of the art is settled. In other areas, such as cost of capital, capital budgeting, and valuation, much new thinking is permeating the field. In these cases, classical perspectives are provided on the techniques that are appropriate to the subject area. By making note of both the pros and cons of different methods or points of analysis, we have attempted to draw the reader's attention to some areas where new thinking is being actively put forth and debated. Also, the book provides references to some of the best sources from which the reader may find further information on the subject at hand. Finally, in the references, we have included some of the most current and interesting sources of thought on the subjects we have addressed.
In our view, finance is one of the most interesting and useful of the social science paradigms, but it is only a tool. One cannot use it blindly and without the application of skill and judgment. The entrepreneur should use his or her knowledge of finance as he or she would any other tool. By itself, finance does not provide “the answer”; one cannot use it to calculate “the solution,” but it can be used to frame the problem and suggest a proper course of action. Nothing, and certainly not the discipline of finance, can replace the entrepreneur's drive, ability to convince others of the worth of his or her vision, or ability to tolerate the uncertainty that the entrepreneur faces in the pursuit of his or her dream.
Acknowledgments
We are grateful for the support, encouragement, and feedback we received during the production of this text. Several people deserve special mention for their unwavering and tireless support of this project. Carol Pacelli assisted in the preparation of many of the chapters. Francisco J. Ayala provided substantial research support and assistance in developing some of the chapters. Jonathan Beckley provided research support. Of course, any remaining errors, either of omission or commission, remain the sole responsibility of the authors.
Thanks to the following reviewers who participated throughout all stages of the book's development:
Frank W. Anderson, University of Texas at Dallas
Craig E. Armstrong, University of Alabama
David M. Ford, University of Alabama
Steven Frankforter, Winthrop University
Mary H. Harris, Cabrini College
Ronald Meyers, University of Cincinnati
Talitha Smith, Auburn University
David Springate, University of Texas at Dallas
Mengsteab Tesfayohannes, Susquehanna University
Xuan Tian, Indiana University
About the Authors
Gary Gibbonshas extensive professional experience in portfolio management, securities valuation, financial modeling, and financial planning and evaluation of entrepreneurial firms. His corporate and investment clients include the Bank of Bermuda, the Agyros Foundation, Imperial Mortgage, Kaiser Steel Resources, the New Kaiser VEBA, the Kaiser Steel Benefit Trust, and many other institutions and small firms. Additionally, he has served as an expert witness or expert consultant in numerous legal proceedings; he has provided opinions that have been used in support of specific civil, tax, or regulatory positions. He has worked on both civil and criminal litigation and in court, arbitration, or mediation proceedings. Dr. Gibbons has served on the board of directors of both public and private companies. When serving on these various boards, he has generally acted in the capacity of the chief financial officer or the chair of the finance committee. Dr. Gibbons earned his PhD in business administration—with emphasis in strategy and finance—at Claremont Graduate School, Peter F. Drucker Graduate School of Management. He is the Academic Director of the Thunderbird Private Equity Center at Thunderbird School of Global Management.Robert D. Hisrichis the Garvin Professor of Global Entrepreneurship and Director of the Center for Global Entrepreneurship at Thunderbird School of Global Management. He is also president of H&B Associates, a marketing and management consulting firm he founded. Dr. Hisrich received his MBA and PhD degrees from the University of Cincinnati and honorary doctorate degrees from Chuvash State University (Russia) and the University of Miskolc (Hungary). He has authored and coauthored 34 books, including Marketing for Entrepreneurs and SMEs: A Global Perspective (with Maja Konečnik Ruzzier and Mitja Ruzzier, 2014); Managing Innovation and Entrepreneurship (with Claudine Kearney, 2014); Governpreneurship: Establishing a Thriving Entrepreneurial Spirit in Government (with Amr Al-Dabbagh, 2013); Entrepreneurship: Starting, Developing, and Managing a New Enterprise (9th edition; with Michael P. Peters and Dean A. Shepherd, 2013); International Entrepreneurship: Starting, Developing, and Managing a Global Venture (2nd ed., 2013); Corporate Entrepreneurship: How to Create a Thriving Entrepreneurial Spirit Throughout Your Company (with Claudine Kearney, 2011); and Technology Entrepreneurship: Creating, Capturing, and Protecting Value (with Thomas N. Duening and Michael A. Lechter, 2010). He has written more than 325 articles on entrepreneurship, international business management, and venture capital. He has instituted academic and training programs in Hungary, Russia, and China.Carlos M. DaSilvahas widespread experience in entrepreneurship and the startup ecosystem. He is the Director of the Founder Institute, Portugal, the world's largest early stage startup accelerator, with over 1,000 graduate companies across six continents. Dr. DaSilva is responsible for the mentoring of dozens of technology entrepreneurs every year. He is frequently invited to lecture on topics related to entrepreneurship, as well as participate in the jury of various startup competitions. Dr. DaSilva held the positions of visiting scholar at the Thunderbird School of Global Management and at the University of Southern California in Los Angeles. He is a professor of entrepreneurship at the School of Business Administration in Fribourg, Switzerland, and lectures on topics related to entrepreneurial finance and business model innovation. Prior to obtaining his PhD in technology management at the University of Ljubljana, he worked for several years as a strategy manager at an Eastern European startup venture that was recently acquired by a large multinational group.
Chapter 1 The Entrepreneurial Challenge: A Global Perspective
Learning Objectives
To understand the importance of entrepreneurial finance
To introduce the different types of entrepreneurs
To expose the challenges associated with being an entrepreneur
To identify the traits of global entrepreneurs
To understand what is different about entrepreneurial finance
Case: CEON Solutions Pvt. Ltd.
Abhay Panjiyar, a young engineer in his second year of engineering school, had an idea while he was creating an effective administration process for Bhopal, an India-based education nongovernmental organization (NGO). Along with three friends who “believed in creating everything out of nothing” (hence the name CEON), Abhay developed an analytical problem-solving software for use in India's schools. He started participating in business plan competitions with his revolutionary idea of educational process management (EPM) software and received an invitation from IIM Ahmedabad's Centre for Innovation Incubation and Entrepreneurship (CIIE) to be their first incubator company.
Improving the quality of education is an important issue in India and other emerging countries. Abhay saw the major obstacle being the nonsharing of information among teachers, students, and parents. He filled this gap by developing software that connects all parties
