Finance 661: Entrepreneurial Finance
Instructor: Prof. Manuel Adelino
March 22, 2014
Section 402: 12:30 -2:45 PM
1. There were multiple barriers to starting a biotechnology firm in France: A) Expensive fund-raising: Raising capital was a huge issue in France. Unlike US, France did not have a mature stock market. Hence, doing an IPO was not a viable option. Additionally, the Venture Capital market was risk averse in France due to certain cultural barriers. VC’s perceived biotechnology as an extremely risky business and would not invest in this business unless the company has a proven concept or stable source of revenue. French Venture Capitalists firms focused more on expansion rather than funding start-ups B) Lack of experienced management expertise: One of the biggest barriers for biotechnology firms was finding the right management people. French nationals had no knowledge of patents, licensing and business development. Lack of global exposure among management people meant that biotech firms failed to look beyond the French capital raising market and did not build any relationships with global pharma and biotech firms. Also, most of the managers were fluent only in French so dealing with global clients was a huge issue due to language barrier. C) Academic orientation of Scientists: France had the competitive advantage of having some of the best scientists in the world. However, they lacked the desire to commercialize their products. Most of the scientists wanted to win a Nobel Prize rather than starting a firm that generates profits. The absence of major biotech firms in France also led to this academic orientation of scientists.
Exhibit 2: Florida Air - DCF Valuation (Modified Revenue and Formative Year Growth w/ Sensitivity)
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