Chapter Eleven: Human and Financial Capital

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Chapter Eleven Human and Financial Capital

• Introduction to e-Commerce
• Emmett Dulaney

2
Startups

• By definition, a startup engages in
• Developing and refining the offering and strategy
• Obtaining initial funding to begin operations
• Building a capable management team to handle
  those operations

3
The MOST Critical asset of a Startup

• is its human assets. This consists of
• Entrepreneur
• Management team
• Strategic advisors and partners
• Logistical advisors and partners

4
Alliances

• In a strategic alliance, the parties draw up a
  legally binding contract to share resources for a
  specified period of time
• EVERY prospectus contains management bios

5
A Business Plan

• Define the value proposition
• Frame the market opportunity
• Detail how to reach customers
• Develop an implementation plan
• Evaluate potential external influences
• Articulate the revenue model
• Identify needed people
• Calculate preliminary financial projections
• Establish milestones
• Summarize the advantages

6
Financing

• Roughly half of all startup financing comes from
  equity financing
• In its earliest stages, bootstrapping is the most
  viable financing option for entrepreneurs in the
  earliest startup stages
• Venture capitalists are most active during the
  expansion stage
• Angels are primarily interested in new firms that
  are in their early stage

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Financing (cont)

• Organizations that nurture new firms through the
  startup stage in exchange for a share of the
  return are called incubators
• Unlike a venture capitalist, the major focus of a
  holding company is operational
• Due Diligence is the obligation of any investor
  to check the validity of a business plan and the
  expertise of its personnel

8
Metrics

• Valuable metrics for early-stage firms include
• Key industry success drivers
• Number of registered users
• Conversion rate
• The pro forma income statement considers
• The firms expected revenue
• The firms expected expenses
• Projected growth rates for similar firms in the
  industry

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Terms

• A term sheet is a nonbinding description of the
  proposed deal between the funder and the
  entrepreneur
• A venture capitalist will often seek to protect
  his percentage of ownership by insisting on
  antidilution provisions
• Startups go public by issuing an IPO

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Mergers and Acquisitions

• Can provide
• Liquidity
• Increased valuation
• Less risk than an IPO