The University Venture Fund(UVF) recently announced that it has some $18 million to invest in new and growing companies, “Entrepreneur” reported. The UVF has deep ties to Brigham Young University, the University of Utah, Westminster Collge and Wharton School of Business. “We don’t mandate that capital go to alumni,” says managing director Jared Hutchings, “But we certainly give preferential treatment.”
The percentage of listings at BusinessesforSale.com posted by owners has doubled to about 10% over the last five years, CEO Marcus Markou told BusinessWeek SmallBiz, according to an article in the Fall 2006 issue. Robert Fliegel, owner of Discovery Treks posted a listing for his business in January and sold it to an Arizona couple for $265,000 by July, saving a 10-20% broker commission. “People who try to sell on their own end up wasting a lot of time with unqualified prospects who have no intention of buying,” cautions business broker Karl Grasemann. Other online exchanges include BizBuySell.com and BizQuest.com.
Women comprise about 40% of all small-business owners, but only 3% of all female entrepreneurs owned small companies with revenue over $1 million, compared to 6% of all male entrepreneurs, according to the Center for Women’s Business Research. Fortunately, women entrepreneurs have more resources than ever before to reach out for funding, the 9/25/06 “Wall Street Journal” reported, including: the SBA Office of Women’s Business Ownership, Count Me In, Make Mine a Million, Ladies Who Launch, Golden Seeds and the National Association of Women Business Owners.
Vivek Wadhwa tells “Business Week Online” fifteen things you need to know before you go for VC funding. The list includes ten things you need to have in place, and five insights about how VC’s conduct their due diligence on your business.
This article is truly a must-read for anyone thinking about seeking out VC funding for the first time. Venture Capitalists really leave no stone unturned to find out about you, your people and your track records before they invest. Also, please be sure to read to the very bottom of the linked article, including the last paragraph where it says VC’s are looking to make 5-10 times their investment in 3-5 years. By my calculation, this equates to an internal rate of return in the 60-70% range. If this seems greedy on the VC’s part, bear in mind that some investments never pay back a dime! – dr
Q1. Ignoring capital gains as an alternative, the tax law changes in 2003, (which lowered individual tax rates for dividend income to 15%) tend to encourage a:
A. lower dividend policy.
B. constant dividend policy.
C. zero-dividend policy.
D. higher dividend policy.
E. restrictive dividend policy
Q2. For a CFO of a company trying to achieve the optimal capital structure, which of these would be the best piece of advice to follow:
A. Increase equity financing to diversify the shareholder base, and lessen risk
B. Increase equity financing, but do not exceed your target dividend payout rate
C. Increase debt financing, as long as debt rating stays at C or above.
D. Increase debt until the benefits from tax shield on debt are offset by financial distress costs
Q3. Which statement best explains why General Motors has a Beta of 1.77, while Heinz (maker of Heinz Ketchup and other food products) has a Beta of .44?
A. Because General Motors has a lower stock price than Heinz
B. Because GM has greater debt than Heinz.
C. Because consumers will keep buying Heinz food products in a recession, while they may postpone purchase of a new General Motors vehicle.
D. Because headquarters for General Motors is in Michigan, in the middle of the US, and Heinz is in Pittsburgh, closer to the East Coast.
Q4. A company has a weighted average cost of capital of 8%, based on a cost of equity of 11%, cost of debt of 5%, and a 1-to1 debt-to-equity ratio. A year later, the the cost of equity and cost of debt for the company are unchanged, as is the market value of its debt. However the price per share of its stock has doubled, while the number of shares outstanding have not changed. What has been the impact to the weighted average cost of capital for this company?
A. Decreased 1pp from 8% to 7%
B. Unchanged at 8%
C. Increased 1pp from 8% to 9%
D. Increased 8pp from 8% to 16%
Q5. The owner of a $5 million revenue business is turned down for a $150,000 loan by a commercial bank because they are concerned about his ability to repay. The owner approaches an asset-based lender, but due to poor record keeping is unable to tell the lender what his latest accounts receivable account balance is. *Fortunately, the owner is able to find out from his bookkeeper, that on average, his customers pay in 30 days. If the asset-based lender will loan 70% of the accounts receivable balance, how big a loan will this business owner qualify for?
A. $287,671
B. $321,455
C. $345,299
D. $389,711
Please contact David@RudofskyAssociates.com if you are interested in knowing the correct answers!
