Entrepreneurial Finance [Hardcover]

Richard L. Smith (Author), Janet Kiholm Smith (Author)

Book Description

Publication Date: October 10, 2003 | ISBN-10: 0471230723 | ISBN-13: 978-0471230724 | Edition: 2

Smith and Smith apply current thinking in the areas of valuation, real options, and the economics of contracts to new venture decision making. Readers 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. They also learn to use simulation and scenario analysis to evaluate the implications of uncertainty and financial decisions.
* Stresses the importance of strategy in new venture planning.
* Develops real-world context through relevant examples.
* Spreadsheet modeling and simulation using custom software provides hands-on learning.

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, 2^nd 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.

KEY FEATURES

• 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.

 VALUABLE SOFTWARE AND ONLINE RESOURSES

• Venture SIM^TM, 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.

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: 4.3 out of 5 stars  See all reviews (10 customer reviews)
• Amazon Best Sellers Rank: #960,244 in Books (See Top 100 in Books)

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Most Helpful Customer Reviews

14 of 17 people found the following review helpful

2.0 out of 5 stars A Major Disappointment July 12, 2003

By A Graduate Student

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.

10 of 12 people found the following review helpful

4.0 out of 5 stars Good textbook structure - mediocre quality of online section July 8, 2001

By Adrian P. Kalt

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)

15 of 19 people found the following review helpful

5.0 out of 5 stars The rational of financial economics and venture financing November 29, 2000

By Atulesh Kaushik

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.

2 of 2 people found the following review helpful

5.0 out of 5 stars A Must Read in Today's New Venture Economy! February 23, 2000

By Robert Scialdone

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!

2 of 3 people found the following review helpful

3.0 out of 5 stars For the finance pro perhaps, but not the startup entrepreneur November 30, 2006

By Naftali/Cliff Anderson

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.

5.0 out of 5 stars Must read for an graduate business student. December 16, 2010

By Paul R. Murphy IV

Format:Hardcover|Amazon Verified Purchase

This course was required for an entrepreneurial finance business course. This book has lots of good advice. Many companies get in trouble with financing a startup. This helps you avoid pitfalls.

4.0 out of 5 stars Great book for the Entrepreneur April 7, 2009

By Mark Deo

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.

7 of 11 people found the following review helpful

5.0 out of 5 stars An Invaluable Resource! March 7, 2000

By Robert Scialdone

Format:Hardcover

An excellent read for anyone seeking to become an entrepreneur or a serious finance student. A new approach to valuing new ventures which incorporates simulation to explore the uncertainty surrounding new ventures. The book provides many great case examples and valuation templates to assist. I found this book very useful to my finance education. I would highly recommend this book to anyone considering a new venture or anyone serious about finance. A great resource for professionals in the venture finance community as well!