision and Reality ........................................... 19
2
, Section 10.2.1. Present Value Concept ......................................................................................... 19
Section 10.2.2. Divide and Conquer with Discounted Cash Flow.................................................. 19
Section 10.3 Required Versus Surplus Cash ...................................................................................... 20
Section 10.4 Developing the projected financial statements for a DCF valuation........................ 20
Chapter 11: Venture Capital valuation Methods .................................................................................. 20
Section 11.1 Brief Review of Basic Cash Flow-Based Equity Valuations ........................................... 20
Section 11.2 Basic Venture Capital Valuation Method ..................................................................... 20
Chapter 12: Professional Venture Capital ............................................................................................. 21
Section 12.2. Determining (Next) Fund Objectives and Policies ....................................................... 21
Section 12.3. Organizing the New Fund ............................................................................................ 21
Section 12.4. Soliciting Investments in the New Fund ...................................................................... 21
Section 12.5. Obtaining Commitments for a Series of Capital Calls .................................................. 21
Section 12.6. Conducting Due Diligence and Actively Investing ....................................................... 21
Chapter 13: Other Financing Alternatives ............................................................................................. 22
Section 13.1 Business Incubators, Seed Accelerators, and Intermediaries ...................................... 22
Section 13.2. Business Crowdsourcing and Crowdfunding ............................................................... 22
Section 13.3. Commercial and Venture Bank Lending ...................................................................... 22
Section 13.4. Understanding Why You May Not Get Debt Financing ............................................... 23
Section 13.5. Credit Cards ................................................................................................................. 23
Section 13.6. Factoring, Receivables Lending, and Customer Funding ............................................. 23
Chapter 14: Security Structures and Determining Enterprise Values ................................................... 24
Section 14.1. Common Stock or Common Equity ............................................................................. 24
Section 14.2. Preferred Stock or Preferred Equity ............................................................................ 24
Section 14.3. Convertible Debt.......................................................................................................... 24
Section 14.4. Warrants and Options ................................................................................................. 24
Section 14.5. Valuing Ventures with Complex Capital Structures: The Enterprise Method ............. 26
Chapter 15: Harvesting the Business Venture Investment ................................................................... 27
Section 15.1 Venture operating and Financial Decision Revisited .................................................... 27
Section 15.2 Planning an Exit Strategy .............................................................................................. 27
Section 15.3 Valuing the Equity or Valuing the Enterprise ............................................................... 27
Section 15.3.1. Relative Valuation Methods ................................................................................. 27
Section 15.4. Systematic Liquidation ................................................................................................ 27
Section 15.5 Outright Sale ................................................................................................................. 28
Section 15.5.1. Family Members ................................................................................................... 28
Section 15.5.2. Managers .............................................................................................................. 28
Section 15.5.3. Employees ............................................................................................................ 28
Voordelen van het kopen van samenvattingen bij Stuvia op een rij:
Verzekerd van kwaliteit door reviews
Stuvia-klanten hebben meer dan 700.000 samenvattingen beoordeeld. Zo weet je zeker dat je de beste documenten koopt!
Snel en makkelijk kopen
Je betaalt supersnel en eenmalig met iDeal, creditcard of Stuvia-tegoed voor de samenvatting. Zonder lidmaatschap.
Focus op de essentie
Samenvattingen worden geschreven voor en door anderen. Daarom zijn de samenvattingen altijd betrouwbaar en actueel. Zo kom je snel tot de kern!
Veelgestelde vragen
Wat krijg ik als ik dit document koop?
Je krijgt een PDF, die direct beschikbaar is na je aankoop. Het gekochte document is altijd, overal en oneindig toegankelijk via je profiel.
Tevredenheidsgarantie: hoe werkt dat?
Onze tevredenheidsgarantie zorgt ervoor dat je altijd een studiedocument vindt dat goed bij je past. Je vult een formulier in en onze klantenservice regelt de rest.
Van wie koop ik deze samenvatting?
Stuvia is een marktplaats, je koop dit document dus niet van ons, maar van verkoper joboude. Stuvia faciliteert de betaling aan de verkoper.
Zit ik meteen vast aan een abonnement?
Nee, je koopt alleen deze samenvatting voor €6,49. Je zit daarna nergens aan vast.
