Cambridge University Press 978-1-108-42135-5 — Entrepreneurial Finance Edited by Luisa Alemany , Job Andreoli Frontmatter More Information ENTREPRENEURIAL FINANCE The Art and Science of Growing Ventures Academics and practitioners from a range of institutions across Europe pro- vide a cutting-edge, practical, and comprehensive review on the financing of entrepreneurial ventures. From sourcing and obtaining funds, to financial tools for growing and managing the financial challenges and opportunities of the startup, Entrepreneurial Finance: The Art and Science of Growing Ventures is an engaging text that equips entrepreneurs, students and early-stage inves- tors to make sound financial decisions at every stage of a business’ life. Largely reflecting European businesses and with a European perspective, the text is grounded in sound theoretical foundations. Case studies and success stories as well as perspectives from the media and from experts provide real- world applications, while a wealth of activities give students abundant oppor- tunities to apply what they have learned. A must-have text for both graduate and undergraduate students in entrepreneurship, finance and management programs, as well as aspiring entrepreneurs in any field. Luisa Alemany is an associate professor in entrepreneurial finance at ESADE Business School and holds an M.B.A. from Stanford University, California, and a PhD from the Universidad Complutense, Madrid. Her research focuses on business angels, venture capital, impact investing, and entrepreneurship education for children. From 2009 to 2017, Dr Alemany was the director of the ESADE Entrepreneurship Institute. She is currently the academic spon- sor of ESADE Business Angels Network (BAN) and is active at the European level, where she has been a director of the board of the European Business Angels Network (EBAN). She also holds seats in different investment com- mittees, both in venture capital and impact investing. She is part of the first European women-only business angels network, Rising Tide I and II. Dr Alemany has held positions at Procter & Gamble, McKinsey & Co., and Goldman Sachs. She also has experience in venture capital and private equity, having worked for the funds Europ@Web and The Carlyle Group. Job J. Andreoli is a senior lecturer and PhD candidate at the Center for Finance of the Nyenrode Business Universiteit and the Nyenrode New Business School in the Netherlands. In addition, he leads the Nyenrode Incubator in Amsterdam and is on the advisory board of a venture capital firm. Prior to joining Nyenrode, Mr Andreoli has worked as a strategy con- sultant for Ernst & Young (EY) and Capgemini and was responsible for setting up the Strategy and Innovation practice of Atos Consulting. He has also been involved in startups and working with small and medium-sized enterprises that tend towards financial distress. Mr Andreoli holds an M.Sc. degree in Strategic Management from Rotterdam School of Management, Ersamus University and an M.Sc. in Education from VU Amsterdam. © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-108-42135-5 — Entrepreneurial Finance Edited by Luisa Alemany , Job Andreoli Frontmatter More Information ENTREPRENEURIAL FINANCE The Art and Science of Growing Ventures LUISA ALEMANY ESADE Business School JOB J. ANDREOLI Nyenrode Business University © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-108-42135-5 — Entrepreneurial Finance Edited by Luisa Alemany , Job Andreoli Frontmatter More Information University Printing House, Cambridge CB2 8BS, United Kingdom One Liberty Plaza, 20th Floor, New York, NY 10006, USA 477 Williamstown Road, Port Melbourne, VIC 3207, Australia 314–321, 3rd Floor, Plot 3, Splendor Forum, Jasola District Centre, New Delhi – 110025, India 79 Anson Road, #06–04/06, Singapore 079906 Cambridge University Press is part of the University of Cambridge. It furthers the University’s mission by disseminating knowledge in the pursuit of education, learning, and research at the highest international levels of excellence. www.cambridge.org Information on this title: www.cambridge.org/9781108421355 DOI: 10.1017/9781108368070 © Cambridge University Press 2018 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 2018 Printed and bound in Great Britain by Clays Ltd, Elcograf S.p.A. A catalogue record for this publication is available from the British Library. Library of Congress Cataloging-in-Publication Data Names: Alemany, Luisa, editor. | Andreoli, Job, editor. Title: Entrepreneurial finance : the art and science of growing ventures / edited by Luisa Alemany, ESADE Business School, Job Andreoli, Nyenrode Business University/New Business School. Description: New York : University of Cambridge, [2018] | Includes bibliographical references and index. Identifiers: LCCN 2017061576| ISBN 9781108421355 (hbk. : alk. paper) | ISBN 9781108431859 (paperback : alk. paper) Subjects: LCSH: New business enterprises – Finance. | Small business – Finance. | Venture capital. | Entrepreneurship. Classification: LCC HG4027.6 .E58 2018 | DDC 658.15/92–dc23 LC record available at https://lccn.loc.gov/2017061576 ISBN 978-1-108-42135-5 Hardback ISBN 978-1-108-43185-9 Paperback Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party internet websites referred to in this publication and does not guarantee that any content on such websites is, or will remain, accurate or appropriate. © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-108-42135-5 — Entrepreneurial Finance Edited by Luisa Alemany , Job Andreoli Frontmatter More Information CONTENTS List of Figures page vii List of Tables x List of Contributors xi Preface xxi Structure of the Book xxiii I FUNDING SOURCES 1 Introduction to Entrepreneurial Finance 2 Luisa Alemany and Job J. Andreoli 2 Early Sources of Funding (1): Incubators, Accelerators and Crowdfunding 23 Job J. Andreoli 3 Early Sources of Funding (2): Business Angels 60 Colin Mason and Tiago Botelho 4 Venture Capital, Private Equity and Corporate Venture Capital 97 Josep Duran and Oscar Farres 5 Public Sources of Funding 129 Isidro Laso II FUNDING PROCESS 6 Deal Sourcing and Screening 148 Dietmar Grichnik, Torben Antretter and Alexander Stoeckel 7 Preparing the Financial Plan: Forecasting 181 Sophie Manigart and Miguel Meuleman 8 Valuation of New Ventures 214 Luisa Alemany 9 The Term Sheet and Negotiating with Investors 249 Stefano Caselli III GROWING THE VENTURE 10 Monitoring Tactics and Key Metrics 278 Jan Brinckmann, Miguel Meuleman and Peter Witt 11 Corporate Governance 310 Stefano Caselli © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-108-42135-5 — Entrepreneurial Finance Edited by Luisa Alemany , Job Andreoli Frontmatter More Information vi CONTENTS 12 Managing your Intellectual Property 338 Peter Hiscocks IV ALTERNATIVE ROUTES TO ENTREPRENEURSHIP 13 Entrepreneurship through Acquisition (1): MBOS and MBIS 362 Miguel Meuleman and Hans Vanoorbeek 14 Entrepreneurship through Acquisition (2): ‘Searchers’ 408 Timothy Bovard 15 Turnarounds, Workouts and Other Restructuring: Reinventing Value 449 Benoıˆt F. Leleux 16 Impact Investing: Financing Social Entrepreneurs 485 Lisa Hehenberger, Johanna Mair and Sara Seganti V HARVESTING AND THE FUTURE OF ENTREPRENEURIAL FINANCE 17 Harvesting: The Exit 530 Peter Roosenboom 18 The Future of Entrepreneurial Finance 562 Luisa Alemany and Job Andreoli Appendix 1 Examples of Public Support for Entrepreneurship in Europe 583 Appendix 2 Typical Business Angel Term Sheet Clauses 587 Appendix 3 General Term Sheet 588 Appendix 4 Angel Term Sheet 594 Appendix 5 Measuring and Managing Impact 600 Index 607 © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-108-42135-5 — Entrepreneurial Finance Edited by Luisa Alemany , Job Andreoli Frontmatter More Information FIGURES Figure 1.1 Stages of venture development page 13 Figure 1.2 Early stages of a new venture and sources of funding 16 Figure 1.3 Sources of funding by venture development phase 17 Figure 2.1 Early stages of funding by orientation and venture development phase 27 Figure 2.2 Global difference in enterprise creation (2016) 30 Figure 2.3 Overview of the accelerator process 39 Figure 2.4 Top 10 accelerators by capital investment: Europe (2017) 43 Figure 2.5 Main forms of crowdfunding 48 Figure 3.1 Sources of informal venture capital 70 Figure 3.2 The stages in the business angel’s investment process 71 Figure 3.3 The funding funnel of Canadian angel groups 85 Figure 4.1 Venture Capital versus Private Equity 100 Figure 4.2 Life of a VC fund 104 Figure 4.3 Net IRR by vintage year in PE funds as of 30 June 2016 106 Figure 4.4 Investors in European venture capital in 2015 107 Figure 4.5 Distribution of exit multiples in European VC funds (1996–2016) 110 Figure 4.6 Structure chart of a VC fund 116 Figure 4.7 Fundraising volumes by European VC funds (2015) 120 Figure 4.8 Investors in European VC funds (2015) 120 Figure 4.9 Venture capital investments by sector as percentage (2015) 121 Figure 4.10 Venture capital investments as percentage of GDP in European countries (2015) 123 Figure 4.11 Venture