Investors
During the various stages of growth and development of an enterprise there may be varying levels of investment requirements, with a broad and varied spectrum of investors to meet them with equally varied incentives and motivations. Yet are the incentives and motivations of investors the same as the entrepreneur’s? How do investors assess the value of an enterprise to them? How does an entrepreneur assess the value of an investor in return? What does an entrepreneur give up when involving investors? These are the questions these essays will address for the Objectivist Entrepreneur.
“…the right of an industrial concern to engage in business is derived from the right of its owners to invest their money in a productive venture—from their right to hire employees—from the right of the employees to sell their services—from the right of all those involved to produce and to sell their products—from the right of the customers to buy (or not to buy) those products.”
Ayn Rand
1 – Investor Incentives and Motivations
Ideally an entrepreneur would maintain complete control over the growth of their enterprise from beginning to end, never requiring outside investors to fund it. It is possible to self-finance a new enterprise. Serial entrepreneurs often have sufficient funds from a previous venture to fund a new one. An entrepreneur may have accumulated savings they can use to get their enterprise started. And, if a minimally viable, profitable enterprise can get off the ground quickly enough, retained earnings may be sufficient to fund growth. And while banks do not generally fund enterprises they do help finance them with loans against receivables…
2 – Intellectual Property
One of the first questions investors ask an entrepreneur when considering an investment in their company is whether they have any intellectual property (IP) in the form of patents or copyrights. Substantial investments are often required in research and development to create products before than can be sold for a profit. And as the value of a company is determined by those profits (Valuation) IP protects competitors from undermining them by simply copying their products without expense. Yet, what justifies IP? Can anything be patented? For how long should IP be protected? What is the incentive and motivation value of…
3 – Valuation
Determining the value of a company begins by asking the question of value to whom and for what purpose? A company has values both intangible and tangible value to different people for various reasons. Here for example are some intangible values. A company is of value to its employees, as it provides for their livelihood. A company has suppliers it buys from, who value it as their customer. A company has customers it sells to because they value their products. And for the entrepreneur, the company is the vehicle for pursuing their passions (Investor Incentives and Motivations and Why Exit?).…
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Hello
Thanks for the kind remarks. Glad you found the site of value. It represents an accumulation of 50 years applying Objectivism to all the sides of entrepreneurship I have been w]involved with. I owe all my personal success to it.