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E earnings, 8, 23-25 earnout provisions, 390 economic theory, financial, 16 decision making and, 2 venture valuation, 211–212 venture valuation and, 251–268 economy of scale, 139–141, 159, 289 employee stock ownership plan (ESOP), 15, 216 entrepreneur confidence, 373 credibility and commitment, 61–64 defined, 2–3 diversification, 288–290, 322–326 first law of the, 175 as human capital, 322 investment, 289–290, 300–302 moral hazards and the, 381–385 planning process for the, 13 sharing risk and return, 340–347 strategic objectives of the, 82–84 venture valuation and the, 215–216, 286–288 wealth, 291–292, 314, 316–317, 320–322 equity beta by SIC code, 258 cost of outside, 382–384 distribution and cash flow, 137–139 and financing, venture, 68–70 ratio of debt to, 180 securities and certification, 395–396 stocks as, 42–43 Export-Import Bank, 40 external financing Bell Telephone Company, 23 business plans and, 59–64 cash flow and, 141 modeling for, 162–167, 194–202 raising capital by, 373–378 staging of, 26–31, 176, 202, 407 n.14 strategic planning and, 80–82 uncertainty in, 180–183 . see also angel investors; outside investors; venture capitalists F factoring accounts receivable, 40–41 failure, business, 3, 11, 182–183 Financial Accounting Standards Board (FASB), 172 n.8 financial decision making, 4-5, 14 financial strategy. see strategic planning financing alternatives, 197–202, 339–340, 355–362 contracts, 387 debt bond market and, 43 business plans and, 69–70 cash flow and, 137–139 modeling for, 162–167 net present value and, 6 private placements, 41–42 secured lenders and, 41 strategic planning and, 79–80 venture development, 28, 31–33 early-stage, 176 external Bell Telephone Company, 23 business plans and, 59–64 cash flow and, 141 modeling for, 162–167, 194–202 staging of, 26–31, 176, 202 strategic planning and, 80–82, 180–183 global, 35, 277–278, 385 growth, 80–82, 165 mezzanine, 31, 41, 216 rates of return, 214, 233–234, 241 n.31 requirements, 191–202 sources of, 208 n.7, 358 |
spontaneous, 142–143 start-up, 31, 165 subsidized, 355–358 venture break even analysis of, 183–189 business plans and, 55–57, 66–68 cash flow and, 137–139, 174–176 forecasting and, 136–137, 139–141, 148–156 initial public offering (IPO) and, 42–43 international, 35 model for, 162–167 organizational design and, 397–402 precontractural, 371–378 pro forma analysis and, 146–148 sequence of, 30–31 signaling in, 389–392 simulation models of, 107–108, 191–202 sources of, 31–44, 47 valuation methods of, 217–218 working capital, 143 First Chicago venture valuation method, 243, 254–255, 274, 283 n.10 fixed costs, 61–62 Ford Motor Company, 77–79, 82–83, 101 n.7 forecasting, financial break even analysis and, 183–189 business plans and, 14-15, 66–68, 71 implementation plan and, 302–307 information sources on, 159, 161 models, 135 n.13, 162–168 myths of venture valuation and, 213 pro forma analysis and, 146–148, 158–159 rules for, 161 sales and, 148–156 strategic planning, 101 n.1 uncertainty in, 156–158, 167 venture financing, 136–137, 139–142 yardsticks for, 153–154 foreign investment, 277–278 franchising, 15, 43–44 free cash flow, 10 funds, venture capital, 34, 36–39, 134 n.4 rates of return, 214, 233–234, 241 n.31 G game theory, 76-77, 94-98 . see also decision trees General Motors, 77–79, 101 n.8 generally accepted accounting principles (GAAP), 172 n.8 geography and venture capital, 37–38 global venture financing, 35, 277–278 governance, 401–402 government bonds, 256 grants, 39 venture capital programs, 15, 39–40 grants, government, 39 growth financing, 80–82, 165 modeling for sustainable, 175–180, 203 non-sustainable, 180–181 uncertainty in planning, 181–183, 193–194 growth financing. see financing, venture; strategic planning H hedging, 336 n.12 I implementation plan decision making in the, 3 financial contracting and, 358–362 venture formation and the, 14 venture valuation and, 302–307, 314–319 incentive contracts, 8–9 income statements, 137, 148, 154, 158–159, 164. see also statements, financial valuation, venture and, 244–245 |