Assignment: Respond to Pitching a Venture Capitalist

Integrity and Passion are the top two characteristics that should be conveyed when pitching to Venture Capitalist for an investment. They are investing in you, not necessarily the product or service that you are providing. In addition, you should also make sure that you are sharing what experience, knowledge, and skills that you possess that make you credible about what you are saying. The last characteristics that need to be portrayed are leadership, commitment, a vision, realism in what you are saying, and your ability to be coached. Coming in an sharing what you are doing and how you are doing it and not allowing the VC to provide input in how to make your plan better could turn off the VC.

In the presentation, you need to be able to convey the logical progression of why this product/service is needed, how this will help the market, and validation of what you are saying. Showing who the competition is and why your product is needed more will show that you have thought of and realized the competition that is in the market. The most important thing is be consistent and ensure that your message is believable and realistic.

The presentation should be secondary to you and what you are saying. Put an image up on the screen or a couple of words, but make sure that what you are saying is what they are focused on, not the words on the screen. Know what you are talking about and do not look at the screen. Look at the potential investors rather than burying yourself in the presentation.

Listening to this video made me think of Shark Tank and how they pitch to the shark's. I am fascinated by this show where people are asking for a great deal of money for sometimes very little return for the investor. What I have seen is exactly what this TedTalk explained. If they are confident in th entrepreneur, an offer will sometimes be made even if the product needs work. They truly do invest in the person and their ability to make money. If the person comes in with a plan and is willing to change that plan based on the Shark's experience, they are much more likely to get the money that they are asking for.

Respond to Managing A Credit Risk

This article discussed the ways for a corporation to manage the risk that it has when granting credit. The biggest risk is when a company provides the goods or services and then bills for it later. This creates a risk for the company in the event that they do not get paid. Some firms will reduce the payment terms from Net 30 to Net 15. This can make it difficult for some companies to get payments out on time due to internal processes which in turn may keep them from doing business with the company.

In my company, it is difficult for us to get payments made in 45 days and 15 days is impossible. Our internal process for paying bills requires us to get the invoice, code it appropriately, send it to our accounts payable department which is located in Nova Scotia. They then will ensure that the invoice is new and hasn't been paid before and then pay the vendor/company by either electronic payment or sending a check in the mail. Smaller companies or businesses that are all located in one location may not have this issue, but in some larger companies it would be impossible to pay that quickly.

Of course, the firm that is granting the credit has to do its own research to determine the likelihood of the company not paying. In my case, they will get the money because we are a successful firm, they just will have to wait a bit longer. The decision to grant the credit or not needs to be weighed against the size and reputation of the company they are doing business with.

Common Stock and Preferred Stock

Respond

According to the textbook, common stock means different things to different people, but it is usually applied to stock that has no special preference either in receiving dividends or in bankruptcy. Some of the features that common stock have is corporation's shareholders elect directors who then hire management to carry out their directives. Whereas, preferred stock pays a cash dividend expressed in terms of dollars per share. It typically does not have a maturity date. Preferred stock will have a stated liquidating value, that is value at $100 per share.

Reference:

Ross, S., Westerfield, R., Jaffe, J., & Jordan, B. (2016). Corporate Finance (11th). New York, NY: McGraw-Hill.

Floating Rate vs. Fixed Rate Corporate Bonds

Respond to Andrew

Floating rate bonds take corporate bonds to another level from what was discussed earlier in the chapter. Floating rate bonds are exactly what they sound like; the rate is not set in stone. The coupon payments are adjustable with this type of bond. We learn that the adjustments are based on indexes like the Treasury bill interest rate or the 30-year treasury bond rate.

Fixed rate corporate bonds are much more straightforward. The coupon rate on these bonds is determined in advance of the bond and remains consistent until maturity. Both bonds have their advantages, but with fixed rate, you at least know what to expect throughout the life of the bond.