INTG 201 Lecture Notes - Lecture 16: Startup Company, Transaction Cost, Employment Contract

• School: McGill University
• Department: Integrated Management
• Course: INTG 201
• Professor: Mary Maguire

Document Summary

For venture capital investments, around 1 in 1,000 suggested business projects receives funding, on average. As a result, start-ups typically use informal sources of external financing and rely o(cid:374) o(cid:449)(cid:374)e(cid:396)s" pe(cid:396)so(cid:374)al sa(cid:448)i(cid:374)g a(cid:374)d (cid:272)(cid:396)edit to fi(cid:374)a(cid:374)(cid:272)e thei(cid:396) ope(cid:396)atio(cid:374)s(cid:863: 80% personal funds, 15% funds from family and friends, 13% of funds from other businesses. Disclaimer raising money and spending it wisely are make or break issues for many firms, especially start-ups finance knowledge can compensate for a bad business. External sources look at the liabilities and equity (right side of the balance sheet) External: raised from outside, includes liabilities, equity (contributed capital) Debt (liabilities) vs. equity internal: generated from the inside, equity (retained earnings: capital structure of the firm. Debt (loan interest and payment schedule) vs. equity (shareholders and dividends no obligation or legal claim: obligations in debt are very specified. We refer to the liabilities as debt.