Summary: Entrepreneurship & Finance

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• 1 Finance 1 (les)

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• What are the challenges that many start-ups face?

  • How to hire the right people 
    
  • How to get the right office space 
  • How best to compete with existing competitors 

• What is the definition of entrepreneurial finance?

  Entrepreneurial finance is the application and adaptation of financial tools, techniques, and principles to the planning, operations, and valuations of an entrepreneurial venture
  Goal: creating a financially sound environment

• Financing the start-up stage (2)

  Start-up financing: financing needed to start initial production
  Sources: own funds, friends and family, business angels, venture capitalists

• Financing the survival stage (3)

  • First-round financing: external financing used to cover the initial cash shortfalls 
    
  • Sources: business angels, VCs, trade credit (delayed payments), government assistance, commercial banks (difficult) 

• Financing the rapid growth stage (4)

  1. Second round financing: (venture) capital needed to back working capital expansion (e.g., increasing inventory) not covered by own funds
  Souces: VCs, investment banks, commercial banks, trade credit (delayed payments)
  
  2. Mezzanine financing: debt that can be transferred to equity (Ze stellen een lener in staat om leningen om te zetten in aandelen of aandelen)
  Souces: VCs, investment banks, commercial banks
  
  3.  IPO: initial public offering (via de effectenbeurs): going public / or staying private and slow growth rate more easily attainable by own funds or private equity firms

• Overview of the different methods of financing

  1. Venture financing 2. Seasoned financing

• What are the three criteria for a proper business plan?

  1. It provides a sound framework for generating revenues 
     
  2. It provides a sound framework for making profits 
  3. It provides a sound framework for producing free cash flows (used to pay the owners of the company, it is the money extracted after all the investment costs. Also important as a signalling function to investors (yes, we can pay you back with a nice return) 

• What is the content of a business plan?

  1. An executive summary (market, strategy, operations, financing plan)
     
  2. A business description (product, business goal)
  3. Marketing plan and strategy (the target market, projected market share, pricing strategies)
  4. Operations and support (production methods, production targets, production quality and service)
  5. Risks and opportunities (discussion of potential issues that might pop-up, SWOT analysis) 
  6. Financial plans and projections (the financial picture) (projected sheet balance and income statement, break-even analysis and timeframe, timing and size of funding needs)  

• What are the considerations in the development stage?

  • Writing a business plan takes time and money 
    
  • Therefore you need to obtain seed financing 
  • Finding external sources of finance is mainly done through internet platforms
  • 48% of seed financing during the development stage is provided by business angels, 46% by venture capitalists

• What about the start-up stage? (-0.5 to 0.5)

  Goal: incorporate the company/tweaking product based on initial feedback 
  Financing needs: relatively small (cash shortage)