BU121 Chapter Notes - Chapter 6: Operating Cash Flow, Business Plan, Free Cash Flow
Document Summary
Why it is so diicult to raise money and soluions. Uncertainty problem - investors are reluctant due to litle actual evidence, they dispute with the actual value of the venture with the entrepreneur and they want entrepreneurs to provide collateral for insurance. Self-inancing - not a complete soluion since some ventures require a large startup costs. Need to be combined with investors to succeed. Contract provisions - protects investors, like terms of contract for venture inancing. Mandatory redempion rights - allow investor to receive capital back when requested. Converible securiies - allows investor to convert preferred stock to common stock. Forfeiture and anidiluion provisions - allows investors to get more ownership if the venture does not meet the milestones and receive more shares to maintain ownership percentage when a new round of inancing occurs. Control rights - allows investors to control the use of venture assets. Vesing periods - length of ime that entrepreneurs cannot cash out.
