ENTREPRENEURSHIP

Course Code :8503  Unit # 06

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 OBJECTIVES
 - 6 # Financial Entrepreneurial Ventures
Worldwide
Microfinance and Entrepreneurship
Entrepreneurs and Informal Investors
Venture Capital
Factor Effecting Availability of Financing
Bootstrapping New Ventures Valuation
Financing New Venture
Informal Investors
Business Angels
Venture Capitalists
Harvesting Investment
Initial Public Offering
Selling the Company
2A Strategic Acquisition
- Financial Entrepreneurial Ventures
Worldwide:
Entrepreneurial ventures  contend with the
challenge of raising capital for their development
and growth.
Financing for Entrepreneurs and covers
specifically, important aspects of financing
entrepreneurial ventures.
Entrepreneurial finance principles particularly in
relation to the raising of capital exercises
Different financing scenarios according to the
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venture’s life cycle stage
  Forecasting financial requirements in a period of growth 
 Management of the cash conversion cycle and bootstrap
financing techniques 
 The participants in the financial markets (particularly
sources of debt and equity capital) and their interests;
these include angel investors, venture capital firms, banks
and other financial intermediaries. 
 The building of venture value through robust business
models and responsible management 
 The considerations regarding harvest
scenarios in particular, selling the business
or going for an Initial Public Offering 
 Managing ventures experiencing
financial distress 
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- Microfinance and Entrepreneurship
 As microfinance gains increasing attention and
application as a financing mechanism for
entrepreneurs at the base of the economic pyramid
 Microfinance brings a range of financial services,
including microcredit loans, savings, and
insurance, within the reach of millions of poor
households not served by traditional banks.
 The effectiveness of such
microenterprise loans on
increasing entrepreneurs'
incomes and innovation.
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- Larger loans increase income, but less innovative
business practice might threaten such income. 
 - Economist recommend that microenterprise loans
associated with proper business skills, information,
and technologies be provided by MFIs with careful
screening and monitoring to ensure the effective
utilization of loan capital.
- Microfinance in Bangladesh has inherited a long
history of innovative financial inclusion. 
- Financial Inclusion calls for individuals and
businesses to have access to and effectively use a
range of financial services that are provided at a
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reasonable price and in a responsible manner.
-Entrepreneurs and Informal Investors:
- Informal investors have proved to be
highly valuable for the growth of the firms
in which they have invested.
- It is important to understand what
motivates potential informal investors to
make their initial investment as well as
how already active investors develop their
entrepreneurial careers.
- Self-funding by entrepreneurs, along
with funding from informal investors, is
the lifeblood of an entrepreneurial society.
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- Venture Capital:
- Venture Capital is “equity support to fund a new concepts
that involve a higher risk and at the same time, have a high
growth and profit.”“Venture Capital is broadly implies an
investment of long term, equity finance in high risk projects with
high rewards possibilities.”
An investment in a startup business that is perceived to have e
xcellent growth prospects but does not have access to capital
markets. Type of financing sought by early-
stage companies seeking to grow rapidly.
A venture capitalist invests his money in
terms of equity. He does not look for any
dividend or other benefits, but when the
project commercially succeeds, then he
can enjoy the capital gain which is his
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main benefit.
-Process of venture capital

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-Factor Effecting Availability of Financing:
 Business financing is more complex than
personal or other secured loans, with added
evaluations used for business financing.
 Still, as experienced lenders note, all good
loans are based on the same factors.
 Understanding these factors brings more than
knowledge; it can bring you business success.
 While every company is different, the basic
factors involved in business financing are
constant and enduring.
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-Factor Effecting Availability of Financing:
Ability to Repay: The most constant factor in business
financing, the ability to repay is paramount.
Historical Record of Repayment: A company's recorded
history of timely repayment is a critical factor in business
financing.
Business History of Cash Flow: While highly profitable
companies are always impressive, consistent cash flow is
an even more important factor in commercial lending.
Start-up Company Financing Factors: If you are just
starting your business, additional considerations come into
play.
Repayment Terms: Consider how long the financing
arrangement is structured to last.
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-Bootstrapping New Ventures Valuation
 -Bootstrapping is a means of financing a small firm
through highly creative acquisition and use of
resources without raising equity from traditional
sources or borrowing money from a bank.
 -"bootstrapping" means starting a new business without
start-up capital.
 -Bootstrapping is the most likely source of initial
equity for more than 90% of technology based firms.
 -Bootstrapping offers many advantages for
entrepreneurs and is probably the best method to get an
entrepreneurial firm operating and well positioned to
seek equity capital from outside investors at a later
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time.
-Financing New Venture
 Venture capital (VC) is a type of private equity, a form of financing
that is provided by firms or funds to small, early-stage, emerging
firms that are deemed to have high growth potential, or which have
demonstrated high growth.
 Many business ventures today are looking to attract external
financing, with an emphasis on business angel investment.
 Inside this text, the author incorporates the views of business angels,
venture capitalists, entrepreneurs, and legal advisors; and draws upon
the latest academic thinking on financing new ventures, providing
comparisons between business angel and venture capital investing to
further inform the reader.
 The concepts, principles, and guidelines presented can help you and
any entrepreneur, business support agency, business student, and
others interested in raising external investment and in developing an
“investable” business.
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-Informal Investors
 Informal investing has been referred to using a multitude of
different terms. Angel investor, venture capitalist, shark, informal
investor – these terms all refer to the same general concept.
 This type of investor works in the area of financing startups, or
fledgling businesses that are still in the process of creation.
 This investor will enter the scene and step up to provide the
precious funding so terribly needed in order for this new startup to
get off the ground.
 This can be done purely out of good will or the belief in a product
or a concept that it enforces.
 Most of the time though, there is an underlying business deal that
provides incentives for these investors to step up to the task.
 These can and often do include the rights to predetermined portions
of future profits, ownership, or other assets.
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-Informal Investors
 Through some sort of incentive, investors are drawn to the great
risk associated with investing in an unproven startup.
 Informal investing is all about calculated reward and a gift of life
for an emerging business or idea.
 It also involves substantial risk however, which is the reason
behind the incentives often seen attached to these financial
generosities.
 This is the world of the informal investor as well as a few of the
places we can see these particular investors at work.
  Virtually anyone can act as an informal investor here, providing
various amounts of funding to whatever projects suit their
interests. In return, project owners offer some sort of financial or
goods-based incentives at completion time.

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-Business Angels
 Investor angels, or business angels, are people who invest
their money in the initial phase of startups, in exchange for a
participation in capital.
 They also usually carry out the role of a mentor and offer their
consent and experience to entrepreneurs.
 Angel investors are often wealthy individuals who have
entrepreneurial experience themselves or specific industry
experience that is shared with the company being invested in.
 They offer various forms of
finance including shares or
other securities that represent
an ownership interest in a
company including equity, debt and variations of the two.
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-Venture Capitalists
 A venture capitalist is an investor who either provides
capital to startup ventures or supports small companies
that wish to expand but do not have access to equities
markets.
 Venture capitalists are willing to invest in such companies
because they can earn a massive return on their
investments if these companies are a success.
 Venture capitalists also experience major losses when
their picks fail, but these investors are typically wealthy
enough that they can afford to take the risks associated
with funding young, unproven companies that appear to
have a great idea and a great management team.
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-Harvesting Investment
 A harvest strategy involves a reduction or a termination of
investments in a product, product line, or line of business so
that the entities involved can reap the maximum profits.
 A harvest strategy is typically employed toward the end of a
product's life cycle when it is determined that further
investment will no longer boost product revenue.
 employing a harvest strategy will allow companies to harvest
the maximum benefits or profits before the item reaches its
decline stage.
 Companies often use the proceeds from the ending item to
fund the development and distribution of new products.
 Funds also may go toward promoting
existing products with high growth potential.
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-Initial Public Offering(IPO’s)
 An initial public offering, or IPO, is the very first sale of
stock issued by a company to the public.
 Prior to an IPO the company is considered private, with a
relatively small number of shareholders made up primarily
of early investors (such as the founders, their families and
friends) and professional investors (such as venture
capitalists or angel investors).
 The public, on the other hand,
consists of everybody
else any individual or institutional
investor who wasn’t involved in the
early days of the company and
who is interested in buying shares of
the company.
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-A Strategic Acquisition :
 With the most common acquisition strategy, a company
buys another company with cash, stock or a combination of
the two.
 Regardless of the structure, an acquisition is meant to
create synergy that makes the value of the resulting
company greater than the sum of its original parts.
 Through the strategic acquisition of another company, the
purchasing company can achieve economies of scale,
efficiencies and enhanced market visibility.
 The acquisition can also increase the
company’s client base, add new markets
and help increase shareholder value,
among a variety of other benefits.
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- Steps for a successful acquisitions:
 Improve the target company’s performance.
 Consolidate to remove excess capacity from industry.
 Accelerate market access for the target’s (or buyer’s)
products
 Get skills or technologies faster or at lower cost than
they can be built
 Exploit a business’s industry-specific scalability
 Pick winners early and help them develop their
businesses
 Consolidate to improve competitive
behavior
 Enter into a transformational
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merger and Buy cheap.
 All the best for a
SUCCESSFUL / BRIGHT
FUTURE