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Foundations of

New Venture Finance

Anything for a friend, for a fee.

—Fred Allen, 1940s radio personality

OUTLINE

LEARNING OBJECTIVES

After reading this chapter, you will understand

• how to determine the amount of capital a new venture will need.


• the types of financing available to the entrepreneur.


• the elements involved in cash and working capital management.


• the pros and cons of different forms of financing—debt versus equity.


• the major concerns of bankers and how to approach them for a loan.


• the methods for valuing a new venture.


• the legal forms of organizing a business in the United States.


• the special conditions involving taxes, private placements, and bankruptcy.

CHAPTER

7

Determining Financial Needs
Working Capital and Cash Flow
Management
Across the Venture’s Life Cycle
Sources of Financing
Equity-Based Financing
Debt-Based Financing
New Venture Valuation
Asset-Based Valuations
Earnings-Based Valuations
Discounted Cash Flow Models

Legal and Tax Issues

Legal Forms of Organization in the

United States

Private Placements under U.S.

Securities Laws

U.S. Bankruptcy Laws

Summary