Entrepreneurial

Financial
by:
Ni Wayan Supartyani (118111736)
Putu Mareta Manik Indah (118111981)
I Putu Gede Indra Mahardika
(118112163)
Definition of Entrepreneurial
Financial
Entrepreneurial finance is all about applying the fundamental financial principles and
basic theories in the domain of new and small-scale business firms. Furthermore, it is
adapting those principles and theories for planning and developing, starting up, operating,
growing and maturing, valuing, and harvesting entrepreneurial business projects. The nature,
needs, and dynamics of a new venture and the entrepreneurial aspect are what primarily
characterize and identify entrepreneurial finance

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 Sources of entrepreneurial
financing
1. Financial bootstrapping
Financial Bootstrapping is a term
used to cover different methods
for avoiding using the financial
resources of external investors.
It involves risks for the
founders but allows for more
freedom to develop the venture.
2. External financing
Businesses often need more capital than
owners are able to provide. Hence,
they source financing from external
investors: angel investment, venture
capital, as well as with less prevalent
crowdfunding, hedge funds, and
alternative asset management.
 ✗ 4. Venture capital
✗ Venture capital is a way of corporate
financing by which a financial investor takes
✗ 3. Business angels participation in the capital of a new or young
✗ A business angel is a private investor that private company in exchange for cash and
invests part of his or her own wealth and time strategic advice.
in early-stage innovative companies

✗ 5. Buyouts
✗ Buyouts are forms of corporate finance used
to change the ownership or the type of
ownership of a company through a variety of
means.

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There are several variations of
buyouts:
✗ Leveraged buyout (LBO
✗ Management buyout (MBO), Management buy in (MBI) and
Buy in management buyout (BIMBO)
✗ Buy and built (B&B)
✗ Recaps
✗ Secondary Buyout (SBO)
✗ Public-to-private (P2P, PTOP)

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Major entrepreneurial
financial planning

1. Importance
Financial planning allows entrepreneurs to estimate
the quantity and the timing of money needed to
start their venture and keep it running.

The key questions for an Entrepreneur are:

✗ Is it worthy to invest time and money in this
business?
✗ What is the cash burn rate?
✗ How to minimize dilution by external
investors?
✗ Scenario analysis and contingency plan?

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A start-up's chief financial officer (CFO) assumes the key role of entrepreneurial
financial planning. In contrast to established companies, the start-up CFO takes a
more strategic role and focuses on milestones with given cash resources, changes in
valuation depending on their fulfilment, risks of not meeting milestones and potential
outcomes and alternative strategies.
 2. Determination of the financial need of a start-up

The first step in raising capital is to understand how much capital you need to raise. Successful
businesses anticipate their future cash needs, make plans and execute capital acquisition strategies
well before they find themselves in a cash crunch

Three axioms guide start-up fund raising:

a) As businesses grow, they often go through several rounds or stages of
financing. These rounds are targeted to specific phases of the company's growth
and require different strategies and types of investors.

b) Raising capital is an ongoing issue for every venture.

c) Capital acquisition takes time and needs to be planned accordingly.

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 Four critical determinants of the financial need of a venture are generally distinguished:
a) Determination of projected sales, their growth and the profitability level

b) Calculation of start-up costs (one-time costs)

c) Estimation of recurring costs

d) Projection of working capital (inventory, credit and payment policies. This determines the cash needed to
maintain the day-to-day business)

Typically, venture capitalists are part of a fund. Their average size in Europe includes five investment
professionals and two supports. They generate income through management fees (on average 2.5% annual
commission) and carried interest ("Carry", on average 20–30% of the profits of the fund).
 Financial Tips for Entrepreneurs
1. Develop Financial Goals 5. Clearly separate accounts for operational costs,
savings, and investments
2. Set a Budget
6. When making a lot of profit, control the
3. Always try to pay all bills when you have
volatility of buying this and that item if it is not
money
necessary
4. Cultivate the habit of saving so that when you
7. Record all expenses so you can go anywhere
don't get a profit in another month, you don't
the money is spent
get confused right away
8. Conduct a Financial Evaluation and Cost
Planning at the Close of the Yearbook
Thanks
!
Any questions?

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