Raising Entrepreneurial Capital

✍ Scribed by John B. Vinturella, Suzanne M. Erickson

• Publisher: Academic Press
• Year: 2003
• Tongue: English
• Leaves: 422
• Edition: 1
• Category: Library

✦ Synopsis

This book focuses on classic capital raising. That is, it covers the debt vs. equity decision, the options available to smaller businesses, and the considerations that lead to rapid growth, including venture capital, IPOs, angels, incubators, and so forth. ''Raising Entreprenuerial Capital'' begins where entrepreneurship books leave off, assuming that the reader understands simple financial statements, has selected a specific business, and knows how to write a business plan. It provides a broad, high-level summary of the subjects that people typically research, such as 'How should your company position itself to attract private equity investment?' and 'What steps can you take to improve your company's marketability?' Unlike other books of the genre, ''Raising Entrepreneurial Capital'' includes several chapters on worldwide regional variations on forms and availability of pre-seed capital, incubators, and the business plans they create, with case-studies from Europe, Latin America, and the Pacific-Rim. It combines solid theory with practitioner's experience and insights. Case studies illustrate theory throughout the book. It describes worldwide and regional variations in capital raising strategies.

✦ Table of Contents

Table of Contents......Page 10
Detailed Table of Contents......Page 12
Preface......Page 26
ACKNOWLEDGMENTS......Page 28
INTRODUCTION 1......Page 30
UNDERSTANDING THE CHARACTERISTICS OF SMALL BUSINESSES......Page 33
THE HOME-BASED ALTERNATIVE......Page 35
ASSESSING THE RISKS......Page 38
TOP FIVE SERVICE INDUSTRIES......Page 39
ORGANIZATIONAL FORM......Page 41
SOLE PROPRIETORSHIP......Page 42
GENERAL PARTNERSHIP......Page 44
S-CORPORATION......Page 45
C-CORPORATION......Page 47
OWNERSHIP STRUCTURE AND CAPITALIZATION......Page 48
CREATIVE SOURCES OF CAPITAL—BOOTSTRAPPING......Page 49
INITIAL SOURCES OF CAPITAL......Page 52
SMALL FIRMS TYPICAL USE OF FINANCIAL SERVICES......Page 55
BOOTSTRAP STRATEGIES......Page 57
GLOCAL ADVANTAGE COMPANY PERSPECTIVE......Page 58
U.S. SBA’s SMALL BUSINESS FAILURES: A FRAMEWORK FOR ANALYSIS......Page 59
JOSEPH M. SHERLOCK, MANAGEMENT CONSULTANT PERSPECTIVE......Page 60
ORGANIZATION OF THE BOOK......Page 62
SUMMARY 1......Page 63
DISCUSSION QUESTIONS 1......Page 65
CASE 1.1 NEW TECH (A): OVERVIEW......Page 66
REFERENCES 1......Page 67
BIBLIOGRAPHY 1......Page 68
INTRODUCTION 2......Page 70
LENDING SOURCES......Page 71
LOAN BROKERS—ONLINE SCREENING FORM......Page 73
DEBT CAPITAL CONSIDERATIONS......Page 75
THE LOAN PACKAGE......Page 76
THE LENDER’S PERSPECTIVE......Page 77
TERM OF LOAN......Page 80
LOANS MAY BE SECURED OR UNSECURED......Page 82
ASSET-BASED FINANCING......Page 84
TRADE CREDIT......Page 86
CASE 1: SPS—FINANCING STRATEGY......Page 87
CASE 2: MDO PRODUCTS, INC.—START-UP FINANCING......Page 91
BREAK-EVEN ANALYSIS......Page 94
CURRENT ASSETS......Page 96
FIXED ASSETS......Page 97
CAPITAL REQUIREMENTS AS PERCENT OF SALES......Page 98
LONG-TERM DEBT......Page 99
CASE 3: CAJUN YACHTS, INC.—START-UP FINANCING......Page 100
SUMMARY 2......Page 103
CASE 2.1 NEW TECH (B): HOW MUCH DO THEY NEED?......Page 104
APPENDIX 2.1 NEW TECH (C): FINANCIAL STATEMENTS......Page 108
APPENDIX 2.2 NEW TECH (D): FINANCIAL RATIOS......Page 110
BIBLIOGRAPHY 2......Page 112
INTRODUCTION 3......Page 114
ANGEL INVESTORS......Page 115
EARLY-STAGE INVESTING......Page 116
IN PRACTICE......Page 117
CHARACTERISTICS......Page 119
THE SMALL BUSINESS ADMINISTRATION......Page 120
DIFFERING PERSPECTIVES......Page 123
VALUATION ISSUES......Page 124
RAPID GROWTH......Page 126
MATURITY......Page 127
SUMMARY 3......Page 129
DISCUSSION QUESTIONS 3......Page 130
EXAMPLE 3.1 NEW TECH (F): WHERE WILL THE MONEY COME FROM?......Page 131
CASE 3.2 NEW TECH (G): ARE THEY WORTH AN INVESTOR’S TIME?......Page 134
CASE STUDY: ECOTURISTA......Page 138
BIBLIOGRAPHY 3......Page 143
INTRODUCTION 4......Page 144
THE EXECUTIVE SUMMARY......Page 146
THE MARKET ANALYSIS......Page 147
COMPETITIVE ANALYSIS......Page 149
THE VENTURE TEAM......Page 151
LEGAL ENTANGLEMENTS......Page 152
IS THE EXIT STRATEGY FEASIBLE?......Page 153
THE INVESTOR’S PERSPECTIVE......Page 154
PRO FORMA FINANCIAL STATEMENTS......Page 156
CASE STUDY: AMAZON.COM......Page 159
ANALYSIS......Page 163
CASE 4.1 NEW TECH (H): IS MANAGEMENT READY?......Page 165
CASE 4.2 WEB WIRED......Page 169
BIBLIOGRAPHY 4......Page 180
INTRODUCTION: VALUATION METHODOLOGIES......Page 182
LIQUIDATION VALUE......Page 184
MODIFIED BOOK VALUE......Page 185
COMPARABLES......Page 186
VALUING SERVICE BUSINESSES......Page 187
WOODRIDGE CORPORATION......Page 188
SUPERIOR PLUMBING SUPPLY......Page 189
APPROPRIATENESS OF METHODS......Page 190
VALUATION: EXAMPLE......Page 191
CAPITALIZATION RATES......Page 192
EXCESS EARNINGS APPROACH......Page 193
FREE CASH FLOW VALUATION......Page 195
ILLUSTRATING THE FREE CASH FLOW MODEL......Page 196
WOODRIDGE CORPORATION......Page 197
APPLICATION NOTES......Page 199
DETERMINING THE DISCOUNT RATE......Page 201
SUMMARY 5......Page 203
DISCUSSION QUESTIONS 5......Page 204
CASE 5.1 NEW TECH (I): WHAT IS THE COMPANY WORTH?......Page 205
APPENDIX 5.1 REVIEW OF RATIO ANALYSIS......Page 209
BIBLIOGRAPHY 5......Page 216
INTRODUCTION 6......Page 218
THE VENTURE CAPITAL INDUSTRY......Page 219
VENTURE CAPITAL PARTNERSHIPS......Page 220
TYPES OF FUNDS......Page 222
INVESTMENT CHARACTERISTICS......Page 223
AMOUNT AND STAGING OF INVESTMENT......Page 225
INVESTORS’ EXPECTATIONS......Page 226
APPROACHING PRIVATE INVESTORS......Page 227
SET OBJECTIVES......Page 229
PREPARE FOR SUCCESS......Page 230
DUE DILIGENCE......Page 231
LETTER OF INTENT......Page 232
VALUATION ISSUES......Page 233
STRUCTURE AND TERMS OF THE DEAL......Page 235
OBJECTIVE......Page 236
KEY TERM SHEET CLAUSES......Page 238
SUMMARY 6......Page 245
CASE 6.1 NEW TECH (J): GETTING INVESTORS’......Page 246
APPENDIX 6.1 SAMPLE TERM SHEET......Page 252
BIBLIOGRAPHY 6......Page 256
ADDITIONAL RESOURCES 6......Page 257
COMPONENTS OF THE EXIT STRATEGY......Page 258
VALUATION BY REVENUE MULTIPLES......Page 260
LIKELIEST OPTIONS FOR EXIT......Page 261
ACQUISITION......Page 262
EARN-OUT......Page 265
MERGER......Page 266
LIQUIDATION......Page 268
EQUITY GROUP BUYERS......Page 269
FAMILY MEMBERS......Page 270
THE LURE OF GOING PUBLIC......Page 271
CONSTRAINTS......Page 272
CANDIDATES FOR A PUBLIC OFFERING......Page 273
LISTING REQUIREMENTS FOR NATIONAL STOCK EXCHANGES......Page 275
COMPARING THE EXCHANGES......Page 276
ALTERNATIVE FORMS OF LISTINGS......Page 277
BUILDING THE TEAM......Page 278
THE PROSPECTUS......Page 280
FINDING BUYERS FOR THE OFFERING......Page 281
OPEN IPOs......Page 283
ALTERNATIVE METHODS OF GOING PUBLIC......Page 284
THE ‘‘REVERSE MERGER’’......Page 285
DIRECT PUBLIC OFFERING......Page 286
ALTERNATIVE METHODS......Page 287
SCOR OFFERINGS......Page 288
REGULATION A......Page 290
REGULATION D—RULE 504......Page 291
SUMMARY 7......Page 292
BIBLIOGRAPHY 7......Page 293
ADDITIONAL RESOURCES 7......Page 294
CASE 8.1 NEW TECH (K): FINDING COMPATIBLE INVESTORS......Page 296
CASE 8.2 NEW TECH (L): GETTING READY......Page 304
CASE 8.3 NEW TECH (M): CHOOSING AN OFFER......Page 307
CASE 8.4 NEW TECH (N): CLOSING THE DEAL......Page 314
INTRODUCTION 9......Page 318
FRANCHISING BASICS......Page 319
TYPES OF FRANCHISES......Page 320
THE COSTS......Page 322
DUE DILIGENCE......Page 324
THE MCDONALD’S MODEL......Page 326
GREAT HARVEST BREAD COMPANY......Page 328
FRANCHISING OPPORTUNITY......Page 329
FINANCING THE FRANCHISE......Page 331
THE SBA......Page 332
DISCUSSION QUESTIONS 9......Page 333
CASE STUDY 9.1 FRANCHISING THE SHORT LIST......Page 334
BIBLIOGRAPHY 9......Page 337
ADDITIONAL RESOURCES 9......Page 338
INTRODUCTION 10......Page 340
THE CASH CONVERSION CYCLE......Page 341
THE COST OF TRADE CREDIT......Page 344
SAMPLE CASH BUDGET......Page 346
LINES OF CREDIT......Page 350
ASSET-BACKED LOANS......Page 351
CUSTOMERS......Page 352
CASH MANAGEMENT......Page 353
LOCKBOXES......Page 354
SUMMARY 10......Page 355
DISCUSSION QUESTIONS 10......Page 356
CASE 10.1 NEW TECH: MONTHLY CASH BUDGET......Page 357
BIBLIOGRAPHY 10......Page 358
INTRODUCTION......Page 360
DEFINING RISK AND RISK MANAGEMENT......Page 361
STEP 1—DETERMINATION OF RISK MANAGEMENT OBJECTIVES......Page 362
STEP 3—ANALYSIS OF EXPOSURES TO LOSS......Page 363
RISK MANAGEMENT IS A PROCESS, NOT AN EVENT......Page 364
LOSS CONTROL EFFORTS WILL PAY FOR THEMSELVES......Page 365
BEARING SOME LOSS CAN BE RATIONAL......Page 366
CONSEQUENTIAL PROPERTY EXPOSURES......Page 367
LIABILITY EXPOSURES......Page 368
FINANCIAL EXPOSURES......Page 369
STRATEGIC EXPOSURES......Page 370
LOSS CONTROL......Page 371
RETENTION......Page 372
INSURANCE......Page 373
ADVANTAGES OF OUTSOURCING RISK MANAGEMENT......Page 374
SUMMARY 11......Page 375
ADDITIONAL RESOURCES 11......Page 376
THE GLOBAL MINDSET......Page 377
BASIC CONSIDERATIONS 12.1......Page 378
A FEW WORDS ABOUT COMMUNICATIONS......Page 379
BASIC CONSIDERATIONS 12.2......Page 380
SOURCES OF INFORMATION AND ASSISTANCE......Page 381
TESTING THE MARKET......Page 384
WORKING WITH PARTNERS......Page 385
ANGELS AND VENTURE CAPITALISTS......Page 388
WHAT INVESTORS WANT......Page 391
DUE DILIGENCE......Page 392
SCREENING......Page 393
VALUATION AND MONITORING......Page 394
REGIONAL CONSIDERATIONS......Page 395
LISTING ON A STOCK EXCHANGE OUTSIDE THE UNITED STATES......Page 397
DISCUSSION QUESTIONS 12......Page 400
BIBLIOGRAPHY 12......Page 401
Index......Page 403
About the Authors......Page 421
About the Guest Authors......Page 422