Chapter 8 Use Alt-VC First Flashcards
(15 cards)
What are the main funding options available to US entrepreneurs?
Debt, government-based development finance sources, equity sources, Alt-VC sources
Silicon Valley VCs are the best known, but Alt-VC sources may be more suitable for many entrepreneurs.
What is a significant factor affecting financing for entrepreneurs?
Stage of the venture
High-risk early stages make it difficult to obtain VC funding from institutional financiers.
What are the common sources of funding for high-risk early-stage ventures?
Noninstitutional equity sources, collateral-based debt, government-sponsored financing
These are more likely to be available at high-risk early stages.
What should entrepreneurs consider regarding the amount of financing needed?
When they need it, what it is needed for, how much should come from debt, equity, and development finance
Securing the right amount is crucial for achieving business goals.
What factors influence the right financing sources for a business?
Proof of potential, level of potential, cash flow, collateral
Proven ventures usually find it easier to obtain financing.
What is the best combination of financing for a business?
The right combination of financing sources, instruments, and structure
Many entrepreneurs are unaware of all financing sources available to them.
What are some examples of Alt-VC sources for funding?
Entrepreneur’s savings, friends and family, angels, business alliances, Alt-VC funds without control demands
These sources can provide significant capital without the pressures from traditional VCs.
How can an entrepreneur’s personal savings impact their funding prospects?
Shows frugality and commitment
Investors are often impressed by entrepreneurs who invest their own savings.
What role do friends and family play in early-stage financing?
They often provide initial funding due to personal relationships
This source can be limited by the wealth of the entrepreneur’s family.
What is a potential downside of using friends and family for funding?
Risk of damaging personal relationships if the business fails
Losing their money can lead to strained family dynamics.
What types of investors are considered ‘angels’?
Individuals or groups that provide early-stage financing
They often invest in exchange for equity and are typically more risk-tolerant.
What is a distinguishing feature of Alt-VC funds?
They do not demand control over the venture
Small-business investment companies often fall into this category.
What is the significance of business alliances in funding?
They can provide capital and valuable expertise
Examples include funding from customers and vendors.
What is a common characteristic of successful crowdfunding projects?
Funded by potential consumers of the product
Oculus Rift is an example of a successful crowdfunding project.
True or False: VCs are the only financing sources available to entrepreneurs.
False
There are many types of financing sources including Alt-VC options.
