This ppt provides a snapshot on the subject of entrepreneurial finance and also provides an in-depth introduction on venture life cycle and its stages.

1. ENTREPRENEURIAL
FINANCE

4. ❖ Meaning:
•Entrepreneurial finance is the study of value and resource
allocation, applied to new ventures.
• It addresses key questions which challenge all entrepreneurs:
How much money can and should be raised?
When should it be raised and from whom?
How should funding contracts and exit decisions be structured?

5. ❖ Definition:
“It is the application and adaptation of financial
tools and techniques to the planning, funding,
operations and valuation of an entrepreneurial
venture.”

6. VENTURE CAPITAL CYCLE

10. ❖ Five Life Cycle Stages:
Development Stage.
Start Up Stage.
Survival Stage.
Rapid Growth Stage.
Early-Maturity Stage.

11. Venture Life Cycle Meaning:
Stages of a successful venture’s life from
development through various stages of revenues
growth.

28. LIFE CYCLE STAGE LIFE CYCLE ENTREPRENEURIAL
PROCESS ACTIVITIES
DEVELOPMENT STAGE Screen business ideas.
Prepare business model/plan.
Obtain seed Financing.
START UP STAGE Choose organisational form.
Prepare Initial Financial statements.
Obtain start up financing.
SURVIVAL STAGE Monitor Financial Performance.
Project cash needs.
Obtain First Round financing.
RAPID GROWTH STAGE Create and build value.
Obtain Additional Financing.
Examine Exit Opportunities(IPO, SELL OR MERGE).
EARLY-MATURITY STAGE Managing ongoing operations.
Maintain and add value.
Obtain Seasoned Financing.

29. ❖ FINANCING THROUGH VENTURE LIFE CYCLE:
•Major types of financing include:
❑ Seed Financing.
❑ Start up Financing.
❑ First Round Financing.
❑ Second round, mezzanine and liquidity stage Financing.
❑ Seasoned Financing.

30. ❖ TYPES OF SOURCES OF FUNDING BY LIFE CYCLE
STAGE:
VENTURE FINANCING
LIFE CYCLE STAGE TYPES OF FINANCING MAJOR SOURCES / PLAYERS
DEVELOPMENT STAGE SEED FINANCING • Entrepreneur’s Assets.
• Family and Friends.
START UP STAGE START UP FINANCING • Entrepreneur’s Assets.
• Family and Friends.
• Venture Capitalists.
• Angel Investors.
SURVIVAL STAGE FIRST ROUND FINANCING • Business Operations.
• Venture Capitalists.
• Suppliers and Customers.
• Government assistance
Programmes.
• Commercial Banks.
RAPID GROWTH STAGE SECOND ROUND FINANCING
MEZZANINE FINANCING
LIQUIDITY STAGE FINANCING
• Business Operations.
• Suppliers and Customers.
• Commercial Banks.
• Investment Bankers.

31. SEASONED FINANCING
LIFE CYCLE STAGE TYPES OF FINANCING MAJOR SOURCES/ PALYERS
EARLY MATURITY STAGE Obtaining bank loans.
Issuing Bonds.
Issuing Stocks.
Business operations
Commercial Banks
Investment Bankers

32. SOURCES OF ENTREPRENUERIAL FINANCE:
• Personal Investment or Personal Savings.
• Venture Capital.
• Business Angels/Angel Investors.
• Assistant of Government.
• Commercial Bank Loans and Overdraft.
• Financial Bootstrapping.

33. ❑ Principles of Entrepreneurial Finance:
• Real, Human and Financial capital must be rented from owners.
• Risk and Expected Reward go hand in hand.
• While accounting is the language of business cash is the currency.
• New Venture Financing involves search, negotiation and privacy.
• A venture’s financial objective is to increase value.
• Ventures character and reputation can be assets or liabilities.
• It is dangerous to assume that people act against their own self interests.

34. ❖ IMPORTANCE:
• Entrepreneurial finance focuses on the financial management of a venture as it moves through
its lifecycle, beginning with its development stages and continuing through to when the
entrepreneur exists or harvests the venture.
• Nearly every entrepreneurial firm will face major operating and financial problems during its
early years, making entrepreneurial finance and the practice of sound financial management
critical to the survival and success of the venture.
• Financial distress occurs when cash flow is insufficient to meet current liability obligations.
• Anticipating and avoiding financial distress is one of the main reasons to study and apply
entrepreneurial finance.

35. • Generating Cash flows is the responsibility of all areas of the venture- marketing,
production/engineering, research and development, distribution, human resources and finance/
accounting.
• However, the entrepreneur and financial manager must help other members of the
entrepreneurial team relate their actions to the growth of cash flow and value. The financial
manager is normally responsible for keeping the venture’s financial records, preparing its
financial statements forward for one to two years.
• The venture needs adequate cash to survive the short-run. Financial plans indicate whether
the venture is expecting a cash shortage .If so, the entrepreneur should seek additional
financing to avert the shortage.
• Long-term financial planning typically involves projecting annual statements five years forward.
While the reliability of longer- term projections may be lower, it is still important to anticipate
large financial needs as soon as possible. Meeting those needs may dictate several rounds of
financing in the first few years of operations.
• The financial manager is responsible for monitoring the firm’s operating efficiency and financial
performance over time. Every successful venture must eventually produce operating profits and
free cash flows