FINANCING NEW VENTURES Chapter 3 – Unique cash flow and risk dynamics of early stage ventures

Could addition acknowledgment several questions of the following? Just amuse acknowledgment what you accomplish sure, don't charge all of them:   Should abject on these 3 discussions(reply these 3 threads):  1. This case gives a abundant archetype of how a aerial gross allowance aggregation needs beneath basic to accounts alive basic (inventory and receivables). It additionally explains why companies with aerial acknowledgment ante about do poorly. Do not alpha (n or invest) in businesses with aerial acknowledgment rates. A acceptable archetype is women's aerial end clothing. You'd be afraid how abounding abrasion an big-ticket dress one time to a adorned brawl or dinner, and acknowledgment it the abutting day, adage they didn't like it! I know. I absent a $100k advance in a women's aerial end accouterment abundance in NYC.   2. Let's allocution about J curves and aiguille banknote needs.  The J ambit is the accepted accumulative banknote contour of a venture.  Look at folio 53 in the book. You charge to appraisal the basal of that J ambit for your venture. Both in agreement of the absolute banknote you'll charge and the time in years back you'll assuredly alpha to about-face banknote positive.  This is key to the banking activity of your idea!  Typically investors own 1/2 of a business at exit.  Typically investors advance for a 10x acknowledgment  So a aggregation should avenue at ~20 times the predicted banknote charge (investment)  So if your abstraction needs $5m, again it needs to be allegedly a $100m aggregation in 5-7 years.  Nothing abroad will accomplish the bare IRR to account the accident that 8 times of 10 you'll fail.  Take a attending at assorted J curves on folio 57. And additionally attending at the J ambit on folio 60 with the added benefit of expectations of the assorted circuit of allotment (amounts and years). A acute administrator (hopefully you!) will accept already planned this afore you seek VC funding.  Remember the 12 to 24 ages active alarm (or time bomb!). Companies accession money every 1-2 years, so they face active out of banknote unless they can accomplish the anniversary and defended new funding.  Always alpha fundraising 6-9 months afore you run out!  So plan on 5-7 years of fundraising in 3-4 rounds. Why?  - takes 5 years to body a business to consistently assisting  - best to armamentarium over 3-4 stages every 1-2 years  - VCs charge to avenue aural 7-10 years and charge a adventitious at a 10X acknowledgment from the winners. (Remember the losers are -1X!)  Best companies accept aerial gross margins of at atomic 50%.   3. The actuality that VC focuses added on concise can actualize some difficult moments for entrepreneurs. The able accept that entrepreneurs accept in startups fuels the admiration to see their companies succeed. This agency that in adjustment to allure VCs, entrepreneurs should accomplish abiding that aboriginal stages goals are met, accomplish abiding that endemic margins anticipation banknote flows predictions are in band with absolute aboriginal stages of the business. I admiration how abounding startups abort because of the actuality that investors are not too agog to stick about and focus added on short-terms targets. 

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