part 5: Global entrepreneurship class

Global Entrepreneurship
Developing Global Mindset for
Entrepreneurs

Brian David Butler

Teaching:
Brian Butler is currently a professor with Forum-
Nexus, which is co-sponsored by the IQS Business School
of the Ramon Llull University in Barcelona, and the
Catholic University of Milan. He teaches classes on
International Finance and Global Entrepreneurship in
brian.butler@forum-nexus.com Europe every July and January.
briandbutler@gmail.com
LinkedIn/briandbutler
Skype: briandbutler In Miami, Brian has taught Finance, Economics and Global
Trade at Thunderbird’s Global MBA program in Miami.

He previously worked as a research analyst at the
Columbia University Business School in New York
City.

Brian David Butler

International:
A global citizen, Brian was born in Canada, raised in
Switzerland (where he attended international British
school), educated through university in the U.S., started his
career with a Japanese company, moved to New York to
work as an analyst, married a Brazilian, and has traveled
brian.butler@forum-nexus.com extensively in Latin America, Asia, Europe and North
LinkedIn/briandbutler America.
Skype: briandbutler
Brian currently lives in Recife, Brazil where he is teaching
classes on “Global Entrepreneurship” at the university
“Faculdade Boa Viagem”.

KookyPlan – wiki for Entrepreneurs

Global Entrepreneurship:
developing the global mindset for
entrepreneurs

Class #5
Saturday April 24th, 2010

Schedule for today
1. First ½ - Finance

2. After break
▫ Discussion about Group Projects
▫ Presentation of homework – transferrable ideas
(Funded) + dream companies (lottery winners)

3. Continue - Finance of startups (part A)
4. Discuss Exam (next class)

Finance:

Types of funding
sources available to
global entrepreneurs

Common Sources of Financial Capital
for startups:
 Angel investor
 Bootstrap funding -
 bank loans -
 Equity line of credit
 Factoring - accounts receivable financing -
 Mezzanine financing:
While there are many
 peer-to-peer lending - sources, we are going to
 Private equity - talk about the ones in
 Public funding - IPO - BOLD (in this class)
 Personal equity -
 Venture Capital -
 venture capital loan -
Links on : http://kookyplan.pbworks.com/

Two basic categories:

• (a) Equity finance: shareholders – give capital
in exchange for hope of benefiting if company is
profitable later. Think “shares” of company

• (b) debt finance: think “bank loans” – money
plus interest is owed (monthly payments). Note:
banker does not become part owner of company

http://kookyplan.pbworks.com

Two basic categories:
• Equity v. Debt financing…

• Which do you think is more “expensive”

• i.e. : who demands a higher % interest return on
money? (the banker who lends money, or the
investor in shares of a company)??


Equity finance is more “expensive”
• The rate of return that an equity investors
expects is (of course) higher than that of a
debt financer.
▫ This makes sense: a banker that lends you money
under strict terms, and expects payments every month
in interest (perhaps with assets such as inventory as
security) should feel safer, and demand less of a return
on his investment than an equity investor that will
only profit if the business is a success.
• Based on this logic: equity capital should be the
most "expensive", and debt capital should be the
least expensive
http://kookyplan.pbworks.com/

Funding Startups

• Normally done with equity financing, because
debt financing (bank loans) are typically not
available to young startups

• Why? Why are bank loans not available?
▫ Class discuss…

Funding Startups
• Answer: banks are CONSERVATIVE

▫ They require at least 3-5 years of proven results
(income statements, balance sheets, etc) with clear
profits BEFORE they are willing to invest

▫ So, that typically leaves the more EXPENSIVE
form of Equity financing (for startups)

Finance:

Typical “rounds” of
funding for high-
growth entrepreneur

Rounds of funding

Risk and return demanded diminishes
from one round to the next.


Rounds of funding

• Typical rounds might look like this:

• Seed - <$500k
• Angel - <$2M
• Venture Capital
▫ Series A - $1 -$10M
▫ Series B - <$25M
▫ Series C - <$50M

The stages of venture capital investment
• Seed
▫ is an investment of between $1,000 and $500,000 made when a
company is just a few people and/or an idea.
• Start-up
▫ is an investment of between $50,000 and $1 million in private
companies that are completing product development and beginning
initial marketing.
• First stage (or early stage)
▫ denotes an investment of between $500,000 and $15 million made when
a company has completed its product but has no, or little, revenues.
• Second stage (or later stage)
▫ is an investment of between $2 million and $15 million when a firm has
product and revenues and has often already taken money from other
institutional investors.
• Third stage (or mezzanine)
▫ investments range from $2 million to $20 million, often invested in a
profitable company for a major expansion generally leading to an IPO in
three to eighteen months.

Note that some of these terms overlap.

Who remembers…

• What is the difference between:
▫ Private Equity
 And
▫ Venture Capital
 And
▫ Angel Investors

▫ ????

Common Types of Private Equity:

“Private Equity” Industry

Angel Venture Private Equity
Investors Capital funds

Angel investor:
• An angel investor (business angel in Europe, or
simply angel) is an affluent individual who
provides capital for a business start-up, usually
in exchange for ownership equity.


Angel investor:
• Unlike venture capitalists, angels typically do
not manage the pooled money of others in a
professionally-managed fund. However, angel
investors often organize themselves into angel
networks or angel groups to share research and
pool their own investment capital.


Angel investor:
• Who do they invest in:?

• Invest in promising startups too young and raw
to attract the attention and money of
professional venture capitalists.


Angel investor:
• Angel capital fills the gap in start-up financing
between the "three F"s (friends, family and
fools) and venture capital.
• While it is usually difficult to raise more than
US$100,000 - US$200,000 from friends and
family, most venture capital funds will not
consider investments under US$1 - 2 million.


Rounds of funding

Angels invest
HERE

Angel investor:
• Thus, angel investment is a common second
round of financing for high-growth start-ups
• First = seed funding, self-funding, friends,
family, home loans, etc


Angel investor:
Very Popular:

• and accounts in total for more money invested
annually than all venture capital funds combined
(US$24 billion vs. $22 billion in the US in 2004,
according the University of New Hampshire's
Center for Venture Research).


Angel investor:
• Angel investments bear extremely high risk, and
thus require a very high return on investment.
• Some angel investors seek a return of at least 10-
20 times their original investment within 5
years, through a defined exit strategy, such as
plans for an initial public offering or an
acquisition.
• Angel financing can thus be an expensive source
of funds. However, cheaper sources of capital,
such as bank financing, are usually not available
for most early-stage ventures.http://kookyplan.pbworks.com/

Angel investor:
• Deal Size:

• In comparison to VC deals...which start around
6.0 M$ (in 2006)

• ....Angel deals may be as low as $100,000


Angel investor:
• But, how much should Angels invest?

• Angel Investor method of Valuation

▫ Later today, we will cover “valuations”, and
how much % shares to offer an investor …

Common Sources of Financial Capital:
• Venture Capital -
▫ is a type of private equity capital typically
provided by outside investors for financing
new, growing, or struggling businesses.
▫ Venture capital investments are generally high-
risk investments but offer the potential for above-
average returns and/or a percentage of ownership
of the company.
▫ A venture capitalist (VC) is a person who makes
such investments.

Common Sources of Financial Capital:
• Venture Capital -

▫ A venture capital fund is a pooled investment
vehicle (often a partnership) that primarily invests
the financial capital of third-party investors in
enterprises that are too risky for the standard
capital markets or bank loans


Companies with the most VC funding
(as of 09/2008):
• a list of all the technology startups that have raised at least $25 million over
the past two years, according to CrunchBase. The ~160 startups to stockpile
that much capital recently are listed below.
•
• Facebook - $455M
• ZeniMax - $310M
• Nanosolar - $300M
• OverSee - $210M
• OANDA - $200M
• Kayak - $196M
• GridPoint - $167M
• Plastic Logic - $150M
• eSolar - $140M
• Demand Media - $135M

http://kookyplan.pbworks.com/Venture-
Capital

What is Venture Capital?

• Venture Capital companies raise money from
institutional investors, and invest that money for
them in other companies.

http://kookyplan.pbworks.com/Venture-Capital

• VC business model in a nutshell:

▫ VCs goal is to make a large investment, receive a
high return, and do that quickly in order to have a
liquidity event

▫ Note: companies are not LIQUID (not easy
to sell shares on stock exchange)


• Exit Strategy: why is it important?

• In the traditional early-stage venture capital investment
model, a vibrant IPO market is necessary for success.
• Backing early-stage companies is risky and, in any
venture capital fund portfolio, the anticipation is that a
number of investments will end up being written down
or written off.
• Traditionally, the large return multiples available by
taking a high-growth company public were necessary to
cover the losses generated on these investments and to
build an attractive return on the overall portfolio.


• Venture Capital Math Problem:

• Recommended reading: "A venture capital Math
problem" from Fred Wilson, a VC and
principal of Union Square Ventures.


Venture Capital - summary
• Invest in high-risk, high-return
investments, with horizon of five or 6 years.
• Exit strategy: Goal is to either go public or sell
to a competitor.


Venture Capital - summary
• To manage risk, VC’s typically make staged
investments in which the company must meet
stated business milestones before qualifying of
next financing round.
• VCs typically specialize in one stage
(startup, early stage or mezzanine).
• Risk and return demanded diminishes from one
round to the next.


Break…

10 minute break 

Homework review + group
projects

Presentations from last
weeks homework

Homework for this week
• One group assignment – cancelled. Will re-assign
this task next week (this week)

• 2 individual assignments

• Due Dates:
▫ If you want feedback PRIOR to next class… you must
email me the homework before WEDNESDAY at
midnight (before next class)
▫ Otherwise, all homework is due at the start of our next
class, Saturday

Group Project
• Seeking investors:

▫ Next step: assume that you would really consider
doing this project, and assume that I am a Finance
professional with money to potentially invest in your
project. Your job is to convince me to invest in your
project.
▫ Create a viable marketing and business plan for this
market-entry project into the USA. Careful analysis
needs to be made to see if it would work before I would
be willing to invest in your idea.
▫ Make sure to read CH 4 from the book (digital sent by
email)

Group Project Assignment
• #1. Form Group

• Please divide up the project among your team,
▫ and email me back (by next WEDNESDAY) outlining
who is going to work on which part of this project
(who is going to research what?)

▫ Note: you don’t have to do the actual research all
by next class, but you MUST have met with your
group, discussed the case, and divided the task of who
will research what…

Group Project - proposals
• Group 1 • Group 2 • Group 3
• Roberta • Diogo • Pedro
• Luiza • Rodrigo
• Carol
• Arthur • Augusto
• Ana Maria • Juliana
• Italo
• Emanuel
• Transferrable Idea: • Transferrable Idea:
Clube de Estrelinha • Transferrable Idea: assigned: TIVO
assigned: NET FLIX
• Countries:
• Countries:
▫ USA to Brazil
▫ Brazil to USA • Countries:
▫ USA to Brazil ▫ Tivo
▫ Clube Estrelinha ▫ Or shopping cart,
▫ Other ideas? ▫ Or others?

• NET FLIX • TIVO

• http://en.wikipedia.org/wiki/Netflix • http://en.wikipedia.org/wiki/Tivo

• Netflix (NASDAQ: NFLX) is a
service offering online flat rate DVD • TiVo is a brand and model of digital
and Blu-ray disc rental-by-mail and video recorder (DVR). TiVo was
video streaming in the United introduced in the United States and
States. is now available in New
Zealand, Canada, Mexico, Australia,
Taiwan, and the UK. TiVo DVRs
provide an electronic television
programming schedule, whose
features include Season Pass
recordings which record every
episode of a series, and WishList
searches which allow the user to
find and record shows that match
their interests by
title, actor, director, category, or
keyword.

Individual presentations

• Each student is to present their “transferrable
idea” to the class (of a company funded abroad),
with PEST analysis

Homework #1
• Find company abroad that has raised money
▫ What problem are they addressing? How solving?
▫ What trend are they getting in front of?
▫ If you were to localize that business to Brazil, would the same
problem exist? Same solution be appropriate? Are the same
trends important in Brazil? (Include a PEST analysis.)
• Plan on taking that business model to Brazil (creating a
similar business in Brazil)
▫ You will need to raise money (either in Brazil or from foreign
sources of capital)
▫ I will be the VC (venture capitalist)
▫ Your job; convince me to invest – in 5 minutes

To turn in:
▫ Maximum 1 page – word document – submit by email to :
briandbutler@gmail.com Be prepared to present your analysis
in Class (with class review)
To present in class:
▫ 5 minutes to convince class to invest in your project

Be inspired – see what kinds of
companies are getting $$ funded

VentureBeat.com
Key source of
inspiration… if you
see how much $$ is
being raised each
week!

Be inspired – see what kinds of
companies are getting $$ funded

Sign up for the weekly newsletter email!!

Homework #2
• Dream Company:

• What would you do if you won the lottery? But, you
could only spend the money on creating a business…
what business would you create?

▫ Tell me 1-3 ideas

▫ What if I told you the $$ would only be available to “high
growth” business, but if you had an idea with big enough
growth potential, then UNLIMITED money was available

To turn in:
▫ Maximum 1 page – word document – submit by email to :

Finance: Valuations

How much is your
startup worth? How
many shares should
you offer?

Valuing a startup
• This is the most difficult part.
• Determining how much your startup idea is
worth,
• Deciding how many shares (% ownership)
should you trade to an investor (in exchange for
his capital)?
• How do you value a company that might not
have cash flows yet? (no revenues… so what is
the value?)

Valuing a startup – why its difficult:
• Normal ways of financial “valuation” do not
apply (do not work)
▫ Example: the DCF ( discounted cash flow)
technique does not work well for VC’s because the
cash is intended to cover near-term, negative free
cash flows.
▫ But more importantly, the standard techniques of
discounting cash flows does not take into
consideration the multiple financing rounds at
different required rates of return.

Simplified model
• To give you an idea of how to value your
startup, I have created the following model.

1. Assume you will be cash-flow positive in 5 years
(assume positive income)

1 2 3 4 5

Simplified model

2. Look online for similar PUBLIC company (as
close as you can find) and get their PE ratio
(price to earnings).
 This will indicate the “multiple” on earnings that
public companies are valued.
 Multiply to get your “value” in 5 years

Simplified model
• To find PE ratios:
 See: http://en.wikipedia.org/wiki/PE_ratio
 Sites such as Reuters offer these comparisons in
one table. Example of RHT

Simplified model

3. Take that future value, and “discount” it to the
present, using your (estimated) WACC… which
in this case is = VC target rate of return (60%
per year, for example)
4. Discounting will give you the “Present Value” of
your company (before investment)

Simplified model

5. Take this present value (before investment) and
call it “pre-money valuation” (lets assume $20
million)
6. If you are asking for $5 million investment, then
add $20+ $5 and get $25 million (call this “post-
money” valuation

Simplified model
• Pre-money valuation (of company) = $20mm
• Investment = $5mm
• Post-money valuation (of company) = $25mm

▫ Question: what % of shares should the investor
get?

Simplified model
• Did it make sense?

• Question: what % shares of your company would
you give this investor??

• (do you remember the class last week about
“dividing the pie”?)

Dividing the (shares) “pie”
Sales partner 1
10%
partner 2
10%

Keep in
Treasury partner 3
49% 10%

You keep
21%

• Question: what % shares of your
company would you give this
investor??

Sales partner 1
10%
partner 2
10%

Keep in
Treasury partner 3
49% 10%

You keep
21%

• If you are asking for $5 million
• Question: what % shares of your investment, then add $20+ $5
company would you give this and get $25 million (call this
investor?? “post-money” valuation

Answer
• If you are asking for $5 million investment, then
add $20+ $5 and get $25 million (call this “post-
money” valuation

• Pre-money = 20
• Money = 5
• Post-money = 25

• So, the investor would own 5/25 = 1/5th of your
company, and should demand 20% of the shares

Sales partner 1
10%
partner 2
10%
Keep in
Treasury
29%
partner 3
10%
Angel
Investor
$5mm You keep
20% 21%

New Question:
• But, what if the “value of the company” were
calculated at only 10 million, and he offered $5
million…. What % of the shares should you
offer?

• A) 50%
• B) other… ? Why?

New Question:
• Pre-money = $10
• Money = $5
• Post-money = $15
• Value of investment = $5/15 = 1/3 = 33%

• So, NO, you should NOT offer 50% of the shares!

• Follow up question: how many shares will be
left in your “Treasury” after this “round” of
financing? And, do you think you will have
enough shares left for another “round”?

Sales partner 1
10%
partner 2
Keep in 10%
Treasury
16%

partner 3
Angel Investor 10%
$5mm
33%
You keep
• 49% - 33 % = 16% 21%
remaining
• Probably NOT
enough for
further rounds of
financing!!

Valuing a startup – getting help:
• Online software tools can help:

• http://www.liquidscenarios.com/ Liquid
Scenarios provides software that estimates
valuations of private companies, and determines
the benefits or outcomes of liquidation events
versus financings for all parties involved.


http://kookyplan.pbworks.com/Venture+Capital+Method+of+Valuation


http://www.ownyourventure.com/equitySim.html

Rounds of funding - calculator

http://www.ownyourventure.com/equitySim.html

Valuations
• See links from KookyPlan
▫ Venture Capital Method of Valuation
▫ business valuation
▫ Financial modeling
▫ Valuations and internet companies
▫ and Angel investor valuation method


Resources from KookyPlan.com
• Funding
▫ Raising capital - ideas for the entrepreneur
▫ Investing
▫ Venture Capital
▫ Project Finance: capital budgeting
• Valuations
▫ Venture Capital Method of Valuation
▫ business valuation
▫ Financial modeling
▫ Valuations and internet companies
http://kookyplan.com/

more:
• See KookyPlan.com for more info on:
▫ Investing
▫ issuing shares
▫ Abiding by Securities Laws
▫ Presenting your plan to Venture Capitalists

http://kookyplan.com/

• Valuation tools for investors and Entrepreneurs
•
• Angel investor valuation method
• Venture Capital Method of Valuation
• more...
• Accounting
• business valuation
• Choosing which venture capital firm to send your plan
• Finance
• Financial markets
• issuing shares
• List of VC deals from 2007
• Options
• Options valuations with Black-Scholes
• P-E ratio
• Presenting your plan to VC's- tips for entrepreneurs
• Price term sheet
• PE and venture capital in Emerging Markets
• Private equity
• Public funding - IPO
• Securities Laws
• Silicon Valley
• Valuations and internet companies
• Venture Capital Fund Raising
• Venture Capital
• WACC
http://kookyplan.pbworks.com/Venture-
Capital-Method-of-Valuation

Tips for dealing with investors

Advice:

NOT to do:
• Don’t conceal, lie, or exaggerate about the
investment opportunity. Always provide
potential investors with everything that is
available for them to make a knowledgeable
decision. When in
doubt, disclose, disclose, disclose.

http://kookyplan.pbworks.com/issuing-shares and http://nolo.com

NOT to do:

• Don’t make public advertisements of your
investment opportunity.

• Don’t accept investments (or any payment for
interest in your invention) unless the transaction
is exempt from security registration
requirements. If in doubt, speak with an
attorney.

To do:
• Do include the following notice on all
solicitations, business proposals, and business
plans:
▫ “Investing in this enterprise involves considerable
risk and should not be done unless you are
prepared to lose the complete investment.
Estimates of projected income or revenue are
speculative, and this company does not presently
have the capital required to meet such
projections.”

Venture Capital Finance in
Brazil:

VC funds in Brazil

Venture Capital activity in Brazil
• Bigger funds:
▫ 5 times bigger today than five years ago
▫ "The average venture capital fund now being set
up in Brazil seeks to raise 80 million - 100 million
reais while
▫ Five years ago it could only raise 20 million reais,“

What is PE and what is VC?
• Hard to tell exactly how much is PE and how
much is VC
• “it is hard to distinguish the exact sum of money
that has been raised for VC from the amount
secured for private equity (PE).
• Often the lines between the two are blurred, but
VC investment tends to be smaller in size and at
a much earlier stage in a company's formation
than PE.

“Private Equity” Industry

Angel Venture Private Equity
Investors Capital funds

Venture Capital activity in Brazil
• Who invests in Private Equity funds?
▫ Rich individuals
▫ Rich families
▫ And … professional investors
▫ And other funds

• Figueiredo says that around 2% of Brazil's pension fund
assets – which exceed $275 billion, according to
ABRAP, the Brazilian Association of Pension Funds – is
allocated to VC and PE today, up from only 1% a year
ago.
• However, this proportion is still much lower than in the
US, where pension funds allocate 6% to VC and a further
8% to PE.

Venture Capital: Where in Brazil?:
• The country is seeing clusters of technology
companies set up around the best universities,
• particularly in
▫ São Paulo,
▫ Rio de Janeiro and
▫ Belo Horizonte.
• Brazil's equivalent of Silicon Valley will take
shape in these geographic areas, says Wood.
• He adds that its most innovative firms leverage
Brazil's strength in agriculture and are often
found in the bio-technology and ethanol
technology sectors.

Example: Fir Capital
• Fir Capital, the Belo Horizonte-based venture
capitalist with $150 million in assets under
management,

▫ has invested in a business called Safetrace, which has
developed a pioneering platform to track animals'
involvement in the food chain.

• The typical size of Fir's VC investments is $1-$10
million equivalent, and its main exit strategy is
through strategic sale.

Example: Fir Capital
• "We have a time horizon of three to five years
and often earn double-digit multiples on the
original investment we make –
• “Sometimes we get up to 30 times of our
initial investment back," says Fir's president
Marcus Regueira.

Angel Network in Brazil:
• Lupatech, LatAm's biggest valve producer and
leader in precision casting, is a good example of a
Brazilian enterprise that has reaped the rewards of
VC.
• Founded in 1980 by CEO Nestor Perini and called
Micro Inox, the company first received VC backing
from CRP, the Brazilian VC group, in 1987.
• The business – headquartered in Rio Grande do Sul
state – also secured rounds of PE investment in
1995, 2003 and 2005.

Angel Network in Brazil:
• "Venture capital was vital for the development of
the business," says CFO Thiago Alonso de
Oliveira.
• "The most important factor for us was the
management assistance and support that our VC
backers gave us.”

Value of VC’s to entrepreneurs
• “During that time, I’ve come to appreciate the
real value that great venture capitalists provide:
▫ amazing informational awareness,
▫ comprehensive business networks,
▫ providing brand cover for companies so that they
can recruit and raise more money effectively, and
more.

• Ben Horowitz | Apr. 14, 2010

http://www.businessinsider.com/four-things-some-vcs-do-that-i-dont-like-2010-

Angel Network: in Brazil
• In parallel with the evolution of VC in the
country, an angel network of investors has
sprung up throughout Brazil.
• Many of these have themselves created
businesses and know the benefits of receiving a
loan or equity investment when starting a
company.

Angel Network: in Brazil
• The angels have set up their own websites, work
with incubators and universities, and provide
entrepreneurs with capital from 100,000 to a
million reais.
• "We provide an incubator, an accelerator so that
companies can grow really quickly. Some 40,000
business people in Brazil benefit from all the
incubators in the country and the number of them
is growing exponentially," says José Alberto
Aranha, president of the Genesis Institute.

Angel Network:
• Some 80% of the companies in incubators turn
out to be successes, says Aranha.
• One of the main exit strategies for the angel
investors is via mergers of several incubated
companies.

4. Venture Capital Finance in
Brazil: continued…

Why now?

Why Brazil, why now?
• “the venture capital market in Brazil has reached an
extraordinary moment. I compare it to the US in
1994 – an inflection point where a critical mass of
startups in certain markets will grow exponentially.

• Like the US in 1994, a healthy balance exists
between the number of startups and the market for
their products and services. With proper execution
and sufficient capital, Brazilian entrepreneurs
have the potential to build the next
generation of great companies.”
http://vc-brazil.com/blog/

• “For both multinational strategic investors and
private equity firms, Brazil has become a place
where you have to have exposure going
forward,”

 Nick Wollak, who oversees $150 million in private
equity for Axxon Group in Rio de Janeiro


• “In sum, the technology that is required for a boom
is present in Brazil: broadband and great software
development. What will spark the boom going
forward is the confluence of other factors,

• Trends including but not limited to
▫ demographics (emerging middle class, consumers),
▫ the economic environment (lower interest rates, fiscal
stability)
▫ culture (entrepreneurship, high wireless and internet
usage).


Reasons the private VC industry has
not (yet) taken off in Brazil
• A. Pessimist: Interest rates, while
falling, remain high enough to compete for
investor dollars – why invest in a high-risk
startup when you can earn 11% a year buying a
low-risk bond?

• B. Response: Certainly interest rates must
continue to fall or, at least, not rise, in order for
the venture capital ecosystem to flourish.

Reasons the private VC industry has
not (yet) taken off in Brazil

• Indeed, why has most of the venture capital in
Brazil come from government sources
(FINEP, BNDES, etc.) up to this point? Because
private investors have had no incentive to take
the huge risks involved in venture capital
investing. They could get great returns from
bonds or, if they wanted to dabble in alternative
investments, private equity.

Incubators in Brazil

Incubating
companies of the
future

• Incubator: buildings or studios set up for
budding entrepreneurs, often linked to
universities

• Trends in Brazil
▫ Early 2000’s - just 135 incubators had been set
up in Brazil
▫ Today - more than 400 exist today

Source: Brazilian Venture Capital and
Private Equity Association (ABVCAP).


• Today, the incubators are home to some
4,000 start-ups,

Source: Genesis Institute, an incubator attached
to Rio de Janeiro's Catholic University.

Entrepreneurship in Brazil
• Segundo relatório do GEM, o
▫ Brasil está entre os sete países empreendedores,
▫ com mais de 200 incubadoras,
▫ 3.000 companhias,
▫ mais de 15 milhões de empreendedores
▫ e mais de 450,00 novas empresas estabelecidas no
país a cada ano.

http://www.abvcap.com.br/UpLoad/Arquivo/Sobre%20o%20se

International IQ moment

Inspiration from
global travels

Raratonga, Cook Islands – my favorite
travel spot.

Mid-term Exam – May 8th, 2010
-- 830 am-10am

• 1.5 to take exam
• Mixture of
▫ Multiple choice
▫ Short answer (15 words max)
▫ Essay (half page max)

• How to prepare
▫ Study all slides from my lectures

part 5: Global entrepreneurship class

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part 5: Global entrepreneurship class