Entrepreneurship theory process practice 4th edition

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Entrepreneurship

Session 5

Funding for Entrepreneurial Ventures

(Chapter 14 and early part of Chapter 5)

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Louis Geneste

Lecturer

School of Management

Curtin Business School

Tel: 9266-7987

Fax: 9266-7897

E-mail: L.Geneste@cbs.curtin.edu.au

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By the end of this session, you should be able to:

Identify and distinguish between the main sources of entrepreneurial finance;

Discuss the advantages and disadvantages of debt and equity financing;

Explain how informal (angels) and formal venture capitalists differ from each other;

Explain how venture capitalists assess venture funding proposals;

Explain the role of venture capitalists in financing entrepreneurial ventures.

Session Learning Outcomes

But first

Where does the money for new start-ups usually come from?

What about later as the company grows?

Can you think of some creative ways to raise funds?

Has anyone ever used crowdfunding?

Have you ever tried to raise money from your family?

?

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9/3/2017

PowerPoints to accompany Frederick, HH. et al. Entrepreneurship: Theory Process Practice (4th Asia-Pacific ed.), Melbourne: Cengage Learning Australia 2016.

Instructor:

Class:

The times, they are a-changin’

Funding in the new era is not simply thrown at companies in the hope that one in 10 is wildly successful.

Today, funding goes only to entrepreneurs who thoroughly understand their customers’ requirements and who can ensure the funder from the beginning that every product delivers on its value.

Henrik Moltke, licensed under CC Attribution 2.0 creativecommons.org/licenses/by/2.0/

There was a time when an entrepreneur with a bright idea could just walk into a venture capitalist’s office in Silicon Valley or Shanghai and get a heap of money to develop that idea.

The venture capitalist (VC) would take a slice of the company and the entrepreneur would take the money and make something of it – or not.

Now those days are gone. However, like all change, this situation has created its own opportunity, one that can benefit both the funding community and the start-up venturer.

Funding in the new era will not simply be thrown at companies in the hope that one in 10 is wildly successful.

Today, funding goes only to entrepreneurs who thoroughly understand their customers’ requirements and who can ensure the funder from the beginning that every product delivers on its value.

VC1: Work found at https://www.flickr.com/photos/henrikmoltke/5587199796 / Henrik Moltke / Attribution 2.0 Generic (CC BY 2.0)

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Sources of financial capital

Entrepreneurs have a number of sources of financial capital as their ventures develop.

Notice that the level of risk and the stage of the firm’s development should determine the appropriate source of financing for the entrepreneurial ventures.

‘Successful Angel Investing’, Indiana Venture Center, © 2008.

Studies have investigated the various sources of finance preferred by entrepreneurs.

As illustrated in Figure 14.2, entrepreneurs have a number of sources of financial capital as their ventures develop.

Notice that the level of risk and the stage of the firm’s development should determine the appropriate source of financing for the entrepreneurial ventures.

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