Chapter 1

Question 1

Bridge financing 

Answer 1

Temporary funding used to cover short-term expenses until long-term financing is secured 

Question 2

Business Angels 

Answer 2

Wealthy individuals who invest in startups often providing not just funds, but also mentorship 

Question 3

Commercial banks 

Answer 3

Financial institutions that offer loans, deposit accounts, and other financial services to businesses and individuals 

Question 4

Development stage

Answer 4

A period involving the progression from an idea to a promising business opportunity 

Question 5

Development stage

Answer 5

The phase where a business idea is developed into a viable product or service prior to market introduction 

Question 6

E-commerce

Answer 6

The use of electronic means to conduct business online

Question 7

Early maturity stage

Answer 7

A phase and a companies life cycle, where growth slows and the focus shifts to maintaining market position

Question 8

Early Stage ventures

Answer 8

New or very young firms with little operating history

Question 9

Entrepreneur

Answer 9

An individual who starts and runs a business, taking on financial risk in the hope of profit

Question 10

Entrepreneurial finance

Answer 10

The application and adaption of financial tools and techniques to the planning, funding, operations, and valuation of an entrepreneurial venture

Question 11

Entrepreneurial opportunities

Answer 11

Ideas with potential to create value through different or new repackaged or repositioned, products, markets, processes, or services 

Question 12

Entrepreneurial process

Answer 12

The steps and activities involved in starting and growing a business, including idea generation, business planning, financing and growth

Question 13

Entrepreneurship

Answer 13

The act of creating, managing, and scaling a business venture 

Question 14

Financial distress

Answer 14

A situation where a business cannot meet its financial obligations, potentially leading to bankruptcy 

Question 15

First round financing

Answer 15

Equity funds provided during the survival stage to cover the cash shortfall when expenses and investments exceed revenues 

Question 16

Free cash

Answer 16

Cash exceeding that which is needed to operate, pay creditors and invest in assets 

Question 17

Free cash flow

Answer 17

Change in free cash over time

Question 18

Government assistance programs

Answer 18

Financial support, such as low interest rate loans and tax incentives provided by state and local governments to help small businesses 

Question 19

Initial public offering IPO

Answer 19

The process by which a private company offers shares to the public for the first time

Question 20

Investment banking firms

Answer 20

Firms that assist businesses in raising capital, advising on mergers and acquisitions and providing other financial services 

Question 21

Investment banker

Answer 21

An individual working for an investment baking firm who advises and assist corporations in their security, financing decisions, and regarding mergers and acquisitions

Question 22

Mezzanine Financing

Answer 22

A hybrid of debt and equity financing typically used to fund a companies expansion at a later stage 

Question 23

Owner debt holder conflict

Answer 23

Divergence of the owners and lenders self interest as the firm gets close to bankruptcy 

Question 24

Owner manager conflicts

Answer 24

Differences between managers, self interest, and that of the owners who hired them

Question 25

Private financial markets

Answer 25

Markets were securities are not publicly traded, and transactions occurred directly between investors and businesses

Question 26

Public financial markets

Answer 26

Markets were securities are traded publicly such as stock exchanges

Question 27

Rapid growth stage

Answer 27

Period of very rapid revenue and cash flow

Question 28

Seasoned firms

Answer 28

Established companies with a proven track record and stable market presence

Question 29

Seasoned securities offering

Answer 29

The offering of securities by a firm that has previously offered the same or substantially similar securities

Question 30

Second round financing

Answer 30

Financing for ventures in their rapid growth stage to support investments in working capital

Question 31

Seed financing

Answer 31

Initial capital used to start a business often coming from the founders or early investors

Question 32

Small business administration SBA

Answer 32

US government agency that provides support to small businesses through loans, grants and other programs

Question 33

Start up financing

Answer 33

Capital provided to a business in its early stages typically used to develop a product and launch operations

Question 34

Start up Stage

Answer 34

The initial phase of a business’s life cycle, where it is beginning to establish itself in the market 

Question 35

Survival stage

Answer 35

The phase where a new business works to establish itself and generate enough revenue to cover its cost

Question 36

Trade credit

Answer 36

A type of short-term financing where suppliers allow businesses to purchase goods and pay for them in a later date

Question 37

Venture capital

Answer 37

Early stage financial capital often involving substantial risk of total loss

Question 38

Venture capital firms

Answer 38

Firms formed to raise and distribute venture capital to new and fast growing ventures 

Question 39

Venture capitalists VC

Answer 39

Individuals who join in formal, organized firms to raise and distribute venture capital to new and fast growing ventures 

Question 40

Venture law firms

Answer 40

Law firms that specialize in legal services for startups and venture capital transactions 

Question 41

Venture life cycle

Answer 41

The stages of development and growth that a business goes through from start up to maturity - development stage: a period involving the progression from an idea to the promising business opportunity - Start up Stage: . When the venture is organized, developed and initial revenue model is put in place.  - survival stage: When revenues start to grow and help pay some, but typically not all of the expenses. - Rapid growth stage: period a very rapid revenue in cash flow growth - Early maturity stage: . When the growth of revenue and cash flow continues, but at a much slower right thin in the rapid growth stage.

Question 42

Warrants

Answer 42

Financial instruments that give the holder the right to purchase a company stock at a specific price before a certain date

Question 43

E finance principal one

Answer 43

* Real human and financial capital must be rented from owners - 2 factors determine the returns for these capitals. Time value Risk - expect to provide a return or the venture will not survive in market economy 

Question 44

E-finance principle two

Answer 44

* Risk and expected reward go hand-in-hand Time value is not the only cost when using others funds More risk equals more expected reward How much more? market determined 

Question 45

E-finance principle three

Answer 45

While accounting is the language of business cash is the currency

Question 46

E-finance principle 4

Answer 46

Venture financing involves search, negotiation, and privacy  -public financial markets: standard contracts trade on organized exchanges. -Private financial markets: customized contracts bought in ink and infrequently sold and inefficient private negotiations 

Question 47

E finance principles five

Answer 47

A ventures financial objective is to increase value - Many objectives, including personal ones - But the unify financial objective is to increase value - value derives from the ability to generate cash to pay capital providers for their capital

Question 48

E finance principal six

Answer 48

It is dangerous to assume that people act against their own self interest - aligning incentives, investors, founders, employees, spouses, etc. is critical - Incentives diverge and renegotiation is important - owner manager conflicts: differences between a managers, self interest, and that of the owners who hired him or her - owner - debt holder agency conflict: divergence of the owners and the lenders self interest as the firm gets close to bankruptcy. 

Question 49

E finance principal seven

Answer 49

Venture character and reputation can be assets or liabilities - Ventures of character that can be different from the individuals who founded or managed it - Entrepreneurs state that ethical standards are one of the ventures, most important assets and our critical to long-term success and value - Ventures and make society contributions - many successful entrepreneurs are financially and personally involved in charitable endeavors 

Question 50

Venture financing

Answer 50