Bus 400 week 11 ppt 6

1. ©Gundry & Kickul (2007). Entrepreneurship Strategy. SAGE Publications.
Entrepreneurship
Strategy
Financial Resource Capabilities
Chapter 6

2. ©Gundry & Kickul (2007). Entrepreneurship Strategy. SAGE Publications
Financing the New Venture
Equity
 Repayment?
 Exit strategy
 Look for GROWTH
Sales
Earnings*
Equity
Assets
 Compare ratios:
gross and operating
to industry
Debt
 What is the primary
source of
repayment?
Income statement
(operating margins)
 What is the
secondary source of
repayment?
Balance sheet-assets
 What is the character
of the borrower?

3. ©Gundry & Kickul (2007). Entrepreneurship Strategy. SAGE Publications
Debt vs. Equity
(Newton, 2000)

4. ©Gundry & Kickul (2007). Entrepreneurship Strategy. SAGE Publications
Preparing Your Information
for the Lender
Copies of tax returns for both the company and yourself
Explanations of significant variances in past operating
results
Most recent financial results
Revised financial projections, using assumptions
requested by the lender
Names of customers, suppliers, and business
consultants who can be contacted by the lender
Copies of important corporate documents, such as
existing loan and stock agreements, minutes of board of
directors meetings, and major contracts

5. ©Gundry & Kickul (2007). Entrepreneurship Strategy. SAGE Publications
Lending Officer Questions
Have you invested savings or personal equity in your
business totaling at least 25 percent to 50 percent of the
loan you are requesting? Remember, no lender or
investor will finance 100 percent of your business.
Do you have a sound record of creditworthiness as
indicated by your credit report, work history, and letters
of recommendation?
Do you have sufficient experience and training to
operate a successful business?
Have you prepared a loan proposal and business plan
that demonstrate your understanding of and commitment
to the success of the business?
Does the business have sufficient cash flow to make the
monthly payments?

6. ©Gundry & Kickul (2007). Entrepreneurship Strategy. SAGE Publications
Selecting the Lender
Responsiveness to credit needs: Can the lender
respond quickly as your credit needs change?
Reliable source of credit: Can the lender
continue to supply your needs as you grow or if
there is a slight downturn in your business?
Knowledge of your business: Do the people who
will work on your account understand your
business and its industry?
Decision-making authority: Who makes the
ultimate decision on your loan request?
Experienced personnel: Can the people on your
account offer constructive advice?

7. ©Gundry & Kickul (2007). Entrepreneurship Strategy. SAGE Publications
How to Raise Venture Capital
Be willing to offer some
equity investment.
Show prospects: rapid
growth.
Find a VC group that
specializes in area.
Entrepreneur plans to
make stock liquid in 5 to
10 years.

8. ©Gundry & Kickul (2007). Entrepreneurship Strategy. SAGE Publications
The Venture Capitalist’s Maxim
I’d rather have
a Class A entrepreneur
with a Class B idea
than
a Class A idea with
a Class B entrepreneur.

9. ©Gundry & Kickul (2007). Entrepreneurship Strategy. SAGE Publications
(Data from National Venture Capital Association, PricewaterhouseCoopers, Thomson Venture Economics)

10. ©Gundry & Kickul (2007). Entrepreneurship Strategy. SAGE Publications
(Data from National Venture Capital Association, PricewaterhouseCoopers, Thomson Venture Economics)

11. ©Gundry & Kickul (2007). Entrepreneurship Strategy. SAGE Publications
Why Entrepreneurs Don’t
Get Funding
1. Minimize competition in target market
2. Future performance focused
3. Failure to tailor management biographies
to the current stage of business
4. Asking investors to sign a nondisclosure
5. Including investor feedback in your
business plan
(www.growthink.com)

12. ©Gundry & Kickul (2007). Entrepreneurship Strategy. SAGE Publications
6. Claiming first mover advantage
7. Proprietary technology overload
8. Inaccurately defining market size
9. Aggressive financial projections
(www.growthink.com)
Why Entrepreneurs Don’t
Get Funding

13. ©Gundry & Kickul (2007). Entrepreneurship Strategy. SAGE Publications
Tips on Raising Capital
Raise money when you do not need it.
Learn as much about the process and how
to manage it as you can.
Know your relative bargaining position.
If all you get is money, you are not getting
much.
Assume the deal will never close.
Always have a backup source of capital.

14. ©Gundry & Kickul (2007). Entrepreneurship Strategy. SAGE Publications
The legal and other experts can blow it—sweat
the details yourself (remember: the devil is in the
details).
Users of capital are invariably at a disadvantage
in dealing with suppliers of capital.
If you are out of cash when you seek to raise
capital, suppliers of capital will eat your lunch.
Start-up entrepreneurs are raising capital for the
first time; suppliers of capital have done it many
times, everyday, for a living.
Tips on Raising Capital