Message for students

Entrepreneurial finance has become a popular subject. Looking at how start-up companies try to disrupt markets and bring change to society is exciting. It also poses some concrete business challenges: How do investors pick winners? How do they finance growth? How do entrepreneurs manage to attract interest from investors? How does financing contribute to a venture’s success, generate economic benefits and financial returns? Yet entrepreneurial finance can also be confusing and complex, full of jargon, not to mention lots of hype.

Our view is that to become an expert and make sense of the complex world of entrepreneurial finance, one needs to understand not only what is happening, but also why it is happening. This is what this book is for!

Why do we need a new book for this? Why is a corporate finance, or entrepreneurship book not enough? A good corporate finance book can help to understand the world of investors, and a good entrepreneurship textbook the world of entrepreneurs. The key to entrepreneurial finance, however, is to understand how these two worlds clash, combine, and ultimately create financing solutions suitable for innovative start-ups. Corporate finance books focus on the financing of mature companies which mainly issue stocks and bonds. Entrepreneurial ventures have very different financing needs. They need financial arrangements suitable for a highly uncertain environment. There is much more diversity among the various types of venture investors, which matters because these investors often get closely involved in the business. As for entrepreneurship books, they typically touch upon the venture’s funding needs, but rarely look at the fundraising process itself, explore the dynamic implications of financing choices, or clarify the numerous differences across alternative investor types.

This book is grounded in academic principles. The research foundations draw mostly on the core disciplines of finance and economics. In addition, we include insights from entrepreneurship, strategic management, marketing, organizational behavior, law, accounting, public policy, and other related fields, which enrich our understanding of the investment process.

This book is also steeped in practice. Throughout the book we constantly move between concepts and application. We augment the main text with analysis of data and practical examples that are placed into Boxes, Tables, and Figures. The book follows the story of a fictional startup, called WorkHorse, that was started by students just like you. We use this simple, yet realistic story to bring alive numerous key concepts developed in the text, to illustrate how they are applied in practice. The book also contains several short real world examples, drawn for a wide variety of sectors and countries. Finally, the book provide numerous practical learning tools, including summaries, review questions, and spreadsheets. These are available on this website.

Entrepreneurial finance operates in a fast-moving environment, where investment models frequently change over time. Crowdfunding, for example did not exist a decade ago but is becoming an established part of the entrepreneurial ecosystem. A decade from now, we expect that new models will have developed, and current ones will have evolved, too. Hence the importance of understanding the fundamental drivers of the entrepreneurial finance process.

Are you ready?