E. Finance
Euntrepreneurial Finance
Lecture 1:
Ventures: ( new projects/ ideas that make it extremely difficult to attract financing since it’s a new product by eutreprenures with no data and history to back up that they will return or make profit or even successfully launch the product) It is an alternative asset! Lack of tangible assets, expecting negative earnings and have uncertain prospects.
Traditional assets: publically traded shares, bonds, foreign exchanges, commodities, real estate.
Alternative asset: investments that have limited investment history, differentiated features from tradition assets (i.e. its not liquid) and it requires specialist skills to mange.
Eg:
Venture Capital: provides finance for start up firms that require capital but cant seek it out from other sources. Intensely monitors management and sometimes through representation on the board. Funds are dispensed in stages. Less successful investments are either liquidated or remain in operation at a modest level of activity.
Private Equity: Also invests in these high risk, high reward firms. (Not only do they use their own funds but they raise the bulk of their funds from financial institutions and high net worth individuals who want to invest but have no idea on what to invest on) examples of a private equity = university endowments and pension funds.
Buy out Funds
Venture Capitalist “raise a fund” on a periodic basis (every 3-5 years)
Funds are structure as “Limited Partnerships” – 10 years eventually funds are returned to investors and a new fund is raised
20% of investments will be winders 60% living and the other 20% ceases to exist
key problems in private firm financing: agency problems (moral hazard) : when a party is unable to observe/verify a counter part’s behvious AFTER a contract is put in place. They also cant observe the effort but they can only observe the final output..
Even higher risk for entrepreneurial firms as its even harder to observe their
Lecture 1:
Ventures: ( new projects/ ideas that make it extremely difficult to attract financing since it’s a new product by eutreprenures with no data and history to back up that they will return or make profit or even successfully launch the product) It is an alternative asset! Lack of tangible assets, expecting negative earnings and have uncertain prospects.
Traditional assets: publically traded shares, bonds, foreign exchanges, commodities, real estate.
Alternative asset: investments that have limited investment history, differentiated features from tradition assets (i.e. its not liquid) and it requires specialist skills to mange.
Eg:
Venture Capital: provides finance for start up firms that require capital but cant seek it out from other sources. Intensely monitors management and sometimes through representation on the board. Funds are dispensed in stages. Less successful investments are either liquidated or remain in operation at a modest level of activity.
Private Equity: Also invests in these high risk, high reward firms. (Not only do they use their own funds but they raise the bulk of their funds from financial institutions and high net worth individuals who want to invest but have no idea on what to invest on) examples of a private equity = university endowments and pension funds.
Buy out Funds
Venture Capitalist “raise a fund” on a periodic basis (every 3-5 years)
Funds are structure as “Limited Partnerships” – 10 years eventually funds are returned to investors and a new fund is raised
20% of investments will be winders 60% living and the other 20% ceases to exist
key problems in private firm financing: agency problems (moral hazard) : when a party is unable to observe/verify a counter part’s behvious AFTER a contract is put in place. They also cant observe the effort but they can only observe the final output..
Even higher risk for entrepreneurial firms as its even harder to observe their