DRAGON'S DEN DEFINITIONS CONTINUED- MARKET VALUE: THE HIGHEST AMOUNT THAT SOMEONE IS WILLING TO PAY FOR A PRODUCT (AS WELL AS THE LOWEST AMOUNT THAT A SELLER IS WILLING TO SELL AT).
- Book value is the difference between a company's total assets and total liabilities.
- EQUITY: If you own a company, your inventory, cash, and other assets (equipment etc.) equal $12,000. Your debts and liabilities add up to $5,000. You have $7,000 worth of equity. EQUITY= ASSETS - LIABILITIES Equity refers to ownership of the company and it is divided into shares. Sometimes it is referred to as an equity stake. So an investor might have a 20% equity stake in a company, for example. The entrepreneur holds onto an 80% equity stake.
- CUSTOMER ACQUISITION COST: THE AMOUNT OF MONEY REQUIRED TO GET SOMEONE TO BUY YOUR PRODUCT OR USE YOUR SERVICE. IN A VERY SIMPLE EXAMPLE, IF YOU RUN AN AD FOR $1,000 AND 100 PEOPLE BUY YOUR PRODUCT, YOUR CUSTOMER ACQUISITION COST WOULD BE $10 PER CUSTOMER.
- FRIENDS AND FAMILY ROUND: WHEN FRIENDS AND FAMILY GIVE MONEY TO THE FOUNDER(S) OF A BUSINESS TO FINANCE THEIR PROJECT. AS THE NAME SUGGESTS, THIS MONEY MAY COME FROM PARENTS, GRANDPARENTS, CLOSE FRIENDS, ETC.
- LINE OF CREDIT: THIS IS BASICALLY FINANCING THAT YOU NEED TO PAY BACK AT A CERTAIN INTEREST LEVEL. FOR EXAMPLE, IF YOU HAVE TO MANUFACTURE $100,000 WORTH OF PRODUCT, THE LINE OF CREDIT MAY BE $100,000 WITH 5% INTEREST. THIS MEANS THAT ONCE YOU CREATE AND SELL THE PRODUCT, YOU HAVE TO PAY THE ORIGINAL $100,000 BACK WITH $5,000 (TO COVER THE 5% INTEREST).
- CONVERTIBLE LOAN: A LOAN THAT IS EXTENDED TO A BUSINESS THAT COULD BE CONVERTED INTO EQUITY.
- ADVISORY SHARES: SIMILAR TO REGULAR SHARES (OWNERSHIP) OF A BUSINESS, BUT GIVEN TO ADVISORS OF COMPANIES RATHER THAN EMPLOYEES. IT’S EASIER TO GIVE ADVISORY SHARES TO INVESTORS BECAUSE THIS EQUITY CAN BE USED IN PLACE OF CASH AND HELPS MOTIVATE INVESTORS TO CONTRIBUTE.
- ACQUI-HIRE: BUYING A COMPANY IN ORDER TO RECRUIT THEIR EMPLOYEES TO WORK FOR YOU. THIS IS COMMON IN THE TECH INDUSTRY WHERE BIG COMPANIES WILL BUY TINY STARTUPS IN ORDER TO HIRE THEIR FOUNDERS/TEAM.
- B2B and B2C: refers to business to business selling and business to consumer selling.
EASTCOAST LIFESTYLEAfter watching the videos and taking notes, you should read the article on Alex McClean from the Toronto Star, and then check out the Eastcoast website. You should complete the question sheet on Eastcoast Lifestyle. (See Handout) You will work on this in class Mon and Tues and I would like this assignment handed in by the end of the week. Friday Oct 11
NET WORTH: $19 MILLION (2022)
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