Raising Entrepreneurial Capital

Chapter 1: Introduction- In the BeginningA. Introduction1. Understanding the Characteristics of Small Businesses2. The Home Based Alternative3. Assessing the RisksB. Organizational Form1. Sole Proprietorship2. General Partnership3. Limited Partnerships4. S Corporation5. LLC- Limited Liability Companies6. C Corporation7. Ownership Structure and CapitalizationC. Creative Sources of Capital1. Initial Sources of Capital2. Small Firms Typical Use of Financial Services3. Bootstrap StrategiesD. Experts Explain How Small Businesses Fail1. Glocal Advantage Company Perspective2. U.S. SBA's Small Business Failures: A Framework for Analysis3. Joseph M. Sherlock, Management Consultant Perspective4. Business Bankruptcy ProjectE. Organization of the BookSummaryCase 1A. New Tech: Overview1. The Company2. Challenge: How to Grow?3. An Advisor4. Study QuestionsTablesExhibitReferencesBibliographyChapter 2: Options in Venture Financing- Debt CapitalA. Introduction1. Lending Sources2. SBA Loans- Profile of a provider3. Loan Brokers- Online Screening FormB. Debt Capital ConsiderationsC. Approaching Prospective Leaders1. The Loan Package2. The Lender's PerspectiveD. Debt Capital Terms and OptionsE. Term of Loan1. Loans may be secured or unsecured2. Venture Banking3. Asset-based financing4. Trade credit5. Case 1: SPS (A). Financing strategyF. Estimating Financing Requirements1. Case2: MDO Products, Inc. (A): Startup Financing2. Break-Even AnalysisG. Estimating Asset Requirements1. Current assets2. Fixed assets3. Other assets4. Indirect increases in assets5. Capital Requirements as Percent of SalesH. Estimating the Liabilities and Equity1. Current Liabilities2. Long-Term Debt3. Equity4. Case 3: Cajun Yachts, Inc: Startup FinancingSummaryTables1. Table 1: Sources of Credit for Small Business2. Table 2: New Tech Industry GroupDiscussion QuestionsBibliographyCase 2-1 New Tech: Introduction The Challenge: Determining Needs The Challenge: Financial Projections Cost of a new Production Facility Working Capital Requirements Earnings Break-Even Point The Solution: Financial Needs Appendix- New Tech Case Story: 1. Financial Statements Income Statements Balance Sheets Appendix- New Tech Case Story: 2. Financial Ratios Leverage Ratios Profitability RatiosAppendix- New Tech Case Story: 3. Key Assumptions Chapter 3: Options in Venture Financing- Early Stage Equity CapitalA. IntroductionB. Angel Investors1. Early Stage Investing2. In Practice3. CharacteristicsC. Other Sources of Early Stage Funding1. The Small Business Administration2. Differing Perspectives3. Valuation IsuesD. Stages, Or "Rounds," of Funding1. Getting "Off the Ground"2. Rapid Growth3. MaturitySummaryCase 3A. New Tech: Where Will the Money Come From?Case 3B. New Tech: Are They Worth An Investor's Time?Case 3C. Ecoturista Executive Summary: As Distributed in the Fall of 1999BibliographyChapter 4: Determining the Amount NeededA. The Business Plan1. Introduction2. The Executive Summary3. Vision Statement/Business Description4. The Market Analysis5. Competitive Analysis6. The Venture Team7. Sales and Marketing8. Financial Projections9. Legal Entanglements10. Are the Risks Properly Assessed?11. Is the Exit Strategy Feasible?B. The Investor's PerspectiveC. The Financial Projections'1. Pro Forma Financial Statements2. Case Study: Amazon.com3. AnalysisSummaryQuestionsCase 4A. New Tech: Is Management Ready?Case 4B. New Tech: Web Wired Web Wired Executive Summary Company Technology, Products and Benefits Market, Growth and Competitive Overview Sales, Marketing and Revenue Management Financial Projections Investment Needs Business Plans OpportunityMarketing Sales BibliographyAppendixSample Business Plan TemplateChapter 5: Valuation: Survey of MethodsA. Introduction: Valuation MethodologiesB. Asset-Based Valuation1. Liquidation Value2. Replacement Value3. Modified Book ValueC. Market Multiples1. Comparables2. Valuing service businesses3. Mathematical relationships4. Woodridge Corporation5. Superior Plumbing Supply6. Appropriateness of methods7. Valuation: ExampleD. Capitalization RatesE. Excess Earnings Approach1. Defined2. ExampleFree Cash Flow Valuation1. Defined2. Illustrating the Free Cash Flow Model3. Woodridge Corporation4. Application notes5. Determining the Discount RateSummaryQuestionsCase 5A. New Tech: What's the Company Worth? Valuation- The Company's PerspectiveDiscounted Cash Flow Methods Finding the Value at the End of the Investment Period Valuation - the Investor's Perspective To Do: Case Study Questions Appendix: New Tech's Financial ForecastAppendix Liquidity Ratios Asset Management Debt Ratios Profitability Industry Average Data SummaryChapter 6: Venture CapitalChapter Goals:A. IntroductionB. The Venture Capital Industry1. Venture Capital Partnerships2. Types of Funds3. Investment CharacteristicsC. Credible Financial Proposals1. Amount and staging of interest2. Financial projections3. Investor's ExpectationsD. Approaching Private InvestorsE. Presentation1. Develop the context for the meeting2. Set objectives3. Prepare for successF. Due DiligenceG. The VC Process1. Letter of Intent2. Valuation Issues3. Structure and terms of the dealH. The Term Sheet1. Objective2. Key Term Sheet ClausesSummaryCase 6. New Tech: Getting Investors' AttentionBibliographyAppendix Sample Term SheetChapter 7: Exit StrategiesChapter GoalsA. Components of the Exit Strategy1. Importance of the exit strategy2. Differing Perspectives3. Valuation by revenue multiples4. Comparison of returns by exit typeB. Likeliest Options for Exit1. Acquisition2. Earn-Out3. Debt-Equity Swap4. Merger5. Management Buy Out6. LiquidationC. Other Potential Buyers1. Individual buyers2. Equity group buyers3. Partners and employees4. Family membersD. Going Public1. The lure of going public2. Constraints3. Candidates for a public offering4. Listing requirements for national stock exchanges5. Comparing the exchanges6. Alternative forms of listingsE. Initial Public Offering (IPO)1. Overview2. Building the team3. The prospectus4. Finding buyers for the offeringF. Open IPOsAlternative Methods of Going Public1. The "reverse merger"2. Direct Public Offering3. Considerations related to alternative methodsH. Forms of DPOs1. Risks across all forms2. SCOR offerings3. SB-2 Offerings4. Regulation A5. Regulation D- Rule 504SummaryDiscussion Questions:SidebarsChartsBibliographyChapter 8: Executing the Exit StrategyChapter GoalsA. New Tech Case- Finding Compatible Investors 1. Key Tasks 2. The Challenge: Building a Short List 3. The Challenge: Ranking Possible Investors 4. Evaluation of Investors 5. The Solution: Targeting Preferred InvestorsNext Steps 7. What New Tech LearnedB. New Tech Case- Getting Ready 1. Key Tasks 2. The Challenge: Dress Rehearsal 3. The Solution: The Meeting and After 4. What New Tech LearnedC. New Tech Case- Choosing an Offer1. key Tasks2. The Challenge: Negotiating Terms3. The Solution: Striking a Deal4. What New Tech LearnedThe Solution: Final Term SheetD. New Tech Case- Closing the Deal1. Key Tasks 2. The Challenge: The Due Diligence Review3. The Solution: Future Growth 4. What New Tech LearnedChapter 9: FranchisingA. Introduction 1. Franchising Basics2. Types of Franchises3. The Costs4. Due DiligenceB. A Tale of Two Franchises1. The McDonald's Model2. Great Harvest Bread CompanyC. Franchising OpportunityFinancing the Franchise1. Franchisers2. Non Bank Lenders3. The SBASummaryQuestionsCase Study 9-1: Franchising the Neighborhood Restaurant 1. IntroductionKelly O'Bryan's Neighborhood RestaurantBibliographyChapter 10: Internal Financial ManagementA. IntroductionB. The Cash Conversion CycleC. The Cost of Trade CreditD. The Cash BudgetSources of Short-Term Financing1. Lines of Credit2. Asset Backed Loans3. Factoring4. CustomersF. Cash Management1. Lockboxes2. Bank Cash Management ServicesConclusionQuestions:Case 10-1 New Tech: Monthly Cash Budget 1. Cash budget 2. Sensitivity AnalysisBibliographyChapter 11: Essentials of Risk ManagementIntroductionB. Defining Risk and Risk ManagementC. Relationship of Risk Management to Financial ManagementD. The Risk Management Process Step 1- Determination of risk management objectives Step 2- Identification of exposures to loss Step 3- Analysis of exposures to lossStep 4- Selection of Implementation of risk treatment methods Step 5- Administration of the risk management programE. Some Core Risk Management Principles 1. Risk management is a process, not an event 2. Exposure identification is the key to successful risk management 3. Loss control efforts will pay for themselves 4. Pre-loss planning is the key to post-loss survival 5. Bearing some loss can be rationalF. Common Exposures to Loss 1. Direct property exposures 2. Consequential property exposures 3. Liability exposures 4. Human resources exposures5. Financial exposures 6. Operational exposures 7. Strategic exposuresG. Fundamentals of Risk Control 1. Avoidance 2. Loss control 3. Non-insurance transfer 4. Overall risk controlH. Fundamentals of Risk Financing 1. Retention 2. Insurance 3. Derivatives I. Advantages of Outsourcing Risk ManagementJ. SummaryK. Resources 1. Books 2. WebsitesChapter 12: Opportunities to Do Business and Raise Capital GloballyA. The Global Mindset 1. Basic Considerations 2. A Few Words About CommunicationsB. Finding and Working With International Partners 1. Basic Considerations 2. Sources of Information and Assistance 3. Testing the Market 4. Working with PartnersC. Raising Equity Capital from International Sources 1. Basic Considerations 2. Angels and Venture Capitalists 3. What Investors WantD. Due Diligence 1. Screening 2. Valuation and Monitoring 3. Exit Strategies 4. Regional ConsiderationsE. Listing on a Stock Exchange Outside the U.S.Acknowledgement