Management and Organizational Studies 3370A/B Lecture Notes - Lecture 7: Venture Capital, Preferred Stock, Private Equity

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 3370A/B
• Professor: Maria Ferraro

Document Summary

Bootstrapping: initial funding of the firm resources necessary to start their business. The process by which many enterpreneurs raise seed money to obtain other. Usually comes from founder or other founders. Venture capital: wealthy individuals who invest their own money in emerging businesses. Why traditional souces of funding do not work for new businesses: Venture capitalists investments give them equity intrest in the company. Often in the form of preferred stock that is convertible into common stock at discertion of the venture capitalist. Venture capitalists provide more than funding: management skills, advice, How they reduce risk (know that only a handful of new companies will survive to provide counsel for ppl become successful firms) Syndicating investments: occurs when the originating venture capitalist sells a percentage of a deal to other venture capitalists. Increases diversification of investors portfolio (reduce risk) (2 total ways) Every agreement includes provision identifying who has the authority to make critical decisions concerning exit process.