Instructor Resource
Neck, Entrepreneurship, 1e
SAGE Publishing, 2018
Answers to Questions in the Text
Chapter 13: Equity Financing for Entrepreneurs
ENTREPRENEURSHIP IN ACTION
Jason Craparo, Co-Founder, Contap, Inc.
1. What are the potential risks involved in personally financing start-ups in the early
stages?
2. When do you think is the right time to seek outside financing as an entrepreneur?
3. How would you use external financing to enhance your offering?
RESEARCH AT WORK
Talk About the Losses
1. Why do you think VCs tend to “bury their dead quietly”?
2. Do you think it is important to learn about failures as well as successes? Why or why
not?
3. What do you think you could learn from a VC about failed investments? Think of some
questions you would like to ask a VC on this topic.
Sample questions to ask a VC:
• What have been some of your failures along your pathway to success?
MINDSHIFT
Find an Investor–Entrepreneur Pair
1. Was it easier than you expected to find an entrepreneur and investor to interview, or
harder?
2. What obstacles or challenges did you encounter in your conversations?
3. Did you learn anything that surprised you or that ran counter to your expectations?
Instructor Resource
Neck, Entrepreneurship, 1e
SAGE Publishing, 2018
ENTREPRENEURSHIP MEETS ETHICS
Approaching Investors
1. You are in a meeting with an angel investor whose funding could jump-start your
venture. How would you feel if you had to answer the investor’s questions with “I don’t
know” several times in a row?
2. It is impossible to prepare thorough responses to all of the questions an angel investor
may ask, particularly personality-related questions. What ground rules can you establish
that will allow you to remain confident and ethical when not knowing the answers to an
angel investor’s questions?
3. What would you do if you realized you had unintentionally provided critical but
inaccurate information to an angel investor?
Summary Questions
1. Define equity financing for entrepreneurs and outline its main stages.
Equity financing is the sale of ownership stake within the company in exchange for funding.
2. Illustrate the basics of enterprise valuation.
Instructor Resource
3. Describe angel investors and how they finance entrepreneurs.
Angel investors are typically high-net-worth individuals that are accredited investors investing
4. Explain the role of venture capitalists and how they finance entrepreneurs.
Venture capitalists differ from angels in the sense that they are professional money managers.
5. Describe how investors carry out due diligence processes.
To ascertain the prospects of any potential investment, angel investors and venture capitalists
6. Explain the money versus power trade-off and the funding life cycle.
The typical “entrepreneur’s dilemma” is choosing between retaining significant ownership and