arixzhia

• Barriers to entry


  Obstacles that make it difficult to enter a given market
• Other Barriers to entry in entrepreneurship

  • Technology
  • Knowledge
  • Competition
  • Threats
  • Lack or too much of these may lead people not to pursue entrepreneurship
• Entrepreneurial Capital


  Topic 8
• Source of Financial Capital

  • Financing
• Debt financing


  Loans; loans from other individuals; government-backed loans, lines of credit; credit cards; mortgages; and equipment loans
• Equity financing


  When companies sell shares of stocks to investors to raise capital
• Benefit of equity financing

  The money received doesn't have to be repaid. If the company fails, the funds raised aren't returned to shareholders
• Informal Investors


  • Founders
  • Family
  • Friends
  • Foolhardy investors
• Foolhardy


  Throws caution to the wind and takes reckless chances
• Foolhardy mistake


  Typically the result of impulsive behavior
• 4Fs


  Founders, Family, Friends, Foolhardy investors
• Crowdfunding


  A fundraising campaign, which is typically time-limited. The fundraising business publicizes its efforts and requests contributions for startup costs or a specific project
• Angel Financing


  An investment model wherein "business angels" – essentially, individuals – provide financial backing for small businesses in exchange for equity in the company
• Business Angels


  High net worth individuals, foundations, research centers, nonprofit societies, corporations acting as donors, etc.
• Corporate Angels


  Private investors who use their severance or early-retirement pay from former senior management positions at large corporations to make entrepreneurial investments. Typically, they seek a new senior management job in the investment
• Entrepreneurial Angels


  Successful entrepreneurs themselves, now looking for ways to diversify their portfolio or expand current business, rather than looking for a new job. They take bigger risks and invest more capital
• Enthusiast Angels


  Less professional than their entrepreneurial counterparts, these angels invest in firms more as a hobby now that they are in their later years. Most enthusiast angels are aged 65 or older, are independently wealthy from success in a business they started
• Professional Angels


  Prefer to invest in firms that offer a product or service with which they have experience, frequently offering their sector expertise to the investee firm, although they're usually not too actively involved. Invest/Co-invest in several companies at one time
• Micro-management Angels


  Prefer great control over their investments, often micromanaging them from a seat on the company board rather than through active participation. Some of them were born wealthy, but the majority attained wealth through their own efforts. They may invest in as many as four companies at a time
• Seed Financing


  A type of equity-based financing. Provides the initial funds for a business concept to be developed. (also known as seed capital, seed money, or seed funding) is the earliest stage of the capital-raising process of a startup. This may involve additional research, product development and initial marketing to reach out to early-adopter customers
• Venture Capital


  A type of private equity investing specific to earlier-stage businesses that require larger capital. In return, the investor receives an equity stake in the business through the issuance of some type of security instrument
• Venture Capital


  • Capital for start-ups and expansion
  • Market research and strategy
  • Management-consulting functions
  • Contacts with prospect customers, suppliers, etc.
  • Assistance on negotiating technical agreements
  • Management and accounting controls
  • Additional Employee recruitment
  • Risk management
• Commercial Banks


  Make 1-5 year immediate-term loans secured by collateral (receivables, inventories, or other assets)
• Advantage of Commercial Banks

  No relinquishment of ownership is required. During periods of low interest rates, the opportunity cost is justified since the cost of borrowing is low
• Disadvantage of Commercial Banks

  Regular (monthly) interest payments are required. Continual cash-flow problems can be intensified because of payback responsibility. Heavy use of debt can inhibit growth and development
• Four Types of micro-finance providers

  • Formal financial institutions: commercial banks, state banks, agricultural development banks, savings banks, rural banks
  • Non-governmental organization (NGOs): solidarity lending, village banking and mobile banking
  • Informal financial service providers: moneylenders, pawn brokers, pawn shops, insurance firms, cashier's check issuers, check cashing locations, payday lending, currency exchanges, and microloan organizations
  • Member-owned organizations: self-help groups, credit unions and a variety of hybrid organizations such as financial service associations
• Initial Public Offerings (IPO)


  It is used to represent the registered public offering of a company's securities for the first time. "GOING PUBLIC" is a term used to refer to a corporation raising capital through the sale of securities on the public markets
• Advantages of IPO


  • Size of Capital amount
  • Liquidity
  • Value
  • Image
• Disadvantages of IPO


  • Costs
  • Disclosure
  • Requirements
  • Shareholder Pressure
• Bonds


  While stocks are ownership in a company, bonds are a loan to a company, investor or government. With a set interest payment, a maturity date, and a face value that the borrower will repay
• The business founder can raise money through a bond

  By borrowing P1M from investors and promising to pay back P1M in 2 years plus an additional 10% interest
• According to data from the Bureau of Labor Statistics, approximately 20% of small businesses fail within the 1st year. By the end of the second year, 30% of businesses will have failed. By the end of the fifth year, about half will have failed (50%). And by the end of the decade, only 30% of businesses will remain (a 70% failure rate)
• About 50% of all new businesses will fail within 5 years -(Lending Tree & SBA) 82% closed/failed-SCORE
• Poor Marketing/Mgmt.
• Mainstream markets


  Difficult for entrepreneurs to break into
• Niche markets


  Cater for specialist needs
• Emerging trends


  The smartest entrepreneurs see early and maneuvers themselves into the cash flow
• How To Assess an Opportunity

  • Choosing Suitable, Exploitable Markets
  • Opening new markets
  • Geographic/Mkt segments/Distribution
  • Steering clear of overcrowded marketplaces
• Small fish in a really big pond

  Have the opportunity to capture market share
• Offering a better or a different product or service


  The entrepreneur may discover some technical breakthrough protected by a patent