BUS131D_Lecture10_Handout0.ppt

BUS131D_Lecture10_Handout0.ppt - Raising Money for Starting...

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Raising Money for Starting and Growing New Dr. Michael Merz College of Business San Jose State University
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Dr. Michael Merz College of Business, San Jose State University 2 Today’s Agenda Importance of Raising Money Alternatives for Raising Money for a New Venture Sources of Personal Financing Sources of Equity Financing Sources of Debt Financing Sources of Other (Creative) Financing Timing of Different Sources of New Venture Funding Selection of Investors Creation and Importance of Social Capital Legitimacy Social Networking Networking Skills
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Dr. Michael Merz College of Business, San Jose State University 3 “To raise money, all you need is a great idea —the rest is just icing on the cake.”
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Dr. Michael Merz College of Business, San Jose State University 4 Importance of Raising Money Three Reasons New Ventures Need Funding Sources: Barringer and Ireland 2008
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Dr. Michael Merz College of Business, San Jose State University 5 Alternatives for Raising Money for a New Venture Alternatives Personal Financing Equity Financing Debt Financing Other (Creative) Financing • Personal Funds • Bootstrapping • Business Angels • Venture Capital • Initial Public Offerings • Commercial Banks • SBA Guaranteed Loan Program • Lease • Grants • Strategic Partners Sources: Lodish, Morgan, and Archambeau 2007 Barringer and Ireland 2008
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Dr. Michael Merz College of Business, San Jose State University 6 Sources of Personal Financing Personal Funds Involves both financial resources and sweat equity. Sweat equity represents the value of the time and effort that a founder puts into a firm. Often comes in the form of loans or investments, but can also involve outright gifts, foregone or delayed compensations, or reduced or free rent. Finding ways to avoid the need for external financing through creativity, ingenuity, thriftiness, cost- cutting, obtaining grants, or any other means. Bootstrapping Sources: Barringer and Ireland 2008
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Dr. Michael Merz College of Business, San Jose State University 7 Examples of Bootstrapping Buy used instead of new equipment. Coordinate purchases with other businesses. Lease equipment instead of buying. Obtain payments in advance from customers. Minimize personal expenses. Avoid unnecessary expenses, such as lavish office space or furniture. Buy items cheaply but prudently through discount
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This note was uploaded on 09/08/2010 for the course BUS 131D at San Jose State University .

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BUS131D_Lecture10_Handout0.ppt - Raising Money for Starting...

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