Why stock would generate bigger return on bonds

Many different paths but one standard route would be

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Unformatted text preview: ompany, you still have to be prepared to talk to institutional professor How sophisticated is your business plan and how good is your accounting How quickly do you need the money? Every venture capitalist protects themselves by doing thorough review of company they are investing in. sometimes also do “due diligence” to stall to see if entrepreneur runs out of money (get more of company for lower price) If you need money quickly, individuals are better Are you willing to cede some control? Venture capitalists may seek some restrictions for bigger checks If you want to maintain control, look more at individuals. Are you looking for non- financial value from your investors? VC’s will help you recruit other talent that will help your business grow. If you’re gonna do a pubic offering, how liquid do you want your securities to be? Institutional investors tend to reduce stock liquidity (big block trades of stock) Question 4: do you use an intermediary (i.e. investment bank)? Do you have sufficient contacts and expertise of your own? I banks charge money, flat and then profit- based If you have money on your own, you may not need banking firm (save the fee). if you don’t have this, the bankers can help you. Do you need “branding” which an intermediary can bring (especially in an IPO)? Mark of distinction to have one of the bigger firms underwrite your IPO. How much are you raising? Larger amounts, investors would want a banker. Are you raising money publicly or privately? In public context, need ‘underwriter”, privately less so. Do you need help “cleaning up” your business? Bankers can help with this know what invesotrs require. Will you need to raise capital again in the future? “relationship value” of an investment bank if you have multiple deals, may be better to have banks. are you looking for help with personal liquidity? Banks can hedge stock and work with CEO to allow him to skip out on selling on IPO. WHO ARE THE BANKS? Bulge bracket JP Morgan Chase Bank of America Merrill lynch Morgan Stanley Goldman Sachs Credit Suisse Citigroup Deutsche Bank Barclays UBS Wells Fargo Question 5: what are the stages in a capital raising process? Many different paths but one standard route would be: Determine amount of capital needed, form of capital, public or private If appropriate, hire an investment bank Prepare materials (offering memo, prospectus, reg. statement, official statement) Disclose information to potential investors, that is your defense against a lawsuit There is no law that guarantees an investor will make money. if you give accurate info, there should...
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This document was uploaded on 03/27/2014 for the course FINC 150 at Georgetown.

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