Entrepreneurial Finance Course Note

Title

Subject

• Tech: small start money (fb: 100 thou-250mi)
• real estate: huge start money
• hundreds of millions—>who fund? (require return)
• fall in which category?

• page 4
• how much/long? constrained or not?
• when? in 2 months (should have raised for 6 months)
• suit your term? allow the company grow? (more than cash) eg. Angel; VC - supervisor;
• secure? partner (boutique VC)

• page 7
• [Debt]: principle+interest
• minimize the risk
• page 8
• cash: COVNANTS
• non-cash: trademark/IP
• venture: highly-reputed even if cash negative
• (a)cheaper (b)faster; problem? repay the debt requires more expensive…

• page 10
• [Equity]
• why bear more risk? new equity come-in
• 5X? 2m—>succeed min:10m
• eg. baseline ‘decylination' for Disney? could be successful-potential; then the return should be….
• Professional managed firm (VC, PE, HF, )
• recourse?; control the capital, distribute into different periods - revaluate
• board seats: shareholder: dilute; supplier;
• if big VC back up, then easier to employ and monitor performance (Risk: don’t devote 100%)
• The vast majority fails

• page 12
• hybrid [Convertible Debt] DEBENTURE; note-start as debt, end as equity-cheap, no disclosure
• non-priced financing
• eg. 1m (implicitly: 20% discount, explicitly: no price) valuation; 10m-at cap 5m
• UPSIDE
• page 13
• Joke: It depends. on one hand,… on the other hand,… (Can I have only one arm? 0.0)
• strategy~ (syndicator?align…) conflicting interest-suggest an appropriate partnership-close relationship;alumni-Harvard…(Non-traditional financing…) guanxi..
• first dimension: second dimension:
• novelty X capital intensity: PC; low initial capital: google, uber…
• Power;
• Valley of death (R&D)-where? State funding; This is why university exists! (eg. AIDS)-time and money
• page 15
• Is more money better?
• give up too much
• Tradeoff
• New Yorker article: ?
• be constrained by Human Being
• *When answering a question. Ask Whom the argument coming from? (lean start-up)
• block investors
• raise only enough for 12-18 months
• philosophy question
• Group working
• Dec 1st; 11,10,9
• investor: Dec 7th 7,8,9
• early-stage valuation;
• Industry: Food…Electrical; Sports…
• survey of mkt; back-up research