New Forms of Funding in Strategic Corporate Finance: Entrepreneurial Finance, Venture Capital, Private Equity and Hedge Funds

Abstract

New forms of funding outside the public capital market give startups and fast-growing businesses the room they need to realize innovative models and processes. In the past, the general risk aversion of traditional investors was often the downfall of such enterprises. By contrast, today’s new breed of financial investors tends to assess risks on the basis of the value they can realistically expect their investments to add. New forms of funding and this new breed of investor make it easier to tread new paths. The new financial investors mostly use unconventional, high-interest financial instruments, combined money/capital market instruments, hybrid financing instruments, progressive receivables management and derivatives based on all kinds of underlying transactions (especially credit derivatives) to leverage the return on equity. Along these new paths, however, all that glitters is not gold.