Lecture 5 Entrepreneurship and Enterprise Dr Vijay Vyas
Jan 04, 2016
Lecture 5Entrepreneurship and Enterprise
Dr Vijay Vyas
Understand 1. The nature of equity gap for small firms2. Importance of venture capital 3. Difference between formal and informal venture
capital4. Process of venture finance 5. Requirements of venture capital companies
2/15
Bank debt the usual option Problems with bank debt
◦ Collateral◦ Risk◦ Short term◦ Repayment pressure◦ Impatient and uncommitted
Size: £50000 to £500,000 (Deakins and Freel, 2003)
3/15
4/15
Seed Young Growing MatureStock Market
Institutional investorsRetained Profits
Venture capital Banks
Informal investorsFamily/Friends
Own Capital
Stage Model of Finance
Financial investment in companies which...◦ are unquoted◦ have significant growth potential◦ promise substantial capital gains but◦ are high risk investment
5/15
6
7/15
Cold Contacts Technology scansR
eferralsThe venture capital The venture capital process process
8/15
Asymmetric InformationAsymmetric Information
Adverse Adverse SelectionSelection
Moral HazardMoral Hazard
Institutional venture capital (formal)Min £500,000; Average Over £1 million
Informal (business angels)◦ Market?◦ Competitive?◦ Credible?◦ Potential?◦ Where money would be used?
Corporate venture capital Public sector venture capital
9/15
10
11/15
12/15
13/15
14
Seed finance (proof of concept funding)
Start-up finance Expansion finance Replacement Capital MBI/MBO
15/15
Thank You