Management and Organizational Studies 1023A/B Lecture Notes - Lecture 2: W. M. Keck Observatory, Information Asymmetry, Investment Banking

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 1023A/B
• Professor: ALL

Document Summary

Initial funding of the firm: bootstrapping the process by which many entrepreneurs raise seed money and obtain other resources necessary to start their business. It is important because entrepreneurs have only limited access to traditional sources of funding. Instead they invest in venture capital funds that specialize in identifying attractive investments in new businesses. Syndication occurs when the originating venture capitalist sells a percentage of a deal to other venture capitalists. Increases the diversification of the originating (cid:448)e(cid:374)tu(cid:396)e (cid:272)apitalist(cid:859)s i(cid:374)(cid:448)est(cid:373)e(cid:374)t po(cid:396)tfolio: second, willingness of other venture capitalists to share in the investment provides independent corroboration that the investment is a reasonable decision. In-depth knowledge this gives the venture capitalist a competitive advantage over other investors or lenders who are generalists: the exit strategy, venture capitalists are not long-term investors in the companies they back. Usually they stay with a new firm until it is a successful going concern, usually takes 3-7 years then they exit by selling their equity position.