Chapter 7 Entrepreneurship

What is business valuation?

The process of determining how much a company is worth.

What is earnings capitalization?

Valuing a business based on expected future earnings.

What is present value of cash flows?

Valuing a business using discounted future cash flows.

What is market-comparable valuation?

Valuing based on similar companies.

What is asset-based valuation?

Valuing based on company assets.

What is modified book value?

Adjusted asset value from the balance sheet.

What is replacement value?

Cost to replace company assets.

What is liquidation value?

Value if assets are sold quickly.

What are business angels?

Individuals who invest in early-stage startups.

How do angel investors differ from VCs?

They invest earlier and in smaller amounts.

What are the types of angel investors?

Entrepreneurial, corporate, professional, enthusiast, micromanagement.

What are entrepreneurial angels?

Former entrepreneurs who invest.

What are corporate angels?

Executives from large firms who invest.

What are professional angels?

Experienced, repeat investors.

What are enthusiast angels?

Invest based on interest or passion.

What are micromanagement angels?

Highly involved investors.

What factors do VCs evaluate?

Management team, market, product, competition, returns, business plan.

Why is the management team important to VCs?

It determines execution ability.

Why is the target market important to VCs?

It shows growth potential.

Why is the product/service important to VCs?

It must provide value and differentiation.

Why is competitive positioning important?

It shows advantage over competitors.

Why are financial returns important?

Investors want strong ROI.

Why is the business plan important?

It shows strategy and feasibility.

What is an exit strategy?

How investors get their money back.

What is an IPO?

Selling shares to the public.

What is an acquisition?

Selling the company to another firm.

What is a buyback?

Founder buys back investor shares.

What are pros of an IPO?

Raises large capital and increases visibility.

What are cons of an IPO?

Expensive and requires regulation.

What are pros of acquisition?

Quick exit and immediate payout.

What are cons of acquisition?

Loss of control and integration issues.