554 ENTREPRENEURSHIP
Growth (New York: John Wiley, 1986): 231-
33.- In addition to the books mentioned in notes
5 and 6, see B. Mavrovitis, Cashflow, Credit
and Collection(Chicago: Probus, 1990); L.
Masonson, Cash, Cash, Cash (New York:
Harper, 1990); B. Blechman and J. Levinson,
Guerrilla Financing (New York: Houghton-
Mifflin, 1991): chapter 5. - A. Bhide, “Bootstrap Finance: The Art of
Start-Ups,” Harvard Business Review,
November-December 1992: 110-17. - “What Is Mezzanine Financing?” Retrieved
from the Web February 27, 2007,
http://www.wisegeek.com/what-is-mezza-
nine-financing.htm. - J. Fraser, “Capital Steps,” Inc., February
1996: 42–47. - H. Sapienza and J. Timmons, “Venture
Capital: The Decade Ahead.” In J. Kasarda
and D. Sexton (eds.),The State of the Art of
Entrepreneurship (Boston: PWS-Kent, 1992):
402-437. - Lee Gomes, “The Angels Are Back and This
Time They Have a Trade Group,” The Wall
Street Journal,April 11, 2005: B1. - State laws are known as blue sky laws.
Federal laws are primarily those of the U.S.
Securities and Exchange Commission (SEC)
that regulates private offerings. It is impera-
tive that any entrepreneur navigate these
waters with the aid of experienced legal coun-
sel. - J. Freear and W. Wetzel, “The Informal Ven-
ture Capital Market in the 1990s.” In D. Sex-
ton and J. Kasarda (eds .), The State of the Art
of Entrepreneurship (Boston: PWS-Kent,
1992): pp. 462–486; and Wetzel, 1992. - I. Grosbeck, M. Roberts, and H. Stevenson,
New Business Ventures and the Entrepreneur,
3rd ed. (Homewood, IL: Irwin, 1989). - D. Enrich, “Lessons from a Lender,” The
Wall Street Journal, May 8, 2006: R6. - W. Bygrave, “Venture Capital Returns in the
1980s.” In J. Kasarda and D. Sexton, eds.,
The State of the Art of Entrepreneurship
(Boston: PWS-Kent, 1992): 438-61. - J. Solomon, “Intelligence Investing,” The
Wall Street Journal, September 12, 2005: A4. - J. Emory, “The Value of Marketability as Il-
lustrated in Initial Public Offerings of Com-
mon Stock,” Business Valuation Review,
December 1990: 114–16. - See http://www.grameen-info.org/# for
more information about the bank. Retrieved
from the Web February 27, 2007.- Adapted from J. Timmons, New Venture
Creation, 3rd ed. (Homewood, IL: Irwin,
1990). - Adapted from A. Mamis, “Can Your Bank Do
This?” Inc., March, 1996: 29–38. - P. Singer, “Capital Ideas,” The Wall Street
Journal,May 8, 2006: R6. - Singer, 2006.
- L. Berton, “Asset-Backed Loans Aid Cash
Strapped Entrepreneurs,” The Wall Street
Journal, November 28, 1989: B2. - In chapter 5, we suggested that unless good
business reasons suggested otherwise, a valu-
ation could be calculated at the end of a five-
year period of projections. - They may also be bargaining over a host of
other issues. These will be discussed in the
next chapter. - Of course, historical returns are no indication
of future returns. This is boilerplate language
that all who solicit investments must use.
Statistically the best prediction of future
returns is past returns, but this may be a mis-
use of statistics. - The government is paid first (taxes), then
employees. Creditors are paid next, followed
by equity investors, first preferred stockhold-
ers, and finally common stockholders. - Arbitrage occurs when an asset (or business)
has different prices in different markets. For
example, for a very short period of time
(because of the speed of information), a stock
can be selling for more in Tokyo than in
London. Why? Because news affecting earn-
ings (in this case positively) is released in
Tokyo first due to the time difference. An
arbitrageur can profit briefly by buying the
stock in London and selling it in Tokyo.
Because the price difference will be small and
the window of opportunity very narrow, only
very large transactions make sense. - This discussion follows Stevenson et al.,
1989. - A “pure play” is a firm that is undiversified
and operates in a single line of business. Be-
cause most new ventures operate as pure
plays and very few ongoing larger firms do, it
is difficult to get comparable capitalization
rates. - Of course, the actual amount of equity the
investor will own is subject to negotiation
and many other variables. These will be dis-