ENTREPRENEURIAL FINANCE - 2026
Inhoudsopgave
1. Entrepreneurial Finance introduction ....................................................................................................................................3
1.1 Entrepreneurial Finance versus Corporate Finance .........................................................................................................3
1.2 Stages of Venture Development ......................................................................................................................................7
1.3 Wrap-up .........................................................................................................................................................................11
2. Sources of financing .............................................................................................................................................................12
2.1 Bootstrapping.................................................................................................................................................................12
2.2 Friends, Family and Fools (3F’s) .....................................................................................................................................14
2.3 Incubator, accelerator & venture studios ......................................................................................................................14
2.4 Crowdfunding .................................................................................................................................................................16
2.5 Business angels ..............................................................................................................................................................19
2.6 Venture capital ...............................................................................................................................................................20
2.7 Banks ..............................................................................................................................................................................23
2.8 Strategic partners ...........................................................................................................................................................24
2.9 Government measures ...................................................................................................................................................24
2.10 IPO .............................................................................................................................................................................24
Difference between sources of financing ................................................................................................................................25
How to target an investor to invest in an early stage venture? ...............................................................................................25
Main elements to evaluate when asking for financing ............................................................................................................25
Wrap-up ...................................................................................................................................................................................27
3. Financial Planning + Case Study QualiPro .............................................................................................................................27
3.1 Understanding the key terms of a financial plan .............................................................................................................28
Step 1: Revenue Forecast .........................................................................................................................................................30
Step 2 : P&L Statement ............................................................................................................................................................33
Step 3: Cash Flow Statement ...................................................................................................................................................38
Step 4: Balance sheet ...............................................................................................................................................................40
Step 5: Assess the Burn Rate and Runway ...............................................................................................................................45
3.2 Understanding the unit economics of your business model ..........................................................................................47
3.3 Wrap-Up .........................................................................................................................................................................47
4. Exercises financial planning ..................................................................................................................................................48
5. Valuing Entrepreneurial Companies .....................................................................................................................................61
5.1 Introduction to valuation ...............................................................................................................................................62
5.2 Discounted Cash Flow (DCF) Method .............................................................................................................................65
5.3 Probability-adjusted DCF method ..................................................................................................................................67
5.4 Multiples ........................................................................................................................................................................70
5.5 Venture Capital Method.................................................................................................................................................73
5.6 Wrap-Up .........................................................................................................................................................................77
6. Exercises Valuation ...............................................................................................................................................................77
1
,7. Deal Structures .....................................................................................................................................................................91
7.1 Investment staging ...........................................................................................................................................................92
7.2 Term sheet .......................................................................................................................................................................95
Valuation ..............................................................................................................................................................................98
Company control: Shareholder leverage ..............................................................................................................................98
Company control: composition of the board .......................................................................................................................99
Dividends ..............................................................................................................................................................................99
Anti-dilution ..........................................................................................................................................................................99
Liquidation or exit preferences ......................................................................................................................................... 104
Stock-option pool .............................................................................................................................................................. 108
Vesting for founders (and other protection) ..................................................................................................................... 109
Pay to play ......................................................................................................................................................................... 109
Drag alongs and tag alongs ................................................................................................................................................ 110
Milestones and tranches ................................................................................................................................................... 111
Exit provisions.................................................................................................................................................................... 111
Other terms ....................................................................................................................................................................... 112
7.3 Wrap-up ...................................................................................................................................................................... 113
8. Exercises deal structures ................................................................................................................................................... 114
Quizzes ...................................................................................................................................................................................... 123
Session 1 : Intro ..................................................................................................................................................................... 123
Session 2: Sources of Financing............................................................................................................................................. 125
Session 3: Financial Planning................................................................................................................................................. 127
Session 5: Valuation .............................................................................................................................................................. 127
Session 7: Deal structure ....................................................................................................................................................... 129
2
, 1. Entrepreneurial Finance introduction
Entrepreneurial Finance
- Valuing and financing unquoted entrepreneurial companies
- Making deals
- Financial decision making by entrepreneurs who are undertaking new ventures
Corporate finance: financial decision making by managers of public companies
What is an entrepreneur?
- “An entrepreneur is someone who exercises business judgement in the face of uncertainty” (Cantillon, 1755)
- “Entrepreneurship is characterized by the existence of new combinations causing discontinuity… The process of
creative destruction…” (Schumpeter, 1936)
- “The ability to discover new ways of dealing with known problems or new combinations of given knowledge”
(Penrose, 1959)
- Howard Stevenson (HBS):“Someone who pursues opportunities with no regard to resources currently controlled” ->
Impossible to provide a profile, but leading psychoanalysts suggest many entrepreneurs do share characteristics.
Three defining characteristics
1) Opportunity recognition / creation
2) Uncertainty
3) Limited resources
“Good ideas and good products are a dime a dozen. Good execution and good management−in a word, good people−are
rare.” - Quote by Arthur Rock, an early investor in companies like Apple and Intel
The language of early-stage finance
- Entrepreneur → ???
- Investor → pre-money, participating, preferred, common, anti-dilusion, angel, full-ratchet, post-money, change of
control …
Entrepreneurs make it happen through business
- Starting
- Building
- Buying
- Selling
➔ All the above are points of change that necessitate a valuation process followed by a refinancing process
Valuation is a key skills as it is necessary to
- Raise equity
- Raise debt
- Satisfy vendor
- Satisfy purchaser
- Get deal done
- Get rich
- Go bust
Goal of this course:
- To expose you to the different financing options
- To expose you to the valuation and structuring issues that entrepreneurs and investors must consider when
assessing, entering and exiting deals
- To enable you to identify the critical factors when doing it for real – a ‘nose’ for deals
1.1 ENTREPRENEURIAL FINANCE VERSUS CORPORATE FINANCE
New venture creation process
3
, -
(kind of doctor signature: if it does not work: shift again start looking for product-market fit and finding customers:
shifts all the time, as investor: how do you value it because do not know the future)
Key risks involved in growth oriented innovative startups
- Will the technology work? = technological risk
- Will customers buy the product at a viable price?
o When will the market take off = market risk
- Can we stand competition? Can we protect IP? = competitive risk
- Can the team deliver what they promise? = execution risk
o Executing customer acquisition strategy
o Attracting and training the right talents
o Managing investor expectations
o Handling team conflicts
o …
- Can we overcome legal and institutional barriers? = regulatory risk
- Can we secure enough funding? = funding risk
Corporate finance
- → track record, history, public information
- Investing → assets
- Financing → liabilities & equity
Entrepreneurial finance
- Newness, uncertainty, private information
- “The art and science of investing and financing entrepreneurial ventures”
Information problems
- Information on the opportunity is incomplete and uncertain to Es and OIs
- Outside investors lack information on
o Value of idea: Risk of appropriation of intellectual property & ideas by entrepreneurs, competitors and
investors
o Skills and efforts of an entrepreneur
- Even with the same information, Es and OIs may interpret information differently; different views of the future
o Driven by huge uncertainty
- Uncertainty leads to different views of future
o Uncertain whether technology would work
o Uncertainty with respect to demand
o Uncertainty with respect to price
o Uncertainty with respect to patent application
Addressing agency problems
- Reduce information asymmetry
o Pre-investment screening and due diligence
o Post-investment monitoring
- Align goals of E’s and OI’s (Outside Investors)
o E’s are expected to show real commitment
- Invest their own savings
o E’s are shareholders: bear risk and upside potential
o Use of specific investment instruments help to align goals
4
Inhoudsopgave
1. Entrepreneurial Finance introduction ....................................................................................................................................3
1.1 Entrepreneurial Finance versus Corporate Finance .........................................................................................................3
1.2 Stages of Venture Development ......................................................................................................................................7
1.3 Wrap-up .........................................................................................................................................................................11
2. Sources of financing .............................................................................................................................................................12
2.1 Bootstrapping.................................................................................................................................................................12
2.2 Friends, Family and Fools (3F’s) .....................................................................................................................................14
2.3 Incubator, accelerator & venture studios ......................................................................................................................14
2.4 Crowdfunding .................................................................................................................................................................16
2.5 Business angels ..............................................................................................................................................................19
2.6 Venture capital ...............................................................................................................................................................20
2.7 Banks ..............................................................................................................................................................................23
2.8 Strategic partners ...........................................................................................................................................................24
2.9 Government measures ...................................................................................................................................................24
2.10 IPO .............................................................................................................................................................................24
Difference between sources of financing ................................................................................................................................25
How to target an investor to invest in an early stage venture? ...............................................................................................25
Main elements to evaluate when asking for financing ............................................................................................................25
Wrap-up ...................................................................................................................................................................................27
3. Financial Planning + Case Study QualiPro .............................................................................................................................27
3.1 Understanding the key terms of a financial plan .............................................................................................................28
Step 1: Revenue Forecast .........................................................................................................................................................30
Step 2 : P&L Statement ............................................................................................................................................................33
Step 3: Cash Flow Statement ...................................................................................................................................................38
Step 4: Balance sheet ...............................................................................................................................................................40
Step 5: Assess the Burn Rate and Runway ...............................................................................................................................45
3.2 Understanding the unit economics of your business model ..........................................................................................47
3.3 Wrap-Up .........................................................................................................................................................................47
4. Exercises financial planning ..................................................................................................................................................48
5. Valuing Entrepreneurial Companies .....................................................................................................................................61
5.1 Introduction to valuation ...............................................................................................................................................62
5.2 Discounted Cash Flow (DCF) Method .............................................................................................................................65
5.3 Probability-adjusted DCF method ..................................................................................................................................67
5.4 Multiples ........................................................................................................................................................................70
5.5 Venture Capital Method.................................................................................................................................................73
5.6 Wrap-Up .........................................................................................................................................................................77
6. Exercises Valuation ...............................................................................................................................................................77
1
,7. Deal Structures .....................................................................................................................................................................91
7.1 Investment staging ...........................................................................................................................................................92
7.2 Term sheet .......................................................................................................................................................................95
Valuation ..............................................................................................................................................................................98
Company control: Shareholder leverage ..............................................................................................................................98
Company control: composition of the board .......................................................................................................................99
Dividends ..............................................................................................................................................................................99
Anti-dilution ..........................................................................................................................................................................99
Liquidation or exit preferences ......................................................................................................................................... 104
Stock-option pool .............................................................................................................................................................. 108
Vesting for founders (and other protection) ..................................................................................................................... 109
Pay to play ......................................................................................................................................................................... 109
Drag alongs and tag alongs ................................................................................................................................................ 110
Milestones and tranches ................................................................................................................................................... 111
Exit provisions.................................................................................................................................................................... 111
Other terms ....................................................................................................................................................................... 112
7.3 Wrap-up ...................................................................................................................................................................... 113
8. Exercises deal structures ................................................................................................................................................... 114
Quizzes ...................................................................................................................................................................................... 123
Session 1 : Intro ..................................................................................................................................................................... 123
Session 2: Sources of Financing............................................................................................................................................. 125
Session 3: Financial Planning................................................................................................................................................. 127
Session 5: Valuation .............................................................................................................................................................. 127
Session 7: Deal structure ....................................................................................................................................................... 129
2
, 1. Entrepreneurial Finance introduction
Entrepreneurial Finance
- Valuing and financing unquoted entrepreneurial companies
- Making deals
- Financial decision making by entrepreneurs who are undertaking new ventures
Corporate finance: financial decision making by managers of public companies
What is an entrepreneur?
- “An entrepreneur is someone who exercises business judgement in the face of uncertainty” (Cantillon, 1755)
- “Entrepreneurship is characterized by the existence of new combinations causing discontinuity… The process of
creative destruction…” (Schumpeter, 1936)
- “The ability to discover new ways of dealing with known problems or new combinations of given knowledge”
(Penrose, 1959)
- Howard Stevenson (HBS):“Someone who pursues opportunities with no regard to resources currently controlled” ->
Impossible to provide a profile, but leading psychoanalysts suggest many entrepreneurs do share characteristics.
Three defining characteristics
1) Opportunity recognition / creation
2) Uncertainty
3) Limited resources
“Good ideas and good products are a dime a dozen. Good execution and good management−in a word, good people−are
rare.” - Quote by Arthur Rock, an early investor in companies like Apple and Intel
The language of early-stage finance
- Entrepreneur → ???
- Investor → pre-money, participating, preferred, common, anti-dilusion, angel, full-ratchet, post-money, change of
control …
Entrepreneurs make it happen through business
- Starting
- Building
- Buying
- Selling
➔ All the above are points of change that necessitate a valuation process followed by a refinancing process
Valuation is a key skills as it is necessary to
- Raise equity
- Raise debt
- Satisfy vendor
- Satisfy purchaser
- Get deal done
- Get rich
- Go bust
Goal of this course:
- To expose you to the different financing options
- To expose you to the valuation and structuring issues that entrepreneurs and investors must consider when
assessing, entering and exiting deals
- To enable you to identify the critical factors when doing it for real – a ‘nose’ for deals
1.1 ENTREPRENEURIAL FINANCE VERSUS CORPORATE FINANCE
New venture creation process
3
, -
(kind of doctor signature: if it does not work: shift again start looking for product-market fit and finding customers:
shifts all the time, as investor: how do you value it because do not know the future)
Key risks involved in growth oriented innovative startups
- Will the technology work? = technological risk
- Will customers buy the product at a viable price?
o When will the market take off = market risk
- Can we stand competition? Can we protect IP? = competitive risk
- Can the team deliver what they promise? = execution risk
o Executing customer acquisition strategy
o Attracting and training the right talents
o Managing investor expectations
o Handling team conflicts
o …
- Can we overcome legal and institutional barriers? = regulatory risk
- Can we secure enough funding? = funding risk
Corporate finance
- → track record, history, public information
- Investing → assets
- Financing → liabilities & equity
Entrepreneurial finance
- Newness, uncertainty, private information
- “The art and science of investing and financing entrepreneurial ventures”
Information problems
- Information on the opportunity is incomplete and uncertain to Es and OIs
- Outside investors lack information on
o Value of idea: Risk of appropriation of intellectual property & ideas by entrepreneurs, competitors and
investors
o Skills and efforts of an entrepreneur
- Even with the same information, Es and OIs may interpret information differently; different views of the future
o Driven by huge uncertainty
- Uncertainty leads to different views of future
o Uncertain whether technology would work
o Uncertainty with respect to demand
o Uncertainty with respect to price
o Uncertainty with respect to patent application
Addressing agency problems
- Reduce information asymmetry
o Pre-investment screening and due diligence
o Post-investment monitoring
- Align goals of E’s and OI’s (Outside Investors)
o E’s are expected to show real commitment
- Invest their own savings
o E’s are shareholders: bear risk and upside potential
o Use of specific investment instruments help to align goals
4
