IUM SWAKOPMUND
IUM SWAKOPMUND
130000981
LUKAS AMUPANDA
FINANCE MANAGEMENT
ASSIGNMENT 3
DATE SUBMITTED : 05 March 2015
Venture-Capital-Backed - the selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative to an IPO for a venture-capital-backed company is an acquisition (getting purchased by another company).
Reasons why ventured backed tech company is failing.
They focus on revenues instead of profits. Revenues don’t matter profits do. However, most ventured capital-backed firms still focus on building instead of harvesting. The argument is that these firms have some cash in the bank from the VCs, so get sales now and sell later (i.e., soon) for a multiple of sales. Profits are always an appropriate discipline for any management team. If you’re not creating profits, what value is your business? Focus on profits and revenues will take care of themselves.
Securing a ventured capital deal can be a difficult process due to accounting and legal costs a firm must shoulder. The start-up company must also give up some ownership stake to the ventured capital company investing in it. This results in a partial loss of autonomy that finds venture capitalists involved in decision-making processes. Ventured capital deals also come with stipulations and restrictions in composition of the start-up's management team, employee salary and other factors. Furthermore, with the VC firm literally invested in the company's success, all business operations will be under constant scrutiny. The loss of control varies depending on the terms of the VC deal. Blackie and Chris should also consider cutting down on the number of employees down to approximate 40 employees to cut down on losses and regain revenue in the meantime.
Chris can offer the following deal to his investors or owners of the business (i) selling out before the company’s value can be demonstrated by its financial performance; (ii) addressing cultural and
130000981
LUKAS AMUPANDA
FINANCE MANAGEMENT
ASSIGNMENT 3
DATE SUBMITTED : 05 March 2015
Venture-Capital-Backed - the selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative to an IPO for a venture-capital-backed company is an acquisition (getting purchased by another company).
Reasons why ventured backed tech company is failing.
They focus on revenues instead of profits. Revenues don’t matter profits do. However, most ventured capital-backed firms still focus on building instead of harvesting. The argument is that these firms have some cash in the bank from the VCs, so get sales now and sell later (i.e., soon) for a multiple of sales. Profits are always an appropriate discipline for any management team. If you’re not creating profits, what value is your business? Focus on profits and revenues will take care of themselves.
Securing a ventured capital deal can be a difficult process due to accounting and legal costs a firm must shoulder. The start-up company must also give up some ownership stake to the ventured capital company investing in it. This results in a partial loss of autonomy that finds venture capitalists involved in decision-making processes. Ventured capital deals also come with stipulations and restrictions in composition of the start-up's management team, employee salary and other factors. Furthermore, with the VC firm literally invested in the company's success, all business operations will be under constant scrutiny. The loss of control varies depending on the terms of the VC deal. Blackie and Chris should also consider cutting down on the number of employees down to approximate 40 employees to cut down on losses and regain revenue in the meantime.
Chris can offer the following deal to his investors or owners of the business (i) selling out before the company’s value can be demonstrated by its financial performance; (ii) addressing cultural and