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Entrepreneurial Finance 2nd Edition

11 customer reviews
ISBN-13: 978-0471230724
ISBN-10: 0471230723
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Editorial Reviews

From the Back Cover

An Essential Resource for Entrepreneurs, Angel Investors, and Venture Capitalists

About half of all new businesses fail in the first five years. So whether you’re bringing your new idea to market or investing in new ventures, make sure you have the tools, state-of-the-art valuation methods, and practical knowledge you need to make smart business decisions.

Now updated with late4-breaking data and references, Smith and Smith’s ENTREPRENEURIAL FINANCE, 2nd Edition equips you with an effective framework of financial economic principles to guide you through the process of incubating and growing a new venture. 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.


  • Applies financial economic theory and the economics of contracts to the study of entrepreneurship and new venture finance.
  • Blends finance theory with the practical aspects of new venture financing.
  • Emphasizes the importance of strategy in new venture planning.
  • Uses a valuation perspective to approach topics such as strategic planning, business planning, financial modeling, assessing financing needs, raising outside financing, structuring financial contracts with investors, and harvesting.


  • Venture SIMTM, the authors’ own custom simulation software.
  • Cases complete with downloadable Excel templates.
  • Tutorials on suing the simulation software, basic finance and statistical concepts, and on the more technical valuation tools covered in the text.
  • Downloadable valuation templates.

About the Author

Richard Smith is Professor of Financial Management at the Peter F. Ducker Graduate School of Management, Claremont Graduate University, where he teaches courses on new venture finance, and strategic risk management. He also is Director of the Venture Finance Institute at Claremont. Professor Smith has served on several boards that are responsible for investing on behalf of pension funds and university endorsements, and has consulted extensively for venture capitalists, business angels, entrepreneurs, and government, on matters involving investment, valuation, financial contracting, securities litigation, and antitrust.

Janet Kiholm Smith is the Von Tobel Professor of Economics at Claremont McKenna College, where she teaches course on the economics of strategy and industrial organization. She currently serves on the College’s investment committee and consults on matters related to working capital management, the economics of contracts, and antitrust. She is the author of numerous journal articles, including publications in Journal of Legal Studies, Journal of Finance, Journal of Corporate Finance, Journal of Financial and Quantitative Analysis, Journal of Law and Economics, and Journal of Law, Economics and Organization.


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Product Details

  • Hardcover: 640 pages
  • Publisher: Wiley; 2 edition (October 10, 2003)
  • Language: English
  • ISBN-10: 0471230723
  • ISBN-13: 978-0471230724
  • Product Dimensions: 7.8 x 1.1 x 9.5 inches
  • Shipping Weight: 2.4 pounds
  • Average Customer Review: 4.4 out of 5 stars  See all reviews (11 customer reviews)
  • Amazon Best Sellers Rank: #1,318,005 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

14 of 17 people found the following review helpful By A Graduate Student on July 12, 2003
Format: Hardcover
The first edition of this text has a tendency to get too theoretical with betas and CAPM as they apply to private companies, make too many distinctions between individual and personal required rates of return without a discussion of any empirical data to back up the opinions, not explain the implications of the SML theory to private investments that well, not fully explain the theory and computations behind the models they use or why they use escalating discount rates in the models. To try to understand the models, you have to go to the web site and dissect the Excel spreadsheet. I have the impression the authors bring no practical experience to the text, only the attempt to force complicated corporate financial theory into the realm of privately held business.
As a business appraiser, I found most of the quantitative theoretical information useless and its application to privately held businesses tenuous, at best. Alternative theories and approaches were not really discussed. The concepts of expected value and simulation have some real good application possibilities, but not much time was spent on how to do it in a way usable for small entities with limited budgets and a staff with basically no statistical background. I feel that the authors' agenda was to impress the readers with what they know (or think they know), without regard to conveying their ideas in an easily understood, supportable and workable format. I found chapters 8-11 to be especially frustrating. To top it all off, there are also errors in the answers to the end of chapter questions.
On the positive side, the book was well organized and there were references to studies, papers and other texts that make further reading and investigation into the topics easier.
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10 of 12 people found the following review helpful By Adrian P. Kalt on July 8, 2001
Format: Hardcover
The book has a good structure and has good chances to become a standard textbook in MBA classes or for industry newcomers. However, to make it a real classic it badly needs a second edition. First, there are too few (good) case examples. Second, the online tools are far from complete (something like this should never be published!). Third, the exercises need revising and are partly inconsistent or reptitive. (Comments based on online tools and materials as of June '01)
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14 of 18 people found the following review helpful By Atulesh Kaushik on November 29, 2000
Format: Hardcover
In this book the authors have blended business finance and economics in a unique way to help entrepreneurs understand the relationship between venture finance and evaluation of business risk. This book covers some important issues like financial projections, risk evaluation, financial valuation, investor diversification and contract negotiation. This book provides a framework for financial management using complex economic theories (ex. portfolio theory, capital asset pricing model) through simple and user friendly spreadsheet templates. The valuation framework with spreadsheet templates is one of the highlighting factors of this book. The valuation templates with their underlying assumptions help reduce the ambiguity that palgues venture financing today. This book comes with an access to Entrepreneurial Finance website where authors walk the readers through spreadsheet templates and sample business cases evaluated by them in the book. This book is a must buy for entrepreneurs, aspiring entrepreneurs, venture capitalists and academics.
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2 of 2 people found the following review helpful By Robert Scialdone on February 23, 2000
Format: Hardcover
This book explores the entire new venture process. A must read for anyone serious about starting a new venture or anyone interested in the new venture process. The book is easy enough for the financially-challenged and yet still interesting and challenging to the more advanced reader. The book also explores simulation and an accompanying Excel add-in, Venture.Sim, carries out the simulation. I highly recommend this book to finance students and professionals, well worth the investment!
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2 of 3 people found the following review helpful By Naftali/Cliff Anderson on November 30, 2006
Format: Hardcover
This might be a great advanced finance textbook in the academic world, but it definitely is NOT a good book for the person doing a technology startup who needs to know how to build the case for financing the new company. The word 'entrepreneurial' is in the title, but the audience is the MBA or graduate student. This needs to be noted so that starting entrepreneurs don't go out and buy this book hoping that it will help them build the financial section of their business plan. My sense is that it won't.
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Format: Hardcover
Mr. Smith really fuses Finance and Economics very well. This book is structured very well and well. Provides a great foundation for financial management. Great from a new venture standpoint. A must read for anybody in finance and all entrepreneurs.
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