1. What are various sources of equity investment?

• Public stock: Buying/selling stocks among publicly traded companies (NYSE/NASDAQ)
• Private equity:
• Venture capital- equity investments made for launch or early expansion of business
• Leverage buyout- strategy of making equity investments as part of transaction in which the company gains business assets from current share holders
• Growth Capital- refers to the equity investments in mature companies looking for capital to expand operations, enter new markets, or finance a major acquisition without change of control of the business
• Distressed/Special situations- investments in equity or debt securities of a distressed company or company where value can be unlocked resulting from a one time oppotunity
• Mezzanine capital- equity securities that often represent the most junior portion of a companies capital structure that is senior to the companies common equity

3. What guidelines should entrepreneurs follow when they are selecting a venture capitalist?

1. scrutinize your business with a critical eye- can the business give returns the VCs demands?
2. Beef up management- hire the right people
3. Keep a high profile so the VCs will visit
4. Target the search- look for firms that specialize in industry and size of investment
5. Keep a lookout- look for smaller VC firms
6. investigate possible venture partners- figure out needs

5. What are the differences between a single-hit and a home-run business?

• A home-run business is basically a business that invests more and more capital over a long period (7 or 8 years) in hopes of high returns. This usually yields poor results and can hurt the investor and business owner.
• Whereas a single-hit business seeks a more capital efficient way doing things. Theyll turn to virtual businesses and receive higher returns on early stage funding, building the essential assets needed within 2 to 3 years.

6. What are the four key factors that a banker seeks before providing a corporate loan?

-The 4 Cs of lending:

• Character- talent, reliability and honesty
• Cash Flow- to cover debt, service must be available throughout term of obligation
• Collateral- to support at least part of the loan should the company be unable to meet its obligations
• Contribution- contributions by the entrepreneur towards the funding requirements

1. What sources of funding are available to entrepreneurs at the early stages of the company?

• Self-Funding: use personal resources to launch venture
• Moonlighting & part time consulting: founder is working a full time job to support self and business
• Bootstraping: being cost conscious (example; no/low rent, renting, used equipment, outsourcing)
• Family & Friends: not as worried about quick profits as professional investors are
• Micro-equity and Micro-loans: trade small ownership for substanable cash and connections to loaners network of entrepreneurs
• Bank loans: Borrow money, payed back with interest
• Factoring & supplier funding: Receive funds from a private lender, you secure those funds using purchase orders as security loans. Charge high interest.

2. what are “virtual” companies? What tools help them function? Why are they of interest to an entrepreneur?

• A virtual company is one that has no offices, no communication costs, low legal costs and so forth. They use providers such as Skype for video conferencing, Basecamp for team projects, and other sophisticated, free or low pay, tools to help function. Theyre a good resource to entrepreneurs without taking on long term liabilities.

3. Describe seven techniques for bootstraping that you could use if you started a company.

• No or Low Rent
• Cooperative Purchases
• Outsourcing
• Bartering for Goods and Services
• Renting or Leasing Equipment
• Used Equipment
• Trading Intellectual Property Rights

4. Why is bootstraping important for (a) closely held companies and (b) early stage, high-growth companies seeking equity investors?

• (a) can reduce costs from operations and overhead allowing the entrepreneur to become more proficient with their companies costs
• (b) by becoming more efficient and cost conscious the entrepreneur will be put in a stronger position to qualify for additional fundings from investors

5. What is meant by factoring of purchase orders?

• Using the purchase orders from customer to secure funding from private lenders. They receive the money from the customer and you get whats remaining after fees and interest has been applied.

6. How can suppliers help in providing working capital?

• Suppliers help because they give you a line of credit for your purchase orders. The mini case example showed that the company had a 150 day pay cycle allowing them to receive payments from customers before paying the supplier. They were able to use the suppliers cash to fund the company essentially.

1.  What financial measurements should be prepared to measure company procedures?

There are 3 methods of measuring financial performance:

• Measuring sales volume
• Measuring profits
• Measuring cash generated

2. What are the categories and steps in preparing a financial budget?

• The 11 categories to preparing a financial budget are: sales, cost of goods sold, gross profit, operating expenses, operating profits/loss, other income and expenses, pretax income, income taxes, net income, EBIT, EBITDA.

4. Describe the break even technique in the decision-making model to determine profit and loss.

• It a mathematical formula used to help determine whether a certain volume of output will result in profit or loss. Break-even occurs when the total revenue is equal to the total costs. P(x) = F + V(x)

6. Why is building a corporate culture to match a companys mission important?

• Its important because companies that do build a corporate culture to match a companys mission perform on a much higher scale and are often times much more successful. The book refers to Michael Dell as an example. He succeeded where others did not because he was able to lead his organization on a mission where everyone was involved and clear concise goals were established.

7. Select six leadership attributes that you feel are the most important when building a strong culture. Why?

• Freedom:  Youre not forcing too much control over the individual/ suffocating them
• Empowerment: Lets the employee know we can trust in their skills to handle issues
• Honesty: An honest and open environment builds confidence in the work environment
• Support: Should know that their ideas will never go unnoticed/ unsupported
• Alignment: Having clear goals makes it easier foe the employee to follow the same goals
• Teams: Should never feel as if they have to accomplish a difficult task(s) on their own

8. Name three important factors that you must take into account when hiring key people.

• Matching Values
• Check references
• Hire professional recruiter for key positions

1.  Name three factors that impact how a new technological innovation fits existing markets conditions.

• Must follow appropriate government regulations
• Enters more easily if it is compatible with existing products and standards
• Adheres to its position in the hype cycle

3. Name two factors that impact the “market window of opportunity”

•  Knowing where you are on the hype cycle as you promote your innovation
• Experimenting with early adopters as you polish your marketing plan, it allows for testing of the market and planning ahead

5. Name a product that is currently being used by early adopters only?

• The Oculus Rift, its projects virtual reality gaming