This chapter will provide insights on an alternative path to entrepreneurship: entrepreneurship through acquisition. Rather than starting a company from scratch, you can acquire an existing company through a management buy-in or management buyout, or even buy a company in distress and use that company as a platform to pursue your entrepreneurial ambitions. Given the number of companies that change ownership every year and the risks involved in starting from scratch, for many individuals this might be a worthwhile route to consider when aspiring to entrepreneurship. The process of buying a company requires a special skill set and mindset that differ from the traditional startup method. We also describe the situation whereby the entrepreneur would acquire a company in a distress situation, having experienced hard times, whether self-inflicted or the result of external conditions not entirely managed or manageable. The main goal of this chapter is to provide you with a step-by-step guide to the key questions to consider when buying a company.

Corporate venture capital (CVC) is defined as equity investment by an established corporation in entrepreneurial ventures. CVC investors play an important role in the entrepreneurial ecosystem, accounting for one-fifth of total funding disbursed and a substantially higher fraction in specific sectors and geographies. As the name suggests, the practice consists of established corporations that set out to act as venture capitalists and fund entrepreneurs who develop and scale innovative technologies and solutions. Similar to venture capital (VC) investors, CVC investors receive an equity stake in return for the provision of capital. A major distinction concerns the motivation and structure of corporate investors. Financial returns are an essential consideration for CVC investors, yet often strategic objectives motivate the parent corporation and its CVC activities. Moreover, there is substantial variation in the structure of corporate investors. While most VC investors follow a limited partner–general partner (LP–GP) structure, different corporate investors have different structures.

This chapter will go deep into the process of searching for a business to acquire as a way of becoming an entrepreneur in an existing business. Similar to Chapter 17 on management buyouts and buy-ins (MBOs and MBIs), the entrepreneur is not starting from zero, but looking to acquire an existing business that they can then run and enhance as an equity-owning CEO. Unlike what we saw in Chapter 17 with MBOs/MBIs, in the case of a ‘searcher’ the company to acquire has not yet been identified and most of the process is devoted to the search for the ‘dream’ company. In both cases, and as we have seen for startups looking for financing from external investors, the idea is to search for a business, acquire it, run it for some years, and then sell it, allowing the investors and the searcher to have a healthy internal rate of return (IRR), in general of around 30 per cent.

This chapter will act as your guide as you begin your journey in entrepreneurial finance. It will serve as a roadmap, allowing you to choose between reading the book from start to finish or, if you are looking for specific advice, to jump directly to the relevant chapter or topic. We will look at the differences and similarities between entrepreneurial finance and more traditional fields of finance, such as corporate finance. Finally, we will discuss the different stages that a new venture may go through as it grows, and some of the financial challenges that both the founders and investors in the business might meet along the way.

The logic is simple: you can be as thorough as you like with your due diligence or portfolio strategies – in the end, none of this will help you to reach attractive investment returns if your process is flawed from the very beginning. If the selection process was carried out poorly, then you will most probably either lose some money or lose a lot of money. You will lose some money if you find out in the course of due diligence that your target is not really a target. You may lose a lot of money, however, if you find out after the investment has been made that your portfolio company is unlikely to succeed. Thus, the process of deal sourcing and the screening process are of utmost importance. Let’s get started!

This chapter addresses ESG (environmental, social, and governance) requirements as they affect privately held investments. ESG has a complex and lengthy history in financial markets, stretching back to 2004, when the UN Global Compact published a report titled Who Cares Wins.

This landmark report called for the ‘better inclusion of environmental, social, and corporate governance (ESG) factors in investment decisions’ as investors, companies, regulators, and policymakers sought to grapple with a changing world shaped by a looming climate crisis, rampant social issues, and structural economic concerns.

This chapter explores deep tech investing, a field gaining traction for its pivotal role in developing pioneering academic research into impactful, widely adopted technologies responsible for driving social change, such as the microwave, RNA vaccines, mobile phones, and batteries.

Deep tech companies are characterized by extended periods of development due to the complex nature of their R&D efforts, often resulting in highly defensible differentiation of their product or service. A relevant aspect for both deep tech founders and investors that we will address is a checklist of possible business model challenges that need to be anticipated.

In this chapter, we explore crowdfunding as a valuable means of providing early funding and support for aspiring entrepreneurial ventures. Crowdfunding has emerged as an innovative source of early funding and support for entrepreneurial ventures, particularly in the early 2000s, coinciding with the rise of online crowdfunding platforms. This new avenue to financing allows entrepreneurial ventures to reach a larger pool of potential small investors, fostering financial growth and providing valuable resources for entrepreneurs’ business development. By examining the concept of crowdfunding, we aim to highlight the potential benefits for early-stage entrepreneurs. We will also explore the underlying aspects of crowdfunding in greater detail, comparing it to traditional fundraising methods. As will be evident, this method of funding is part of the broader strategy of obtaining funding (i.e., the ‘art’) that complements the more technical aspects (i.e., the ‘science’) of growing ventures.