Management and Organizational Studies 3370A/B Lecture Notes - Lecture 7: Angel Investor, Investment Banking, Private Equity
29 Mar 2016
School
Department
Professor
Document Summary
Bootstrapping iniial funding of the irm: process of how entrepreneurs raise money regular individuals. 1-2 years in length: early stages of prototype development, seed money base funding. Informaional asymmetry problems: venture capitalists are given equity interest in the company. Form of preferred shares converible to common stock. Experts in the industry ind good investments. Provide advice: how to reduce their risk. Only handle a handful of new companies. Reduces risk in 2 ways: increases diversiicaion of the originaing venture capitalist"s investment porfolio, willingness. Tendency to focus on investments they know: exit strategy not long-term investors. Contracts that indicate when, how and at what price is acceptable for the venture capitalists to exit. Sell to strategic buyer in private market: seek companies that will it strategically into their companies. Sell to inancial buy in the private market: will treat like a stock only interested in proit.
