Entrepreneurial Financing, Advice, and Agency Costs

This paper studies the interplay between advice and agency costs in entrepreneurial financing. We show that advise may exacerbate agency problems, because the agent may use it at the investor's expense and thereby hurt investors. Depending on the magnitude of the agency problem, optimal financing relationship may induce full, partial, or no advice. Because the trade--off between the positive and negative effect of entrepreneurial advice is delicate, investors need to control the information flow carefully. This explains the dual role of financing and consulting by investors in entrepreneurial financing.optimal advice, agency costs, informed investors, entrepreneurial financing

Essays On Entrepreneurial Financing

This thesis consists of three chapters on the impact of different government policies on entrepreneurial financing. In the first chapter, by quantitatively evaluating the impact of different personal bankruptcy regimes on entrepreneurship in a life-cycle model with occupational choices, I conclude that personal bankruptcy law affect entrepreneurship mainly through the insurance effect rather than the borrowing cost effect. In addition, I find that variations in bankruptcy regimes have very different impacts on households with different abilities, and changes in the length of post-bankruptcy punishments have the largest impact on entrepreneurship compared to variations in other dimensions of the bankruptcy regime. In the second chapter, I demonstrate in a model that firms could be credit-constrained due to aggregate uncertainty and the government could offer insurance in the form of loan guarantees to ease borrowing constraints for small businesses, thus increase the efficiency of the overall economy. The third chapter shows that different regulation on equity financing by financial institution could be an explanation for the large disparity in sectoral allocation of investments by Venture Capital industries between developed countries. I develop a simple principal-agent model shows that when three commonly documented characteristics of the high-tech industry coexist, the ability for lenders to vary the level of control contingent on performance becomes key. Thus venture capitalists as equity holders have a clear advantage in financing young high-tech firms in countries where equity financing from banks is not allowed

The Power of Words in Crowdfunding

In this chapter, the authors first provide an overview of the crowdfunding phenomenon. Through the literature review of crowdfunding success factors in the four models, the authors then summarize that the current entrepreneurial research focused on success factors has failed to sufficiently examine how the power of words would affect crowdfunding. Therefore, the authors propose that non-verbal and verbal cues are crucial to entrepreneurial financing success. Based on the insufficient research related with those cues, especially the non-verbal ones, the authors open an area of study on non-verbal and verbal cues in the entrepreneurial financing process by conducting and writing this chapter

Effect of Entrepreneurial Financing on Women Entrepreneurship Performance in Zamfara State

This research seeks to empirically examine the effect of entrepreneurial financing on women's entrepreneurship in Zamfara state. The study specifically wishes to examine the effect of personal savings, rotating savings, sources from relatives, partners, friends (informal sources of entrepreneurial financing) and microcredit, bank loans, government, and other agencies' grants (formal sources of entrepreneurial financing) on women entrepreneurs in Zamfara state to draw our findings based on the outcome of the research. Therefore, the research design is a survey of close-ended questionnaire-based research, which was distributed to women entrepreneurs within the state, from which a sample was drawn by the use of convenient sampling; where a sample of xxx women entrepreneurs was drawn and randomly given a questionnaire. The valid responses were presented in tables and charts for a better understanding of users. The data collected was then analysed by the use of SPSS version 20.0 through ordinary least square regression technique and ANOVA, then followed by a post-diagnostic reliability test of Cronbach alpha, multicollinearity, or/and outliers. The confirmation of this analysis suggested the final result, and from it, a conclusion and recommendations will be proffered

Entrepreneurial Financing—Alternatives for Raising Capital

Most entrepreneurs are continually concerned about their finances. Their companies perhaps not yet profitable, they may have a fear of “running out of dry powder.” These entrepreneurs often have fallen in love with their company’s technologies, products, and potential markets, but they require more resources. Invariably these emerging ventures shroud their fear of the grueling capital raising marathon by presenting voluminous business plans to potential investors. They often flaunt their “optimized business models.” Investors, however, typically want to know why the potential investment is such a good deal. The entrepreneur often wants guidance regarding what to say to whom in a changing financing environment. In this article, our “Practitioner’s Corner” associate editor Joe Levangie collaborates with a long-time colleague Paul Broude to address how businesses should “make their capital-raising initiatives happen.” Levangie, a venture advisor and entrepreneur, first worked with Broude, a business and securities attorney, in 1985 when they went to London to pursue financing for an American startup. They successfully survived all-night drafting sessions, late-night clubbing by the company founder, and even skeet shooting and barbequing at the investment banker’s country house to achieve the first “Greenfield” flotation by an American company on the Unlisted Securities Market of the London Stock Exchange. To ascertain how the entrepreneur can determine what financing options exist in today’s investing climate, read on

Entrepreneurial financing decisions, venture capital ownership and bargaining power

It is widely acknowledged that entrepreneurial companies play a key role in shaping a local economy. Entrepreneurial companies are a source of growth and innovation for an industry and provide jobs for the local population. However, entrepreneurs of high growth oriented companies rarely have the capital to finance their innovative ideas themselves and therefore also have to accept the risks associated with assessing and acquiring the necessary finance resources from other investors. The goal of this dissertation is to study the impact of venture capital (VC) finance on such entrepreneurial finance decisions. Although VC investors are a highly focused and specialized kind of investors that offer a wide range of differentiated services, it is to date still unclear how VC investors may reduce agency costs for other potential investors. The first study of this dissertation studies the effect of VC finance and associated VC ownership for finance decisions from other investors who have the potential to invest in these companies. This study demonstrates that VC ownership results into a larger supply of finance for the entrepreneurial company. Second, I find that VC ownership results into an even larger positive effect on capital investment decisions from equity investors as VC finance is typically also associated with the implementation of an equity-oriented corporate governance mechanism in entrepreneurial companies. VC ownership does not have an effect on the supply of finance from financial debt investors, however. Nevertheless, I find that debt finance is equally available for companies with VC ownership as compared to companies without VC ownership, which is a surprising result given the high risk associated with high growth companies that raise VC finance. Another important finding of this study is that the positive effect of VC ownership is stronger for repeated VC finance versus non-repeated VC finance. In fact, these results indicate that the effect of VC finance for entrepreneurial companies’ finance decisions is considerably larger if VC investors commit to further finance the company. The second study of this dissertation extends the first study and explores the effect of VC ownership on entrepreneurial finance decisions in different institutional settings. Although the effect of VC ownership is not limited to one specific institutional context, this study shows that its impact on entrepreneurial finance decisions is stronger in countries with a better quality of law enforcement and in countries where the entrepreneur is able to obtain a fresh start after bankruptcy. Specifically, in countries with a better enforcement of law, VC investors are more effective in reducing agency problems between entrepreneurs and potential investors. The attractiveness of a fresh start after bankruptcy will also be higher for an entrepreneur who raised VC finance, as VC investors focus more on maximizing the value of their portfolio rather than on the survival of individual firms. The third study acknowledges the fact that VC investors are not all equal and explores which VC investor types have more bargaining power versus the entrepreneur and how such differences in VC investor bargaining power affect company valuations in VC investment rounds. VC investor bargaining power is important because company valuations are the outcome of negotiations between the VC investor and the entrepreneur. We show that university VC firms and government VC firms negotiate lower valuations compared with independent VC firms. The proprietary deal flow of university VC firms and the limited competition in niche markets in which government VC firms compete will directly increase their bargaining power versus the entrepreneur, which these VC investor types then further exploit by negotiating lower company valuations compared with independent VC investors. Although differences in VC investor type did not affect entrepreneurial finance decisions in the first and second study, they do affect the equity stake that an entrepreneur will have to give up in order to raise VC finance and in order to a have a greater access to entrepreneurial finance from potential investors in the future

The entrepreneurial financing of the immigrant entrepreneurs: a literature review

There is an increasing interest in the phenomenon of immigrant entrepreneurship. Despite the growing number of studies, the financing aspect of immigrant entrepreneurship is still an emergent subject. In this paper, we critically and systematically review the field of the entrepreneurial financing of immigrant entrepreneurs. For this purpose, we conduct a two-step analysis of 37 systematically selected articles. In the first step, we provide an overall description of the field, while in the second step we perform a SWOT analysis on different aspects of the field, including the units of analysis, the main questions, and the use of theories and methods in the field. The review identifies gaps and weaknesses in the field, suggests potential opportunities for future research, and highlights some threats that could impede the implementation of future opportunities. Finally, the review suggests further questions to be explored for future advancement of knowledge in the field

Present and future of crowdfunding as source of entrepreneurial financing

Treball Final de Grau en Finances i Comptabilitat. Codi: FC1049. Curs acadèmic: 2016/2017New financing techniques have emerged due to the recently experienced deep crisis. In a changing technological environment any individual with an innovative business idea and an achievable entrepreneurial project can easily undertake it without resorting to traditional banking. As a result of the new Fintech technology, a word stemming from a contraction of the words “finance” and “technology”, it may be possible for anyone to use a wide range of financial services in a faster, more comfortable and transparent way. This technological revolution has entered with force in our country. However, even though the high turnover figures that move financial startups of other countries have yet to be reached here, investment and growth in this sector is rapidly increasing. Therefore, the crowdfunding industry marks the present and the future as a source of financing for business projects in our country

The Role of Entrepreneurial Financing on National Output: An Empirical Analysis

Due to the magnanimous role of entrepreneurial finance in spurring output thereby fostering economic performance as supported by the intermediation and entrepreneurial financing theory, this study explored the influx of entrepreneurial financing on output generation in Nigeria utilizing secondary sourced data over the period of 1992 to 2014. The study was carried out utilizing analytical tools such as the Unit root/Stationarity test, Ordinary Least Squares Regression, Johansen Co-integration, Error Correction Estimates and Pairwise Granger Causality tests. It was discovered that in both the short and long run relationship, analyses indicated that Micro-Credit (MC) and Commercial Banks Loans to Small and Medium Scale Enterprises (CME) influence on the Gross Domestic Output in the nation had been on the increase. It was discovered that Access to Credit Facilities (ASCF) and Small and Medium Equity Investment (SMIE) played insignificance role in the nation’s performance level. This study discovered the accessibility to fund a major problem. In this light, it was recommended that government ought to, as a matter of criticality, help planned business visionaries to have admittance to the public purse to back them up and provide them easy access to fundamental data identifying with business opportunities, present day innovation, crude materials, business sector, plant and hardware which would empower them to diminish their working expense.Key Words: Micro-Credit, Commercial Bank Loans to the Small and Medium ScaleEnterprises, Access to Credit Facilities, Small and Medium Industry EquityInvestment

Entrepreneurial Finance: Insights from English Language Training Market in Vietnam

Entrepreneurship plays an indispensable role in the economic development and poverty reduction of emerging economies like Vietnam. The rapid development of technologies during the Fourth Industrial Revolution (Industry 4.0) has a significant impact on business in every field, especially in the innovation-focused area of entrepreneurship. However, the topic of entrepreneurial activities with technology applications in Vietnam is under-researched. In addition, the body of literature regarding entrepreneurial finance tends to focus on advanced economies, while mostly neglecting the contextual differences in developing nations. Therefore, this research contributes to these topics by investigating the main characteristics of a high potential market for entrepreneurs in Vietnam, which is the English language training market (ELTM). It also aims at indicating the impacts of technology on the entrepreneurial firms within this market, with an emphasis on financing sources. To answer the research questions, this study employs a qualitative analysis and conducts 12 in-depth, semi-structured interviews with entrepreneurs and researchers in the field. The key findings in our study highlight the main contributing factors to the growth of the market, both universally and context-specific for a developing nation like Vietnam. It also lists the leaders in each market segment and the industry’s potential profit margin. The results also show that most entrepreneurs in the ELTM utilized private sources of finance rather than external ones, such as bank loans. It again confirms the idea from previous works that even with the rapid development of the economic and technological landscape, entrepreneurial activities in general barely benefit from additional sources of funding. However, it also points out the distinct characteristics of the ELTM that may influence these financing issues; for example, English training services usually collect revenues from customers before delivering their classes. This is of advantage for entrepreneurs in this area and helps significantly reduce the financial barriers. These findings, which are among the first attempts to contribute to a better understanding of entrepreneurial opportunities in the Industry 4.0 in Vietnam, provide valuable insights for policymakers and entrepreneurs, as well as investors