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
