Questions and Answers of Entrepreneurial Finance

What is the effect on performance of replacing a company founder with an outside CEO?
What constitutes a good fit between the support needs of a company and the support capabilities of the investors?
What are the pros and cons for investors to stage their financial commitments?
What is the option value of abandonment? How can one estimate it?
When might investors use tranched as opposed to staged financing?
When do inside investors prefer higher over lower valuations?
What determines the seniority of the preferred terms across different financing rounds?
What is the intent behind anti-dilution clauses? Who benefits most from the full-ratchet clause?
What does “pay-to-play” mean?
What financial, managerial, and legal challenges are commonplace in down rounds?
What aspects enter into the formulation of an investor’s dynamic investment strategy?
How should entrepreneurs manage their valuation profile across stages?
What are the main components of a debt contract? What alternative structures exist?
What is collateral? What assets are suitable for collateral?
The Modigliani-Miller theorem claims that debt and equity are equally costly. Is this true in reality?
Why do most banks hesitate to lend to start-ups?
How can one infer the true cost of trade credit?
What is the difference between discounting and factoring?
How does venture leasing differ from traditional leasing?
Does venture debt substitute or complement equity capital?
What is the difference between enterprise and equity value?
How can one adjust the venture capital valuation method to account for debt?
Why do investors and entrepreneurs want an exit?
What affects the optimal timing of exit?
Why are IPOs often underpriced?
What are the advantages and disadvantages of dual-class share listings?
What are the most common strategic motives for acquiring start-ups?
How do financial buyers differ from strategic buyers?
What are the main challenges of structuring secondary markets for private shares?
Why are there several bankruptcy regimes? What are their respective objectives?
How are exit decisions affected by market forces?
What are the most common sources of internal conflict around exit decisions?
From the perspective of institutional investors, what are the pros and cons of investing in VC funds?
What are the main components of a limited partnership agreement (LPA)? Why is it needed?
Why do most VC funds have a 10-year horizon? What are the alternatives?
What is the difference between management fees and carried interest? What incentives do they give to the general partners (GPs)?
Who are the people working at VC firms?
What affects the success of raising a VC fund?
What are the main dimensions of a VC investment strategy?
What are the possible growth strategies for a successful VC firm?
What is the difference between gross and net returns in VC?
What does it mean that returns in VC persist? Why is it surprising? Which factors could be behind this fact?
Why do founders often invest in their own venture?
What are the investment motives of family and friends? How can they help?
Why do angel investors coordinate through networks or groups?
How do angel funds differ from $\mathrm{VC}$ funds?
Why do corporations fund start-ups? How should an entrepreneur view them?
What alternative approaches can corporate investors use for cooperating with start-ups?
What alternative crowdfunding options are available to entrepreneurs? Which options are most suitable for which entrepreneurs?
How does an ICO differ from an IPO?
How do accelerators, incubators, and technology transfer funds prepare companies for fundraising?
How do social impact venture investors differ from purely financially motivated venture investors?
Who are the main actors in an entrepreneurial ecosystem?
What are the main factors contributing to the agglomeration of economic activity?
Within an ecosystem, what are the main externalities among entrepreneurial companies?
Why does investor diversity matter for an ecosystem?
What is the role of professional service providers within an ecosystem?
What are the main arguments for and against government intervention in entrepreneurial finance?
What is the difference between supply and demand side policies?
What is the relative advantage of governments investing directly in companies, investing in VC funds, or investing in funds-of-funds?
Should countries welcome foreign venture investors?
Who benefits and loses from brain drain?
A. An analysis of the cash conversion cycle should also help Kaj understand what has been happening to the operations of Scandi. Prepare an analysis of the average conversion periods for the three
The Castillo Products Company was started in 2014. The company manufactures components for personal digital assistant (PDA) products and for other handheld electronic products. A difficult operating
From the Headlines—The Lovely Touch in Raising Cupcake Dough: Discuss the foundations of the itemized cupcake costs for the $3.00 cupcake in relationship to the possible new costs and break even
LeAnn Sands has reason to believe that 2017 will be a replication of 2016 (see Problem 8) except that cost of goods sold is expected to be 5 percent of the estimated $450,000 in revenues. Other
Salza Technology Corporation increased its sales from $375,000 in 2015 to $450,000 in 2016 as shown in the firm€™s income statements resented below. LeAnn Sands, chief executive
From the Headlines—Competing to Let the Light Shine: Describe three financial performance measures that d.light could use when comparing itself to other potential competitors.
Interact Systems, Inc., has developed software tools that help hotel chains solve application integration problems. Interact’s application integration server (AIS) provides a two-way interface
What is accrual accounting? What are generally accepted accounting principles (GAAP)?
What does short-term financial planning involve?
In 2016, Jennifer (Jen) Liu and Larry Mestas founded Jen and Larry’s Frozen Yogurt Company, which was based on the idea of applying the microbrew or microbatch strategy to the production and sale
The Castillo Products Company was started in 2014. The company manufactures components for personal digital assistant (PDA) products and for other handheld electronic products. A difficult operating
The “Internet of Feet”: Discuss the role that Indiegogo played in the initial funding of Sensoria. Do you believe it was important in leading up to the $5 million A round?
What is securities crowdfunding?
Following is the rate-of-return component information for First Venture investors:Rate
A potential venture investment has the following possible outcomes: A. What is the expected rate of return on the venture?B. Calculate the variance and standard deviation
You have been retained as a consultant for Ecosphere and tasked with assessing the financial viability of their commercial ventures. What types of financial ratios would you enlist in your report to
How is a venture’s WACC likely to change as it moves through a successful life cycle?
Kaj Rasmussen founded Scandi Home Furnishings as a corporation during mid-2013. Sales during the first full year (2014) of operation reached $1.3 million. Sales increased by 15 percent in 2015 and
Two years of financial statement data for the Munich Export Corporation are shown below.A. Calculate the inventory-to-sale, sale-to-cash, and purchase-to-payment conversion periods for Munich Exports
What role does the statement of cash flows play in long-term financial planning?
What is meant by sweat equity?
A. Describe Spatial Technology€™s business model in terms of revenues, profits, and cash flows.B. What intellectual properly, if any, does Spatial Technology possess?C. Describe the
The first quarter of 2008 had not yet ended and Steve Savage already knew the company would surpass the projected $22 million in revenues for the year. He and the management team had doubled sales
The EnCal Corporation is a small, West Coast€“based power company specializing in power generation methods that use clean-burning fuels and renewable natural resources.However, due to a
What is foreclosure?
Describe how the relative value method is used to value a firm’s equity.
What are unicorns? How might their exit values be impacted when they go public?
List three venture capital firms active in your region and describe their investing style and restrictions.
List seven Web sites or print magazines that contain venture capital investing information that might be of use to entrepreneurs seeking venture capital.
Locate a recent study covering venture capital fundraising (not investing) for the previous year. Determine what the current sources of funds tend to be.
Locate a venture capital–backed firm that recently completed an initial public offering (IPO). Provide a summary of the venture’s history and success through the IPO and to date.
What would you need if you wanted to conduct an enterprise valuation for a hypothetical Round D for Fuel3D? Discuss the relationship between Fuel3D and MakerBot. How might it affect the terminal
What are convertible notes? Why are convertible notes issued, and who typically issues them?
In 2016, Jennifer (Jen) Liu and Larry Mestas founded Jen and Larry’s Frozen Yogurt Company, which was based on the idea of applying the microbrew or microbatch strategy to the production and sale
Describe examples of customer funding used to reduce financing needs.
Describe the two major types of crowdfunding.
What is meant by the terms business crowd sourcing and crowdfunding?
What are business incubators and seed accelerators? How do they differ?

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