Financial Management

Chapter 1

INTRODUCTION AND OVERVIEW

FOCUS

The purpose of this first chapter is to present an overview of what entrepreneurial finance is about. In doing so we hope to convey to you the importance of understanding and applying entrepreneurial finance methods and tools to help ensure an entrepreneurial venture is successful. We present a life cycle approach to the teaching of entrepreneurial finance where we cover venture operating and financial decisions faced by the entrepreneur as a venture progresses from an idea through to harvesting the venture.

LEARNING OBJECTIVES

1. Characterize the entrepreneurial process

2. Describe entrepreneurship and some characteristics of entrepreneurs

3. Indicate three megatrends providing waves of entrepreneurial opportunities

4. List and describe the seven principles of entrepreneurial finance

5. Discuss entrepreneurial finance and the role of the financial manager

6. Describe the various stages of a successful venture’s life cycle

7. Identify, by life cycle stage, the relevant types of financing and investors

8. Understand the life cycle approach used in this book

CHAPTER OUTLINE

1. THE ENTREPRENEURIAL PROCESS

2. ENTREPRENEURSHIP FUNDAMENTALS

A. Who is an Entrepreneur?

B. Basic Definitions

C. Entrepreneurial Traits or Characteristics

D. Opportunities Exist But Not Without Risks

3. SOURCES OF ENTREPRENEURIAL OPPORTUNITIES

A. Societal Changes

B. Demographic Changes

C. Technological Changes

D. Crises and “Bubbles”

4. PRINCIPLES OF ENTREPRENEURIAL FINANCE

A. Real, Human, and Financial Capital must be Rented from Owners

B. Risk and Expected Reward go Hand in Hand

C. While Accounting is the Language of Business, Cash is the Currency

D. New Venture Financing Involves Search, Negotiation, and Privacy

E. A Venture’s Financial Objective is to Increase Value...