Foundations of New Venture Finance 293- What steps should the entrepreneur take to position the new venture for a loan?
- Discuss the models and methods of new venture valuation. What are the pros and cons of
each method? - Discuss the pros and cons of the various legal forms of organization.
- How does U.S. securities law aid in promoting entrepreneurship through private place-
ments?
EXERCISES
- Calculate the startup capital needed to finance the new venture described in your business
plan. - Analyze the cash flow cycle from your business plan pro forma statements.
- Develop a plan to control your firm’s cash flow cycle. Recalculate question 1. How much
money did you save? - Calculate the prospective value of your new venture at the end of five years by adjusted book
value or replacement value, by using the appropriate earnings method, and by using the dis-
counted cash flow method. - Match your financing needs to the appropriate sources of capital.
- Using the residual pricing method, how much equity would you have to sell in order to
raise money from a venture capitalist? - Choose a legal form of organization for your proposed venture. Justify your choice.
Rooting for and Investing in the Home Team
Most people associate celebrity Pat Sajak
with the turning letters on the “Wheel of
Fortune” TV game show. When Sajak was
recruited to throw out the first ball at the May
2005 opening game of the Golden Baseball
League in Arizona, it was not just because
he’s a fan or because he’s a celebrity, but
also because he’s a league investor.
“Although I made a good living, it’s not like I
can buy the L.A. Dodgers anytime soon, so
this seemed a nice way to get involved,” says
Sajak.
The Golden League
(www.goldenleague.com), one of five inde-
pendent baseball leagues currently in exis-
tence, was born in an entrepreneurship classat Stanford University. After the Western
Baseball League folded in 2002, business
graduate students David Kaval and Amit
Pavel decided to launch a new West Coast-
based minor league.
The key difference between Golden
League and other baseball leagues is its cen-
tralized ownership. “We saw that that was a
superior business model and that we could
grow to 20 to 30 teams with that model,”
says Kaval. Because the league’s teams all
have the same owner there are no bidding
wars for players. Less than ten percent of
each team’s $1 million operating budget is
spent on talent. There’s an annual salary cap
of $88,000 for the entire three-month, 80-DISCUSSION CASE