Entrepreneurial Finance: Strategy, Valuation, and Deal Structure

Learning Objectives

After reading this chapter you will be able to:

• Understand the factors that influence the choice of financing

• Explain why immediacy of financial need limits the range of alternatives and why better planning yields more and less expensive alternatives

• Understand why the choice of financing depends on the size of the need, duration, and incentive effects of different financing structures

• Evaluate financial alternatives by considering the venture’s financial condition and development stages and capabilities of alternative providers of investment capital

• Identify advantages and disadvantages of relational financing arrangements such as strategic partnering and franchising

• Explain how and why financial distress affects availability of financing

• Understand how collateral, relationships, and reputations affect availability of financing

• Recognize that financing usually involves bilateral negotiation between parties who have differing incentives to complete a deal quickly or draw out the negotiations

• Avoid financing missteps in dealing with market downturns