Chapter 10 Seek Non-VC VCs First Flashcards
(20 cards)
What are alternate sources of equity?
Sources that offer significant amounts of funding without seeking control.
Why are corporate alliances considered attractive for equity funding?
They offer money, clout, and can open many doors for entrepreneurs.
What potential downside exists when forming alliances with corporations?
Corporations may want options to acquire your company later, limiting upside.
What was a notable alliance between Microsoft and IBM?
IBM paid Microsoft for using its operating system and allowed licensing to others.
How did Mike Bloomberg benefit from his alliance with Merrill Lynch?
Received funding and credibility while retaining control of his company.
What role did Charter Medical Corporation play in Richard Burke’s UnitedHealth?
Provided initial seed capital and staffing for the HMO.
What was the strategy used by Dick Schulze to finance Best Buy?
Used extended terms from suppliers like Sony and Panasonic.
What is a significant risk associated with corporate alliances?
Partners may want to absorb technology and may seek a right of first refusal.
What are Corporate VCs (CVC)?
Corporations that fund ventures directly through alliances or their VC funds.
Why might entrepreneurs prefer late-stage VCs?
They may allow founders to retain control and not require CEO replacement.
What is the function of Small-Business Investment Companies (SBIC)?
Provide equity funding to US ventures using investor funds and federal debt.
What shortcomings led to the rise of the current VC industry?
SBICs’ use of leverage and short loan lifespan forced them to fund later-stage ventures.
What should entrepreneurs consider when seeking Area & Community Venture Capital Funds?
Local VC funds may be more accessible than national Silicon Valley VCs.
What is the significance of community-development VC funds?
They can be an attractive source for businesses in economically depressed areas.
What percentage of ventures do not get VC funding?
99.9 percent.
What is the recommended approach for entrepreneurs if VCs are not interested?
Be capital efficient and explore alternate sources of funding.
Fill in the blank: Entrepreneurs should seek _______ sources such as friends, family, angels, and crowdfunding.
[smarter]
True or False: Late-stage VCs often require the entrepreneur to give up CEO control.
False.
List some alternate sources of funding for entrepreneurs.
- Friends and family
- Angels
- Corporate alliance partners
- Crowdfunding
- Scalable-debt sources
What finance-smart strategies can entrepreneurs use?
Grow more with less and adjust strategy for capital efficiency.
