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Let Financial Economic Foundations Guide You in Your Decision Making! Providing unique insight, this is the first text to apply current financial economics research and theory to the study of entrepreneurship and new venture finance. This approach will help you use financial economic foundations as a framework to guide you in your decision-making process. You'll learn to think of new ventures as portfolios of real options, value financial claims of the entrepreneur and venture capital investors, and structure financial contracts in light of new venture information problems. And with the help of real-world examples, you'll gain a better understanding of the broad range of situations and problems that you'll likely face as an entrepreneur. Key Features
* The importance of strategy in new venture planning is stressed to help you develop a successful business plan for a new venture.
* A valuation perspective is used to describe topics such as strategic planning, business planning, financial modeling, assessing financing needs, raising outside financing, structuring financial contracts with investors, and harvesting.
* Relevant examples are integrated throughout the text to provide a real-world perspective. Also discussed is the fact that entrepreneurs and outside investors have different expectations for performance of a venture, and different requirements for a return on investment.
* Spreadsheet modeling and simulations using custom software are used to enhance learning.
Get Interactive! The book's Web site contains valuable resources including:
* PowerPoint presentations
* Active Excel spreadsheets
* Venture.SIM-a simulation software program
* Tutorials on how to use the software
* Extensive links to other sites and much more!

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CONTENTS
PART 1 GETTING STARTED
 Chapter 1 Introduction = 1
  1.1 The Entrepreneur = 2
  1.2 Finance and the Entrepreneur = 4
  1.3 The Finance Paradigm = 5
  1.4 What Makes Entrepreneurial Finance Different from Corporate Finance? = 5
  1.5 Why Study Entrepreneurial Finance? = 12
  1.6 The Objective : Maximum Value for the Entrepreneur = 13
  1.7 The Process of New Venture Formation = 13
  1.8 Organization of the Book = 15
  1.9 Summary = 17
 Chapter 2 An Overview of New Venture Financing = 22
  2.1 The Rocket Analogy = 23
  2.2 Choosing the Organizational Form = 24
  2.3 Information Problems Facing the Entrepreneur and Investors = 27
  2.4 Measuring Progress with Milestones = 28
  2.5 Stages of New Venture Development = 30
  2.6 Sequence of New Venture Financing = 32
  2.7 Sources of New Venture Financing = 34
  2.8 The Deal = 46
  2.9 Summary = 49
PART 2 FINANCIAL ASPECTS OF STRATEGIC AND BUSINESS PLANNING
 Chapter 3 The Business Plan = 55
  3.1 Why Business Plans of New Ventures are Different = 56
  3.2 Make the Plan Fit the Purpose = 59
  3.3 Is Too Much Attention Devoted to the Business Plan? = 59
  3.4 Plan First - Write Second = 60
  3.5 Strategic Planning and the Business Plan = 61
  3.6 What to Include = 62
  3.7 Confidentiality = 68
  3.8 Financial Aspects of the Business Plan = 69
  3.9 Targeting the Investors = 72
  3.10 Due Diligence = 72
  3.11 Updating the Business Plan = 73
  3.12 Summary = 73
  Appendix 3A : Outline for a Business Plan = 78
 Chapter 4 New Venture Strategy = 80
  4.1 Henry Ford and the Model T = 81
  4.2 What Makes a Plan or Decision Strategic? = 83
  4.3 Financial Strategy = 84
  4.4 Product-Market, Financial, and Organizational Strategy = 84
  4.5 Deciding on the Objective = 87
  4.6 Identifying the Alternatives = 88
  4.7 Recognizing Real Options = 89
  4.8 Strategic Decision Analysis and Decision Trees = 93
  4.9 Rival Reactions and Game Trees = 99
  4.10 Summary = 103
  Appendix 4A : An Introduction to Options = 109
 Chapter 5 Developing Business Strategy Using Simulation = 114
  5.1 Simulation - An Illustration = 117
  5.2 Simulating the Value of an Option = 118
  5.3 Using Simulation to Evaluate a Strategy = 120
  5.4 Comparing Strategic Choices with Simulation = 128
  5.5 Summary = 139
PART 3 FINANCIAL FORECASTING
 Chapter 6 Methods of Financial Forecasting = 144
  6.1 The Cash Flow Cycle = 145
  6.2 Critical Determinants of Financial Needs = 147
  6.3 Working Capital, Growth, and Financial Needs = 151
  6.4 Pro Forma Analysis = 155
  6.5 Forecasting Sales = 158
  6.6 Estimating of Uncertainty = 167
  6.7 Forecasting Income Statement and Balance Sheet Information = 169
  6.8 Information Sources = 172
  6.9 Building a Financial Model : An Illustration = 173
  6.10 Summary = 180
  Appendix 6A : Using the Pro Forma Spreadsheet = 186
  Appendix 6B : Sources of Information for Forecasting = 189
 Chapter 7 Assessing Financial Needs = 191
  7.1 Sustainable Growth as a Starting Point = 194
  7.2 Assessing Financial Needs When Growth is not Sustainable = 198
  7.3 Planning for Product-Market Uncertainty = 199
  7.4 Cash Flow Breakeven Analysis = 201
  7.5 Assessing Financial Need with Scenario Analysis = 207
  7.6 Simulation of Financing Requirements : An Illustration = 210
  7.7 How Much Money Do You Need? = 215
  7.8 Assessing Financial Needs with Staged Investment = 220
  7.9 Summary = 221
PART 4 VALUATION
 Chapter 8 The Framework of New Venture Valuation = 227
  8.1 Perspectives on Valuation of New Ventures = 228
  8.2 Myths about New Venture Valuation = 230
  8.3 An Overview of Valuation Methods = 234
  8.4 Valuation by the Risk-Adjusted Discount Rate Method = 235
  8.5 Valuation by the Certainty Equivalent Method = 246
  8.6 Limitations of the Capital Asset Pricing Model = 249
  8.7 Reconciliation with the Pricing of Options = 250
  8.8 Required Rates of Return for Investing in New Ventures = 251
  8.9 Summary = 252
  Appendix 8A : Mathematics of Time Value = 260
  Appendix 8B : Statistical Review = 265
 Chapter 9 Valuation in Practice : The Investor's Perspective = 271
  9.1. Criteria for Selecting a New Venture Valuation Model = 272
  9.2 Using the Continuing Value Concept = 273
  9.3 New Venture Valuation Methods = 281
  9.4 Valuing the Investment = 298
  9.5 Summary = 306
 Chapter 10 Valuation : The Entrepreneur's Perspective = 314
  10.1 The Entrepreneur as an Underdiversified Investor = 316
  10.2 Required Rates of Return for Full-Commitment Investments = 318
  10.3 Limitations of the Opportunity Cost Framework = 323
  10.4 Valuing Full-Commitment Investments = 328
  10.5 Implementation - Full Commitment = 329
  10.6 Required Rates of Return for Partial Commitment Investments = 335
  10.7 Implementation - Partial Commitment = 340
  10.8 Estimating the Entrepreneur's Wealth and Investment = 346
  10.9 How Undiversified Are Entrepreneurs? = 348
  10.10 Benefits of Diversification = 350
  10.11 A Sanity Check - The Art and Science of Good Investment Decisions = 353
  10.12 Using and Misusing Simulation in Valuation = 356
  10.13 Treatment of Sunk Costs in the Valuation = 356
  10.14 Summary = 357
PART 5 ORGANIZATIONAL DESIGN AND FINANCIAL CONTRACTING
 Chapter 11 Financial Contracting with Symmetric Information = 365
  11.1 Some Preliminaries = 366
  11.2 Proportional Sharing of Risk and Return = 367
  11.3 Nonproportional Sharing of Risk and Return = 370
  11.4 Contract Choices that Allocate Expected Returns = 375
  11.5 Contract Choices that Alter Venture Returns = 383
  11.6 Implementation and Negotiation = 387
  11.7 Summary = 390
 Chapter 12 Dealing with Information and Incentive Problems = 396
  12.1 Information Problems, Incentive Problems, and Financial Contracts = 397
  12.2 Contract Design = 412
  12.3 Organizational Choice = 423
  12.4 Summary = 429
 Chapter 13 Financial Contracting = 439
  13.1 Staging of Investment : The Venture Capital Method = 440
  13.2 Single-Stage Investment - CAPM Valuation with Discrete Scenarios = 446
  13.3 Staging of Investment = 452
  13.4 Using Contracts to Signal Beliefs and Align Incentives = 465
  13.5 Using Simulation to Design Financial Contracts = 466
  13.6 Information, Incentives, and Contract Choice = 477
  13.7 Summary = 484
  13.8 Appendix 13A : Evaluating Alternative Financial Contracts = 489
PART 6 FINANCING AND HARVESTING CHOICES
 Chapter 14 Venture Capital = 495
  14.1 An Overview of the Venture Capital Market = 496
  14.2 The Organization of Venture Capital Firms = 499
  14.3 How Venture Capitalists Add Value = 507
  14.4 Investment Selection and Venture Capitalist Compensation = 513
  14.5 Venture Capital Contracts with Portfolio Companies = 513
  14.6 Venture Capital Contracts with Investors = 516
  14.7 The Role of Reputation in the Venture Capital Market = 518
  14.8 Summary = 519
 Chapter 15 Choice of Financing = 529
  15.1 Financing Alternatives = 530
  15.2 Start with the Objective and Basic Principles of the Financing Decision = 531
  15.3 First Step : Assess the Nature of the Venture's Financial Needs = 532
  15.4 Second Step : Assess the Current Condition of the Venture = 542
  15.5 Third Step : Assess the Relation between Financing Choices and Organizational Structure = 546
  15.6 How Financial Distress Affects Financing Choices = 548
  15.7 How Reputations and Relationships Affect Financing Choices = 552
  15.8 Total Availability of Financing for Small Businesses and New Ventures = 553
  15.9 Avoiding Missteps = 556
  15.10 Summary = 557
 Chapter 16 Harvesting = 566
  16.1 Going Public = 567
  16.2 Acquisition = 578
  16.3 Management Buy-out = 583
  16.4 Employee Stock Ownership Plans of Private and Family Businesses = 584
  16.5 Roll-up IPO = 587
  16.6 The Harvesting Decision = 589
  16.7 Summary = 591
PART 7 CONCLUSION
 Chapter 17 The Future of Entrepreneurial Finance : A Global Perspective = 601
  17.1 Completing the Circle = 602
  17.2 Breaking New Ground = 607
  17.3 An International Comparison of Entrepreneurial Activity = 610
  17.4 The Future of Entrepreneurial Finance = 623
Index = 633