ENT_L5 Flashcards
(31 cards)
List the key questions in entrepreneurial fundraising.
- How much money do you need?
- Do you even need money?
- How to avoid dilution while maximising value?
- When do you need the money?
- What type of investors to target?
- How to provide attractive returns?
- What type of financial instrument?
- How to price your company at each stage?
- How to approach & pitch investors?
Why might a start‑up look for an investor?
- To bridge the “Valley of Death” between idea and break‑even
- Finance the negative cumulative cash flow until revenues exceed costs
What items belong in the monthly BurnRate?
- No cash‑in from customers
- All supplier cash‑out
- Salaries incl. social costs
- Rent and leases
- Interest and taxes
- Other fixed cash costs
How do you calculate RunWay?
RunWay= Cash at hand÷Monthly BurnRate
Shows how many months the company can survive.
Give examples of non‑dilutive and dilutive financing.
- Non‑dilutive: founders’ own money, grants, crowdfunding rewards
- Dilutive: business angels, accelerators, venture capital, corporate VC
Name the most common dilutive sources of finance.
- Business Angels
- Accelerators / Incubators / Super Angels
- Crowd Funding (equity)
- Venture Capital
- Corporate Venture Capital
Typical funding amounts and time frames (examples).
- Family & Friends:$1 – $250 k| ≈30 days
- Crowdfunding:$1 k – $100 k| ≈60 days
- Angels:$250 k – $1.5 M| 30‑60 days
- Venture Capital:$2 M – $10 M| 90‑180 days
- Strategic partners:$1 M – $25 M| 180‑360 days
Define a Business Angel.
- Wealthy private investor, often an ex‑entrepreneur
- Invests CHF10 k – 250 k (sometimes more in syndicates)
- Seeks fun and return; likes hands‑on involvement in known sectors
List different types of Business Angel.
- Super angel
- Domain angel
- Grouped angel
- Financial angel
- “Sport fisherman” angel
- Foolish angel
Roughly what share of angels fail to get their money back?
Between 50 % and 70 % of angel investors do not recover their capital.
What do accelerators / incubators provide?
- Facilities (office, prototyping tools, reception)
- Coaching & mentor access
- Accountability and programme structure (3‑6 months+)
- Sometimes seed funding, often linked to corporate or public sponsors
Describe the two basic crowdfunding funding schemes.
- Fixed: all‑or‑nothing – project only gets funds if target reached
- Flexible: keep‑it‑all – entrepreneur keeps whatever is raised
What is Venture Capital?
- Professional equity invested alongside entrepreneurs
- Finances companies in early or expansion stages
- Channelled through a VC fund pooling several investors
What do VCs expect in a business plan?
- Verifiable 12‑24 month milestones
- Realistic financials – avoid mere hockey‑stick projections
Sketch the basic VC fund structure.
- Limited Partners (LPs) provide capital (pension funds, corporates, etc.)
- General Partners (GPs) manage investments
- Life 10‑13 years; LPs paid first on exits
- Annual management fee 1.5 – 3 % NAV
Why do VCs focus on milestones and exits?
“Nobody makes real money until the exit” – achieving milestones boosts valuation and keeps the firm fundable.
Give the formula linking pre‑money and post‑money valuation.
Pre‑money valuation+Investment=Post‑money valuation
If a firm is worth $1 M pre‑money and raises $250 k, what % does the investor obtain and what is the founder stake post‑deal?
- Investor stake = 250 k ÷ 1.25 M = 20 %
- Founder stake falls from 100 % to 80 %
Explain dilution via a simple cap table timeline.
- T0: founders issue 3 M shares (100 %)
- T1: Investor A buys 25 % for CHF250 k (founders 75 %)
- T2: Investor B buys 20 % for CHF1 M (Investor A un‑diluted ≈20 %; founders ≈60 %)
What is the Asset‑based valuation approach?
- Calculates Enterprise Value (EV)
- Equity value = EV+Cash–Financial debt
Differentiate Equity value and Enterprise value.
- Equity value: value of all shares (market cap)
- Enterprise value: value of entire business debt‑ & cash‑free; equals equity value only when cash & debt are zero
What variables feed the Discounted Cash Flow (DCF) method?
- Forecast Free Cash Flow FCFn
- Discount rate = WACC
- Terminal Value assuming growth g
- Investment horizon (e.g., 3‑5 years)
Define Net Present Value (NPV).
Sum of present values of future positive and negative cash flows over the investment period.
What proportion of European VC‑backed companies fail?
≈50 % fail (analysis of 800 deals).
