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2017 | OriginalPaper | Buchkapitel

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

verfasst von : Guido M. Mantovani

Erschienen in: The Financial Value of Entrepreneurship

Verlag: Palgrave Macmillan US

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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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Vorheriges Kapitel In Search of Competence Value in an Incomplete Financial Market Context

Nächstes Kapitel How to Measure the Competence Value (from the Q Ratio to the T Ratio)

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Titel: The Return-To-Risk Profile of Investing in a Competence-Driven Business
verfasst von: Guido M. Mantovani
Verlag: Palgrave Macmillan US
Buch: The Financial Value of Entrepreneurship
Print ISBN: 978-1-137-39149-0

Electronic ISBN: 978-1-137-36537-8

Copyright-Jahr: 2017
DOI: https://doi.org/10.1057/978-1-137-36537-8_4