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q by J. Chris Leach, Ronald W. Melicher, Chapters 1 - 16,
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Complete With CAPSTONE CASES
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,TABLE OF CONTENTS q q q
Part 1: THE ENTREPRENEURIAL ENVIRONMENT.
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1. Introduction to
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Finance for Entrepreneurs.
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2. Developing the Business Idea.
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Part 2: ORGANIZING AND OPERATING THE VENTURE.
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3. Organizing and Financing a New Venture.
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4. Preparing and Using Financial Statements.
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5. Evaluating Operating and Financial Performance.
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Part 3: PLANNING FOR THE FUTURE.
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6. Managing Cash Flow.
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7. Types and Costs of Financial Capital.
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8. Securities Law Considerations When Obtaining Venture Financing.
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Part 4: CREATING AND RECOGNIZING VENTURE VALUE.
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9. Projecting Financial Statements.
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10. Valuing Early-Stage Ventures.
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11. Venture Capital Valuation Methods.
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Part 5: STRUCTURING FINANCING FOR THE GROWING VENTURE.
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12. Professional Venture Capital.
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13. Other Financing Alternatives.
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14. Security Structures and Determining Enterprise Values.
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Part 6: EXIT AND TURNAROUND STRATEGIES.
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15. Harvesting the Business Venture Investment.
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16. Financially Troubled Ventures: Turnaround Opportunities?
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Part 7: CAPSTONE CASES.
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Case 1. Eco-Products, Inc.
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Case 2. Spatial Technology,
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,Chapter 1 q
INTRODUCTION TO FINANCE FOR ENTREPRENEURS q q q q
FOCUS
The purpose of this first chapter is to present an overview of what entrepreneurial finance is about. In doing so
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we hope to convey to you the importance of understanding and applying entrepreneurial finance methods and
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tools to help ensure an entrepreneurial venture is successful.We present a life cycle approach to the teaching
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of entrepreneurial finance where we cover venture operating and financial decisions faced by the
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entrepreneur as a venture progresses from an idea through to harvesting the venture.
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LEARNING OBJECTIVES q
LO 1.1: Characterize the entrepreneurial process.
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LO 1.2: Describe entrepreneurship and some characteristics of entrepreneurs.
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LO 1.3: Indicate several megatrends providing waves of entrepreneurial opportunities.LO 1.4:
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List and describe the seven principles of entrepreneurial finance.
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LO 1.5: Discuss entrepreneurial finance and the role of the financial manager.LO 1.6:
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Describe the various stages of a successful venture‘s life cycle.
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LO 1.7: Identify, by life cycle stage, the relevant types of financing and investors.LO 1.8:
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Understand the life cycle approach used in this book.
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CHAPTER OUTLINE q
1.1 THE ENTREPRENEURIAL PROCESS q q
1.2 ENTREPRENEURSHIP FUNDAMENTALS q
A. Who is an Entrepreneur? q q q
B. Basic Definitions q
C. Entrepreneurial Traits or Characteristics q q q
D. Opportunities Exist But Not Without Risks q q q q q
1.3 SOURCES OF ENTREPRENEURIAL OPPORTUNITIES q q q
A. Societal Changes q
B. Demographic Changes q
C. Technological Changes q
D. Emerging Economies and Global Changes q q q q
E. Crises and ―Bubbles‖ q q
F. Disruptive Innovation q
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, 1.4 PRINCIPLES OF ENTREPRENEURIAL FINANCE q q q
A. Real, Human, and Financial Capital must be Rented from Owners (Principle #1)
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B. Risk and Expected Reward go Hand in Hand (Principle #2)
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C. While Accounting is the Language of Business, Cash is the Currency (Principle #3)
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D. New Venture Financing Involves Search, Negotiation, and Privacy (Principle #4)
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E. A Venture‘s Financial Objective is to Increase Value (Principle #5)
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F. It is Dangerous to Assume that People Act Against Their Own Self-Interests(Principle
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#6) q
G. Venture Character and Reputation can be Assets or Liabilities (Principle #7)
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1.5 ROLE OF ENTREPRENEURIAL FINANCE
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1.6 THE SUCCESSFUL VENTURE LIFE CYCLE
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A. Development Stage q
B. Startup Stage q
C. Survival Stage q
D. Rapid-Growth Stage q
E. Early-Maturity Stage q
F. Life Cycle Stages and the Entrepreneurial Process
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1.7 FINANCING THROUGH THE VENTURE LIFE CYCLE q q q q q
A. Seed Financing q
B. Startup Financing q
C. First-Round Financing q
D. Second-Round Financing q
E. Mezzanine Financing q
F. Liquidity-Stage Financing q
G. Seasoned Financing q
1.8 LIFE CYCLE APPROACH FOR TEACHING ENTREPRENEURIAL FINANCESUMMARY
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DISCUSSION QUESTIONS AND ANSWERS q q q
1. What is the entrepreneurial process?
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The entrepreneurial process comprises: developing opportunities, gathering resources, andmanaging
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and building operations with the goal of creating value.
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2. What is entrepreneurship? What are some basic characteristics of entrepreneurs?
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Entrepreneurship is the process of changing ideas into commercial opportunities and creatingvalue.
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qWhile there is no prototypical entrepreneur, many are good at recognizing commercial opportunities,
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tend to be optimistic, and envision a plan for the future.
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3. Why do businesses close or cease operating? What are the primary reasons why businessesfail?
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