INNOVATION IN BUSINESS ENTREPRENEURSHIP MANUAL

MANUAL INNOVACIÓN EN EL EMPRENDIMIENTO EMPRESARIAL

Once the Investment Plan has been determined, in Western markets it is required that the founding partners and their "extended environment" (the famous "4f" - founders, friends, family and fouls) contribute at least 50% of the initial investment plan as the Project's own resources. We could say that this financial planning requirement is nowadays demanded of almost any company in Western markets. c) It will always be difficult to obtain financing in the initial phase of the business, the project is high risk. The initial financing of the venture is not bank financing (from conventional private banks). In the initial phase (start-ups go through milestones, with a certain anthropomorphic similarity: they are born, grow, develop and hopefully do not die), the start-up may not have positive EBITDA until the end of the second year. This is why it cannot resort to bank financing from traditional private banks with risk criteria that are highly supported by solid financial variables, in addition to the corresponding guarantees. d) The financing of an entrepreneurial project has a "certain order": first Debt and then Equity (Business Angels or Private Investors). The "natural" order of seeking external funds for the first phase of the company (up to the first two years?) should be: first Debt and then Equity from private investors or Business Angels. The reasons are quite obvious: • Debt in financial terms lowers the average cost of liability resources, lowers the WACC (weighted average cost of capital) and thus lowers the level of demand for the economic return on assets. A different issue is the amount of Debt to be assumed due to risk issues, although we have already pointed out above a recommendable "binding" in terms of percentage of total liabilities. • The Debt does not interfere in the management and/or governance of the company (as will the Business Angel that we give subsequent entry into the capital of the Company through the Shareholders' Agreements it includes). • Firstly, Debt, because in this first phase of the start-up or newly created company, until the first two years, it is normal for the Company to not even have positive EBITDA. How should the portion of capital to be handed over to the Business Angel for its monetary contribution to the Project then be valued?

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European Open Business School