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Chapter 18: Figure 18.1

Idealized cash flow diagram for a new enterprise. Chapter 18: Figure 18.1. Sources of Capital Founders Family Friends Small Business Investment Companies (SBIC) Small Business Innovation Research (SBIR) Professional Investors — Angels Venture Capitalists Banks Leasing Companies

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Chapter 18: Figure 18.1

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  1. Idealized cash flow diagram for a new enterprise Chapter 18: Figure 18.1

  2. Sources of Capital • Founders • Family • Friends • Small Business Investment Companies (SBIC) • Small Business Innovation Research (SBIR) • Professional Investors — Angels • Venture Capitalists • Banks • Leasing Companies • Established Companies • Public Stock Offering • Government Grants and Credits • Customer Prepayments • Pension Funds • Insurance Companies Chapter 18: Table 18.3

  3. Four financial steps in building a successful firm. Chapter 18: Figure 18.2

  4. Bootstrap Financing: to start a firm by one’s own efforts and to rely solely on the resources available from oneself, family, and friends. Chapter 18: Bootstrap Financing

  5. Advantages and disadvantages of bootstrap financing Chapter 18: Table 18.4

  6. Angels are wealthy individuals, usually experienced entrepreneurs, who invest in business start-ups in exchange for equity in the new ventures. Chapter 18: Angels

  7. Criteria for Angel Investments • The New Venture is/has: • Within the industry that the angel has experience. • Located within a few hours driving distance • Recommended by trusted business associates • Entrepreneurs with attractive personal characteristics such as integrity and coach-ability. • Good market and growth potential for the opportunity. • Seeking an investment of $100,000 to $1 million and offers minority ownership, less than 40% Chapter 18: Table 18.5

  8. Venture capital is a source of funds for new ventures that is managed by investment professionals on behalf of the investors in the venture capital fund. Chapter 18: Venture Capital

  9. The Risk and Reward Profile for Various Investments 0 Chapter 18: Figure 18.3

  10. Characteristics of An Attractive Venture Capital Investment • Potential to Become a Leading Firm in a High Growth Industry with few competitors. • Highly Competent and Committed Management Team and High Human Capital (Talent). • Strong competitive Abilities and a Sustainable Competitive Advantage. • Viable Exit or Harvest Strategy. • Reasonable Valuation of the New Venture. • Outstanding Opportunity. • Founders Capital Invested in the Venture. • Recognizes Competitors and Has a Solid Competitive Strategy. • A sound business plan showing how cash flow turns positive within a few years. • Demonstrated progress on the product design and good sales potential. Chapter 18: Table 18.9

  11. Chapter 18: Table 18.15

  12. Initial Public Offering: the first public equity issue of stock made by a company. Chapter 18: IPO

  13. Chapter 18: Table 18.16

  14. Principle: Many kinds of sources for investment capital for a new enterprise exist and should be compared and managed carefully. Chapter 18: Principle

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