Financing new ventures chapter 3 – unique cash flow and risk dynamics

Could someone answer several questions of the following? Just please answer what you make sure, don’t need all of them:


Should base on these 3 discussions(reply these 3 threads):

 1. This case gives a great example of how a high gross margin company needs less capital to finance working capital (inventory and receivables). It also explains why companies with high return rates generally do poorly. Do not start (n or invest) in businesses with high return rates. A good example is women’s high end clothing. You’d be amazed how many wear an expensive dress one time to a fancy ball or dinner, and return it the next day, saying they didn’t like it! I know. I lost a $100k investing in a women’s high end clothing store in NYC. 

 2. Let’s talk about J curves and peak cash needs.  The J curve is the expected cumulative cash profile of a venture.  Look at page 53 in the book. You need to estimate the bottom of that J curve for your venture. Both in terms of the total cash you’ll need and the time in years when you’ll finally start to turn cash positive.  This is key to the financial viability of your idea!  Typically investors own 1/2 of a business at exit.  Typically investors invest for a 10x return  So a company should exit at ~20 times the predicted cash need (investment)  So if your idea needs $5m, then it needs to be plausibly a $100m company in 5-7 years.  Nothing else will generate the needed IRR to offset the risk that 8 times of 10 you’ll fail.  Take a look at various J curves on page 57. And also look at the J curve on page 60 with the added bonus of expectations of the various rounds of funding (amounts and years). A smart entrepreneur (hopefully you!) will have already planned this before you seek VC funding.  Remember the 12 to 24 month ticking clock (or time bomb!). Companies raise money every 1-2 years, so they face running out of cash unless they can achieve the milestone and secure new funding.  Always start fundraising 6-9 months before you run out!  So plan on 5-7 years of fundraising in 3-4 rounds. Why?  – takes 5 years to build a business to consistently profitable  – best to fund over 3-4 stages every 1-2 years  – VCs need to exit within 7-10 years and need a chance at a 10X return from the winners. (Remember the losers are -1X!)  Best companies have high gross margins of at least 50%. 

 3. The fact that VC focuses more on short-term can create some difficult moments for entrepreneurs. The strong believe that entrepreneurs have in startups fuels the desire to see their companies succeed. This means that in order to attract VCs, entrepreneurs should make sure that early stages goals are met, make sure that theirs margins forecast cash flows predictions are in line with actual early stages of the business. I wonder how many startups fail because of the fact that investors are not too keen to stick around and focus more on short-terms targets. 

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

We value our customers and so we ensure that what we do is 100% original..
With us you are guaranteed of quality work done by our qualified experts.Your information and everything that you do with us is kept completely confidential.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

The Product ordered is guaranteed to be original. Orders are checked by the most advanced anti-plagiarism software in the market to assure that the Product is 100% original. The Company has a zero tolerance policy for plagiarism.

Read more

Free-revision policy

The Free Revision policy is a courtesy service that the Company provides to help ensure Customer’s total satisfaction with the completed Order. To receive free revision the Company requires that the Customer provide the request within fourteen (14) days from the first completion date and within a period of thirty (30) days for dissertations.

Read more

Privacy policy

The Company is committed to protect the privacy of the Customer and it will never resell or share any of Customer’s personal information, including credit card data, with any third party. All the online transactions are processed through the secure and reliable online payment systems.

Read more

Fair-cooperation guarantee

By placing an order with us, you agree to the service we provide. We will endear to do all that it takes to deliver a comprehensive paper as per your requirements. We also count on your cooperation to ensure that we deliver on this mandate.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages