ENT exam 2

The entrepreneurial methods for enterprising does NOT include which of the following characteristics

Maintaining the existing business model by implementing incremental change.

A(n) ______ is when a founder can gain liquidity from a business by selling it to existing partners or to other key managers in the business.

Management Buyout (MBO)

Hybrid of debt and equity funding for LATER stages companies

Mezzanine Capital

Longer Holding Period = ____ ROR

More

Cost effective equity financing for later stage deals, Companies that will not go public with IPO

Private Placements

Which harvest option can have the negative attribute of forcing the leadership team to focus on short-term profits and performance results?

Public Offering

Most important criteria for investor?

add value beyond money, expetise

The prospect of bankruptcy can provide a foundation for bargaining with creditors in a turnaround situation. T/F

True

The rate of return (ROR) required by the investor can affect the investor's required share of the ownership. T/F

True

The single most important criterion for selecting investors is what they can contribute to the value of the venture beyond just financing. T/F

True

Venture capital has board of investors T/F

True

angel investors provide more than money T/F

True

Smaller percent of larger pie is preferred over larger percent of small pie T/F

True 10% of 100 million or 100% of 1 million

What is the primary source for decreasing expenses in a troubled company for a turnaround plan?

Workforce Reduction

valuation risk factors

cash flow, available capital on balance sheet, customer quality, revenue growth rate

Earlier capital is more ____

costly

Bootstrapping example

customers to pay quickly, requesting extended credit from vendors and suppliers

Early equity capital can _____ founder position for the future

dilute

Which of the following is the most expensive source of receivables financing?

Factoring

A venture should look for capital only when it has a serious cash shortage. T/F

False

By staging their capital contributions, venture capitalists will lose the right to abandon a project -- even if the prospects look dim. T/F

False

Enterprising families focus on maintaining their local advantage; safeguarding their brands, assets, and customers; and, honing their operational efficiencies. T/F

False

Leasing provides the flexibility of returning equipment after the lease period if it is no longer needed, BUT NOT if that equipment has become technologically obsolete. T/F

False

Most causes of company failure are external and not found within company management. T/F

False

Mature well establish company, selling equity to the public

IPO

Which of the following would NOT be considered a strong signal for predicting trouble for a company?

Increased Research and Development expenditures

Series A =

family, friends, angel investors

Lower risk = ____ valuation

higher

ROR and ___ are highly connected

holding period

Entrepreneurial finance:

more volatile, more imperfect, less accessible

Series C

strategic partners

Small Business Innovation Research, offer grants for research costs and are cheap if accessible T/F

true

Valuation is more art than science T/F

true

Never lie or say no to venture capital T/F

tue

What is Professionally-managed, identifiable/formal funds

venture capital

A typical informal investor (Angel) will invest from ________ in any one deal.

10,000 - 250,000$

Angel Investor average investment

10,000 to 250,000 per deal

Bridge and Mezzanine - ROR - holding period

20-30% 1-3 years

Expansion - ROR - holding period

20-30% 3-5 years

Between ________ of all informal (or non- venture capital) funding comes from family.

30% - 80%

Second Stage - ROR - holding period

30-40% 4-7 years

LBOs - ROR - holding period

30-50% 3-5 years

angel investor age

40-50

First Stage - ROR - holding period

40-60% 5-10 years

What % businesses receive venture capital

5%

How long is the typical expected holding period for a first stage venture capital investment?

5-10 years

Turnarounds - ROR - holding period

50+% 3-5 years

Seed/Start up - ROR - holding period

50-100% more than 10 yrs

Most venture capital investments are in the range of ________ .

500,000 - 1.5 million

How much does venture capital invest

500,000 to 1.5 million

How long for startup to receive funding

6 months or more

The financial mindset for enterprising does NOT include which of the following characteristics:

A willingness to stick with the existing business model.

Larger companies invest in smaller companies that fit together well

Corporate Venture Capital

Which of the following harvest options is viewed as a positive motivational device because it usually creates widespread ownership of stock among employees?

Employee Stock Ownership Plan (ESOP)

Larger ROR means larger ___ required

Equity

When pushed by a potential investor to discuss what other firms or angels you are talking to, you should:

Respectfully Decline

Which valuation method looks at different multiples (such as earnings, free cash flow, and revenue) of recent investments in similar firms?

Rule-of-Thumb Methods

Specialized venture capital for niche and small/emerging companies

Small Business Investment Companies

Which of the following is NOT a characteristic of a successful deal.

They are based primarily on legalese rather than on trust

What is the advantage of dealing with a commercial finance company?

They will make loans that commercial banks will not

Which of the following is the most probable source of debt capital for a new business?

Trade Credit

Which group of creditors below has the lowest claim in a bankruptcy situation?

Trade Debt

Angel Investors prefer local ventures, within 1 hour T/F

True

Angel investors prefer anonymity, not easy to locate T/F

True

Commercial banks primarily focus on existing businesses with long and substantial financial track records. T/F

True

Most advisors view outright sale as the ideal route to harvest because up-front cash is preferred over most stock. T/F

True

Most often, family cash investments are given based on altruistic family sentiments rather than having more formal investment criteria. T/F

True

No established method for determining private company value Only a RANGE of values is possible T/F

True

SBA 7(a) Guaranteed Business Loan Program, the loan must be repayed T/F

True

Shaping a harvest strategy is an enormously complicated and difficult task. T/F

True

Series B

venture capitalists