MGT3960 Entrepreneurship Management Fall 2015

"There's a way to do it better—find it."— Thomas Edison

Equity Financing

What are various sources of equity investment?

Public Stock:
Sale of stock to raise funds to grow and expand. Usually sold on the NASDAQ.

Private Equity:
Venture Capital: Capital provided to small businesses and start ups to help with their growth.
Leveraged Buyout: Acquiring a company by borrowing moneys in forms such as loans.
Growth Capital: The increase in assets of a company.
Special Situations: a circumstance where a company can be valued higher do to special incident.
Mezzanine Capital: A combination of debt and equity financing used to expand already existing businesses.

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

Guidelines for  venture capitalist:
1. Scrutinize your business with a critical eye: Create financial projections
2. Beef up management: Hire people that can help with fixing the debt
3. Keep a high profile so the VCs will visit: Make sure the company always looks good
4. Target the search: look for a company that is a pro in what they sell.
5. Keep a lookout: always look for VC to invest in
6. Investigate possible venture partners: making sure you understand everything that is needed to have a efficient meeting

What are the differences between a single-hit and a home-run business?
A single hit business is one that does not have a business model or product that lasts long in the market, kind of like a one hit wonder. Ex: cupcakes (Crumbs)

home-run business, is one that has a firm basis and continues to grow and mold itself to what people need and want. Ex: Beats by Dre headphones

What are the four key factors that a banker seeks before providing a corporate loan?
The four Cs of lending are:
Characters: Is the business reliable enough to pay back the loan.
Cash Flow: Pay back the debt meeting the terms.
Collateral: Putting up something to guarantee loan can be payed.
Contribution: Putting a down payment and paying back the loan.

Author: Ria Zouroudis

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