For Thursday, Feb 24th …

NOTE: If you encounter unfamiliar terms when reading the financial aspects of our case studies and
related articles, useful glossaries of this terminology are on the Investopedia and Funding Post
websites.

1. Read Bootstrap Finance: The Art of Startups. Consider the following study questions as you read
this article:
a. Explain why Professor Bhide states, “the big-money model has little in common with the
traditional low-budget start-up.”
b. What is bootstrap finance? Why is it advantageous for the entrepreneur?
c. What are “the hidden costs of other people’s money?”
d. The author provides seven axioms of successful entrepreneurs. What are they? Why are they
effective?

2. Read Raising Startup Capital. This is a very substantive article covering key elements of venture
financing. Study it carefully. The glossaries provided at the top of this assignment will likely be of
help in understanding unfamiliar terminology. Consider the following study questions as you read
this article:
a. What are the differences between debt financing and equity financing?
b. What is convertible debt? How does it reflect elements of both types of financing?
c. What’s the major advantage of raising less money?
d. While there are no hard and fast rules about stages of investment, what are the typical stages
and what types of funding might be appropriate in each stage? How is the money raised used
in each of the stages?
e. How is a venture capital firm structured? Who are the different stakeholders in a venture firm
and what role does each play?
f. What do venture capital investors look for in a deal?
g. What is crowdfunding? What are its advantages and disadvantages?
h. Who are angel investors? How do they differ from venture capital firms? What are the
advantages and disadvantages of angel investor funding?
i. Describe the role of accelerators/incubators. When are they appropriate for a startup?
j. What are sources of non-dilutive funding? What are its benefits?
k. What is meant by pre- and post-money valuation? How are these values determined?
l. What is an option pool and what purpose does it serve? Why should it be of concern to an
entrepreneur?
m. What are the principal elements of a venture capital deal? How do liquidation preference and
control factor into a deal? How do these affect an entrepreneur?

3. There will be a short 10-minute closed-book, closed-notes quiz on today’s readings at the beginning
of class. Be sure to bring your laptop to class to access the quiz which will be posted on Canvas.
Quiz questions are typically derived from the study questions provided above as part of the day’s
assignment. While the quiz question may not exactly duplicate a study question, it usually will relate
to the substance of one or more of the study questions. To prepare for a closed-book quiz, be sure
you are prepared to address each of the posted study questions.