Technology Ventures: From Idea to OpportunityChapter 18: Figure 18.1 Idealized cash flow diagram for a new enterprise.

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Presentation transcript:

Technology Ventures: From Idea to OpportunityChapter 18: Figure 18.1 Idealized cash flow diagram for a new enterprise

Technology Ventures: From Idea to OpportunityChapter 18: Table 18.3 Sources of Capital Founders Family Friends Small Business Investment Companies (SBIC) Small Business Innovation Research (SBIR) Professional Investors — Angels Venture Capitalists Banks Leasing Companies Established Companies Public Stock Offering Government Grants and Credits Customer Prepayments Pension Funds Insurance Companies

Technology Ventures: From Idea to OpportunityChapter 18: Figure 18.2 Four financial steps in building a successful firm.

Technology Ventures: From Idea to OpportunityChapter 18: Bootstrap Financing Bootstrap Financing: to start a firm by one’s own efforts and to rely solely on the resources available from oneself, family, and friends.

Technology Ventures: From Idea to OpportunityChapter 18: Table 18.4 AdvantagesDisadvantages  Low pressure on valuation  Easy terms on ownership  Control by founders  Little time spent on finding investors  Unable to fund growth phase  Lack of funding commitment for future  Loss of advice from professional investors Advantages and disadvantages of bootstrap financing

Technology Ventures: From Idea to OpportunityChapter 18: Angels Angels are wealthy individuals, usually experienced entrepreneurs, who invest in business start-ups in exchange for equity in the new ventures.

Technology Ventures: From Idea to OpportunityChapter 18: Table 18.5 Criteria for Angel Investments The New Venture is/has: Within the industry that the angel has experience. Located within a few hours driving distance Recommended by trusted business associates Entrepreneurs with attractive personal characteristics such as integrity and coach-ability. Good market and growth potential for the opportunity. Seeking an investment of $100,000 to $1 million and offers minority ownership, less than 40%

Technology Ventures: From Idea to OpportunityChapter 18: Venture Capital Venture capital is a source of funds for new ventures that is managed by investment professionals on behalf of the investors in the venture capital fund.

Technology Ventures: From Idea to OpportunityChapter 18: Figure 18.3 The Risk and Reward Profile for Various Investments 0

Technology Ventures: From Idea to OpportunityChapter 18: Table 18.9 Characteristics of An Attractive Venture Capital Investment Potential to Become a Leading Firm in a High Growth Industry with few competitors. Highly Competent and Committed Management Team and High Human Capital (Talent). Strong competitive Abilities and a Sustainable Competitive Advantage. Viable Exit or Harvest Strategy. Reasonable Valuation of the New Venture. Outstanding Opportunity. Founders Capital Invested in the Venture. Recognizes Competitors and Has a Solid Competitive Strategy. A sound business plan showing how cash flow turns positive within a few years. Demonstrated progress on the product design and good sales potential.

Technology Ventures: From Idea to OpportunityChapter 18: Table 18.15

Technology Ventures: From Idea to OpportunityChapter 18: IPO Initial Public Offering: the first public equity issue of stock made by a company.

Technology Ventures: From Idea to OpportunityChapter 18: Table 18.16

Technology Ventures: From Idea to OpportunityChapter 18: Principle Principle: Many kinds of sources for investment capital for a new enterprise exist and should be compared and managed carefully.