Review - Chapter 1 Introduction and overview Life Cycle...

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Chapter 1 Introduction and overview Life Cycle Stages Venture life cycle- stages of a successful ventures life from development through various stages of revenue growth. o Development Stage- a period involving the progression from an idea to a promising business opportunity Feasibility of an idea is put on trial in this stage, prototype, and trial service, occurs 1 year before market entry Seed Financing from friends family and assets 50% o Startup Stage- period when the venture is organized, developed and initial revenue model is put in place Goes from -.5 years to .5 years, revenue begins at time 0, begins to operate and sell product and service Startup financing from assets, family, friends, business angels, venture capitalists 40% o Survival Stage - period when revenues start to grow and help pay some but not all of expenses .5 to1.5 years, more serious concerns about financial impression they leave, formal financial statements come into use First round financing- Business operations, VC’s, suppliers and customers, Government assistance programs, Commercial banks o Rapid-Growth Stage- period of very rapid revenue and cash flows Cash flows grow more quickly than outflows, 1.5 to 4.5 years, reaps the benefits of economies of scale in production and dist. Second round financing/mezzanine financing/liquidity stage financing/- Business ops, suppliers/customers, Com. Banks, IB o Maturity stage- period when the growth of the revenue and cash flow continues but at a much slower rate than in the rapid growth stage +4 years, value continues to increase, most venture has already been created, decide when to sell the operation Obtaining bank loans/issuing bonds/stock- Business ops, commercial banks, IB’s Chapter 2 From the idea to the business plan Sound Business Model 3 things o Generate revenues- Perceived present and future value is its current level of revenues, provides a product customers will care about, must strive to generate new products Competition can be delayed but not avoided, which results in lower profit margins o Make Profits- Achieving after tax profits, must target venture profitability growth, No venture can ignore capital costs
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o Produce Cash flows Expectation that the firm will be able to pay accumulated equity capital costs by what remains of profits after all investment costs have been subtracted Anticipates the cash flows associated with expansions in the ventures asset investments Business Plan- written document that describes the proposed product opportunity, current resources and financial projections o Executive summary - overview of the other sections in the business plan, brief descriptions of the product and the market, marketing plan strategy, how operations are to be conducted, management team, financing plan o Business description- Description of the product/service Industry background
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This note was uploaded on 02/27/2008 for the course ESBM 4570 taught by Professor Buczkowski, during the Fall '07 term at Colorado.

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Review - Chapter 1 Introduction and overview Life Cycle...

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