New Venture Creation

Résumé du document

Starting a new business requires (for any entrepreneurs) time and efforts in preparing the launch of the business. These days' businesses should have a solid foundation in order to be the efficient and profitable. Entrepreneurs determine every characteristic of their projects and understand the market based on financing, staffing and other managerial decisions should be undertaken. Drafting a business plan is a necessary step to have a personal long-term vision and enable the third parties (investors) to understand the goals of a project. Forecasts represent the key issue of a business plan, as it will enable third parties to know what will be the expected sales and profits in the short or long term. A business plan is an essential tool for entrepreneurs to attract the investors. Attracting investors is not so easy, for which the entrepreneurs must be fully prepared.

Extraits

[...] “Developing financing and fund-raising strategies, knowing what alternatives are available, and obtaining funding are tasks vital to the survival and success of higher potential ventures.” (Source: Timmons & Spinelli 2004) The progressing of venture capital financing can be achieved to solve the financial problems of a new venture. For entrepreneurs, raising capital may be not perfect in the first time, just a small amount of money. However, the key point is to solve the problem of “survival” firstly (which means to be able to start the business in good conditions and to survive to any short term obstacles), and then concern development and expansion. If the entity of the business is getting stronger it seems logical that more valuable sources of financing will come to them closely. [...]

[...] Typically first generation entrepreneurs start such enterprises. Such enterprises generally do not have a lot of guarantee to offer as security, hence banks and financial institutions are hesitant to finance them. Venture capital funding may be by way of investment in the equity of the new enterprise or a combination of debt and equity, though equity is the most preferred route. Since most of the ventures financed through this way are in new areas (worldwide venture capital follows "hot industries" like info-tech, electronics and biotechnology), the probability of success is very low. [...]

[...] This source of financing is also very expensive has going public involved lots of costs in order to be able to sell their stock in the public market. Costs of this kind of operations usually attain 20% of the overall value of stocks of the company that are available in the markets. Another forms a financing, and the most common is Venture capital firms. Venture capital firms provide equity capital, usually for high-risk potential enterprises that seek for financing. This is the most suitable for rapid growth companies to sell shares and raise capital. [...]

[...] Venture capital is an important source of equity for start-up companies. Professionally managed venture capital firms generally are private partnerships or closely held corporations funded by private and public pension funds, endowment funds, foundations, corporations, wealthy individuals, foreign investors, and the venture capitalists themselves. Venture capitalists generally: - Finance new and rapidly growing companies - Purchase equity securities - Assist in the development of new products or services - Add value to the company through active participation - Take higher risks with the expectation of higher rewards - Have a short-term orientation: they want to go out as quickly as possible When considering an investment, venture capitalists carefully analyze the technical and business qualities of the proposed company. [...]

[...] To conclude, a venture capitalist is one who funds a start up company, in most cases promoted by a first generation technocrat promoter with equity. A venture capitalist is not a lender, but an equity partner. He cannot survive with the minimum. He is driven by maximization: wealth maximization. Venture capitalists are sources of expertise for the companies they finance. For them, exit is preferably through listing on stock exchanges. This method has been extremely successful in USA, and venture funds have been credited with the success of technology companies in Silicon Valley. [...]