BUS 477 Lecture Notes - Lecture 8: Cash Flow

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BUS 477 3/2/2017 FINANCE
Look at
- What did you do to move your venture forward?
- What were your key takeaways from the pitching panel?
- Why do you need external money for your new business venture?
- How much money do you need?
- Different sources of finance for your new business
- Valuation methodologies
o How value changes over time
- Managing risk
o Risk and the entrepreneur
o Risk and the investor
- Exercise: Starting your financing plan
Key Questions
- How much $$ do you need?
o Software typical contingency is 20%
o Hardware stuff , contingency will be double
- Where can you get it?
- Who owns the business?
- How much is it worth?
Why do you need Money?
- Every new business needs money to finance it:
o Administration; sales and marketing; manufacturing; development; salaries;
working capital
- High tech and high growth businesses often need more money than low tech businesses
- Product based companies often need more money than service based companies
- More money means you can grow faster
Do you need External Money
- Not always: it depends
o How much money you have at the start
o How much money your business needs to get started
o How fast you want to grow
o How risk averse you are
o How much control you will give up
- About half of Cambridge high tech companies have used no investment beyond seed
funding
Pros & Cons of External $$
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