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Entrepreneurs, Startup, and New Venture Finance

Cornell University_011122B
[Cornell University]

 

"The Secret Of Change Is To Focus All Of Your Energy,
Not On Fighting The Old, But On Building The New."
-- Socrates

 

If We Can Take The Worst, Take The Risk.

 

 

 - Entrepreneurs and New Businesses

Entrepreneurs play an important role in creating new businesses to advance global society. Entrepreneurs use innovation and technology to foster positive impact and activity in all aspects of life. Competent entrepreneurs learn to identify, select, describe, and communicate the essence of opportunities with enticing potential to become successful businesses. Entrepreneurs are able to describe the valuable contributions of venture capital and create business model designs that can be sustained through competitive advantage. The venture capital team creates a roadmap (strategy) that has a high probability of effectively leading to the commercialization of a new product or service with a sustainable competitive advantage in the market.

 

- Think Tanks and Investing

Amid current global challenges, there is a growing focus on creating a new normal based on sustainable living. In turn, more and more investors are looking to Environmental, Social and Governance (ESG) and impact investing, seeking long-term profitability while not only doing “no harm” but “doing good” (by being positive for people and the planet) impacts) help address environmental and social issues). 

These impact statements are likely to attract more investment, as well as consumers and potential employees.

However, with that comes the risk of "shock washes" (claiming an impact without evidence to support the claim). In fact, 66% of impact investors in the 2020 Global Impact Investing Network (GIIN) annual impact survey said that impact washing is the biggest challenge the industry will face over the next five years.

Therefore, as this movement grows and the private sector’s explicit role in matters of public interest increases, support is needed to ensure the industry delivers on its impact and ESG commitments. 

We recommend that think tanks have the capacity to support this effort. Complement and enhance skills and capabilities in the investment industry. And help nurture this young industry to grow and make an impact in a sustainable way.

 

- Startup (or Startup Company)

There's no definition any two entrepreneurs or investors agree on. Most say a startup is determined by its age, growth, revenue, profitability or stability. The definition of a startup is likely to exclude entities formed by splitting or restructuring businesses or those that have been in existence for five years and exceed certain dollars in sales. Apart from innovation, such startups have to be engaged in the development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property.  

  • A company that is in the first stage of its operations. These companies are often initially bank rolled by their entrepreneurial founders as they attempt to capitalize on developing a product or service for which they believe there is a demand. Due to limited revenue or high costs, most of these small scale operations are not sustainable in the long term without additional funding from venture capitalists.
  • A startup company or startup or start-up is an entrepreneurial venture or a new business in the form of a company, a partnership or temporary organization designed to search for a repeatable and scalable business model. These companies, generally newly created, are innovative in a process of development, validation and research for target markets. 

 

- Venture Capital

Venture Capital (VC): Money provided by investors to startup firms and small businesses with perceived long-term growth potential. This is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns.

Venture capital can also include managerial and technical expertise. Most venture capital comes from a group of wealthy investors, investment banks and other financial institutions that pool such investments or partnerships. This form of raising capital is popular among new companies or ventures with limited operating history, which cannot raise funds by issuing debt. The downside for entrepreneurs is that venture capitalists usually get a say in company decisions, in addition to a portion of the equity.

 

- The Segmentation of the Venture Industry

Today, the venture capital industry has become increasingly specialized. It is going through a segmentation process. Some of this segmentation has been by industry (IT, energy, healthcare, etc.) and sub-industry (iPhone apps, financial tech, etc). But more obvious, especially lately, has been the segmentation by company stage. In general, venture financing is breaking into following four segments: Incubators, Angels, VC, and Late Stage Funds.

In the past, traditional VC’s played all of of these roles. They incubated companies, provided small seed financing, and in some cases provided later stage liquidity. But mostly the mentorship and angel investing roles were played by entrepreneurs who had expertise but shallow pockets and limited time and infrastructure.

A true venture partner provides more than money, but mentorship, counseling and strategic advice that can elevate start-up firms and small businesses to new heights.



[More to come ...]


 

 

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