Best source of equity capital
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Christine Hernandez is in the process of launching a restaurant. She has never owned a restaurant before, but she has worked in two of the best restaurants in town. Starting out as a hostess, Hernandez developed a special knack for the business and quickly worked her way up to manager. Her 18 years of experience have given her a solid foundation for running a restaurant.
Hernandez has worked with a counselor from a nearby small business development center and a counselor from the Service Corps of Retired Executives to prepare a business plan. She asked two other consultants and an accountant to review the plan, and she incorporated their suggestions into the finished product. Hernandez has personal savings of about $15,000, a paid life insurance policy worth $100,000 that her grandfather bought her when she was born, and a small rental property with no mortgage worth about $75,000.
She is considering how to finance her business start up. She needs $165,000 to start her restaurant. She has chosen a location in the center of a major city. The neighborhood is economically depressed, but she thinks a trendy restaurant will draw attention, regardless of the location. Also, her initial rent and utility expenses will be low.
What will be her best source of equity capital? Why?
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Solution Summary
Christine Hernandez is in the process of launching a restaurant. She has never owned a restaurant before, but she has worked in two of the best restaurants in town. Starting out as a hostess, Hernandez developed a special knack for the business and quickly worked her way up to manager. Her 18 years of experience have given her a solid foundation for running a restaurant.
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Her best source of capital will be to raise funds from an angel investor or venture capitalist by diluting stake in the venture and providing some stake to the ...
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- MBA, Rochester Institute of Technology
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