Assessment No.4|Part 4-From Business Plan to Funding Venture

Every business venture requires capital. While capital is needed throughout the life of a business, an entrepreneur faces the most difficulty in acquiring capital at start-up. Before seeking outside financing, an entrepreneur should first explore all methods of internal financing such as:

A special method of raising capital for high-technology firms is a __________________________________________.

The entrepreneur needs to consider all possible sources of capital and select the one that will provide the needed funds with minimal cost and loss of control. Usually, different sources of funds are used at various stages in the ___________ & _______________ of the venture, as occurred in the case of Scott Walker, a successful entrepreneur indeed.

A contract is formed between a sponsoring company and a limited partnership. The partnership bears:

• the risk of the research

• receiving some tax advantages

• sharing in future profits

• fee to use the research in developing any future products

These are the most frequently used source of short-term external debt-financing. This source of funding requires collateral, which may be asset-based or may take the form of cash flow financing. In either case, they tend to be cautious about lending and carefully weigh the five Cs: character, capacity, capital, collateral and condition. Not every entrepreneur will qualify under their careful scrutiny.

The most difficult to obtain, with the most likely source being the private equity market.

Although this capital may be used in the 1st stage, it is primarily used in the 2nd or 3rd stage to provide working capital for growth or expansion. This is broadly defined as a professionally managed pool of equity capital.

To achieve the venture capitalist's primary goal of generating long-term capital appreciation through investments in business, the criteria are used:

• the company must have strong management

• the product/market opportunity must be unique

• the capital appreciation must be significant

• the offer is an obscure return on investment

Valuing the company is a concern of the entrepreneur. Name one of the factors which can be used as a basis for valuation.

A process transforming a closely held corporation into one in which the general public has proprietary interest which is indeed arduous. So an entrepreneur needs to carefully assess whether the company is ready for this as well as whether the advantages outweigh the disadvantages of doing so.