Begrepp Entrepreneruial Finance

  1. Bonding
    it’s a mechanism that address moral hazard. Bondingà a promise, implicit or explicit & specific.
  2. Staging
    is when the investment is staged, the entrepreneur relieves capital that is split trough different stages to keep incentives aligned.
  3. Burn rate
    the rate at which money is consumed at which stage
  4. Due diligence
    a analysis of the firm, its cash flows, balance sheet, etc
  5. Continuing value
    a value that is set and doesn’t change
  6. Bootstrapping-
    is when the entrepreneur finances an early stage business in untraditional ways. For instance, by friends and family, maximising her own credit card and using private savings.
  7. Term sheet
    the sheet stating the terms for the agreement/contract. Sifts the risks from the VC to the entrepreneur
  8. Pro forma analysis
    -analysis with regards to the pro forma statements including income statement, balance sheet and cash flow statement. Theses statements combined with a marked analysis enables us to project cash flows “pro forma” in order to estimate company value.
  9. Reverse merger-
    going public by letting an already public firm bay the shares of the venture. the already public firm is usually old and not frequently traded.
  10. Ratchet
    A ratchet is used to protect early investors from ownership
  11. Syndication-
    one of the VC’s way to overcome problems with information asymmetry and adverse selection
  12. IRR-
    Also known as internal rate of return is the yearly rule of return that a VC-fund generate to its investor. IRR is one of the most important measure of a fun’s performance
  13. Covenant
    refers to the contract between an entrepreneur and investors about what the entrepreneur can
  14. Real option
    refers to the right, not an obligation to make an “non-financial” selection.
  15. Personal guarantee-
    is when an in vidual guarantees the debt of its firm, for example a start-up entrepreneur: if the firm cannot commit to their obligation, you get personal responsible for paying the debt.
  16. Private equity
    works similarly like VCs, but the difference is that they invest in listed companies. They also aim for a larger ownership stake. Performance by large funds with a lot of capital.
  17. IPO-
    it’s the most used method of harvesting and exit.
  18. Lock-up period-
    The period after an exit when some actors ex. The entrepreneur are not allowed to sell their shares (usually 180-360 days). Often in an IPO-exit
  19. Necessity-based entrepreneurship-
    is when an entrepreneur starts a company as they see no other alternative. Common in development countries where people have difficulties finding income. Also increased in the us and other developed countries following the financial crisis in 2008.
  20. CEQ-
    is a method in DCF valuation when instead of taking risk into account in the discount rate you take it to account in the cash flows and then you discount cash flows with the risk-free rate only
  21. Adverse selection
    is a pre-contractual issue due to asymmetric information. It may cause the investor taking a bad decision due to a mislead from the entrepreneur who did not give the correct information.
  22. Milestone-
    Is used as a measure of performance of the business. An example of a milestone can be a monthly sales goal or number of subscribers to a service.
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Begrepp Entrepreneruial Finance