Chapter 6 Finance to the Stage Flashcards
(21 cards)
What is the relationship between the stage of a venture and the risk involved?
The earlier the stage, the higher the risk.
What should entrepreneurs focus on in early stages to maintain control?
Capital efficiency to reduce needs, increase internal cash flow, and seek non-controlling sources.
What is the impact of a venture’s stage on financing options?
Later stages offer more financing options and lower costs compared to earlier stages.
What is the R&D stage in venture financing?
The stage during which the initial product is developed and is the most difficult and expensive to finance.
What are the target annual returns for VCs during the seed/start-up stage?
60–80 percent.
What characterizes the emerging stage of a venture?
The venture has sales with losses and negative cash flow, but risk is lower than in previous stages.
What is the target annual return for VCs during the growth stage?
Around 25 percent and up.
What major change often occurs after the ‘Aha’ moment in venture financing?
VCs may require a change in leadership as a condition for investing.
What is a key strategy for entrepreneurs to reach ‘Aha’ without VC?
Using a variety of strategies and sources, focusing on cash flow, and developing the right strategy to grow with capital efficiency.
What types of financing options are available before reaching ‘Aha’?
Self-funding, strategic alliances, and scalable debt.
What should entrepreneurs do if their direct competitors have VC?
Consider getting VC after leadership Aha to avoid being handicapped.
What is the significance of a self-funding business strategy?
It allows entrepreneurs to maintain control and reduce reliance on VC.
What unique strategy did Michael Dell use to compete against VC-backed competitors?
Selling directly to consumers to generate cash before purchasing inventory.
True or False: Most billion-dollar entrepreneurs grew by avoiding or delaying VC.
True.
Fill in the blank: At the _____ stage, the venture is developing its business plan and has a product ready for sale.
seed/start-up
What is the importance of negotiating from a stronger position as a venture gains momentum?
It helps entrepreneurs lead and secure better financing terms.
What is the role of cash flow in the financing of a venture?
It is crucial for funding losses and for meeting growing asset needs.
What happens to the availability of VC as a venture progresses through its stages?
There are more VCs in later rounds than in earlier ones.
What did Mike Bloomberg’s alliance with Merrill Lynch provide him?
Capital and his first customer.
What is the conclusion regarding financing options for entrepreneurs?
Finding the right financing at each stage is crucial to grow with control.
What is the potential impact of reaching the ‘Aha’ moment on attracting VCs?
It increases the likelihood of VCs reaching out due to higher potential and lower risk.
