BUS 477 Lecture Notes - Lecture 10: Market Risk, Angel Investor, Moral Hazard
9 Sep 2017
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A comparison of the investment criteria of banker, venture capitalist and business angels. Entrepreneurs must customize their business plan according to whether they are seeking funding from a bank, venture capital, fund or business angel. More the business angels require a business plan before they will consider investing. A business plan is the ticket of admission for an entrepreneur. How good the business plan supports the financial proposal is imperative. Ba(cid:374)ke(cid:396)s look to (cid:373)i(cid:374)i(cid:373)ize type o(cid:374)e e(cid:396)(cid:396)o(cid:396)s, (cid:449)hi(cid:272)h is (cid:862)le(cid:374)di(cid:374)g to (cid:271)usi(cid:374)ess (cid:449)hi(cid:272)h. Risk of moral hazard, which is the banks inability to monitor entrepreneurs once a loan has been made. Majority of small business bank loans have occurred through taking collateral on personal assets. This party is looking for capital and to reap some of the benefits that come with the success of the company. The quality of the entrepreneur heavily decides the investment decision: product characteristics, market characteristics, retruns.
