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The Return-To-Risk Profile of Investing in a Competence-Driven Business

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The Financial Value of Entrepreneurship

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Abstract

A successful entrepreneurial finance transaction aims to transform the overall value (W = W1+W2) of the entrepreneurial challenge into market price. To ignite the investment, the return-to-risk profile of any entrepreneurial investment needs to be perceived in full. Since the relative weight of the two value components evolves during the overall entrepreneurial cycle, the return-to-risk profile evolves too. Therefore, an adaptive risk tolerance is required to hold the investment during the overall cycle. The relevant risk refers to both the quantity and the quality of the business risk. The chapter explains how to infer the contribution of the different components of the corporate risk; this helps the entrepreneurial finance deals to match at best the investor’s risk aversion profile with that required by the entrepreneurial business.

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Authors and Affiliations

  1. Ca’ Foscari University, Venice, Italy

    Guido M. Mantovani

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  1. Guido M. Mantovani
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Mantovani, G.M. (2017). The Return-To-Risk Profile of Investing in a Competence-Driven Business. In: The Financial Value of Entrepreneurship. Palgrave Macmillan, New York. https://doi.org/10.1057/978-1-137-36537-8_4

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  • DOI: https://doi.org/10.1057/978-1-137-36537-8_4

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  • Publisher Name: Palgrave Macmillan, New York

  • Print ISBN: 978-1-137-39149-0

  • Online ISBN: 978-1-137-36537-8

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

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