Kevin is saying that there are two ways of handling opportunities when they come along:  the first is to be proactive taking risks, and tailoring the situation, the other is to be passive, sitting back and waiting for something to happen, leaving it up to chance and fate.  In finance, this could apply to an investment opportunity.  For example, if you had always wanted to open a small business, and one day you see an open building for sale, you have two choices.  If you were defining the moment, you would devise your business plan, apply for a loan, find backers, and buy that building to open your store.  Letting the moment define you would be hemming and hawing, worrying about everything that could go wrong, and then finding out that someone else has already bought the building, making your decision for you.  By and large, the people who define the moment--who take risks, seize opportunities, and make their own fate---are the most successful.  Those who sit and wait leave themselves at the mercy of the whims of fate.  (Moothart and Kraemer)

You have to take control of situations instead of letting situations control you.  Your attitude and resolve means more than coincidence or circumstance. (Warwick)

There are windows of opportunity that the entrepreneur can take advantage of, including niche markets and additional capital sources.  (Ripp and Heine)

When faced with a challenge often the enthusiasm and response to the problem has more value than the problem at hand.  If you don't take charge of the problem, then the problem will overcome you.  (Wichman and Ebert)

When an investment opportunity comes along an investor has two options:  take the risk or pass it up.  If you make the investment you can define the moment and reap the benefits or let the moment define you and you lose!  (Briggs and Vacanti)

Many defining moments come along.  These may be milestones or benchmarks or moments when the business has an opportunity to grow, expand, remain stagnant, or discontinue operations.  When a significant event comes by an entrepreneur must take action to effectively control the business or the market will control it.  (Brinkmann)

My approach to this question has to do with point of view and what you are looking at.  A grocery store is a living organism.  Think of it in terms of its processes, the people who work and shop there, the extended "family" of all those people, the interrelationships with the community and the markets.  Looked at in this way, it doesn't really matter that they happen to sell food stuffs.  That is incidental to the life processes that occur.  It just happens to be the product, but is not the real essence of the entity.  

A grocery store can be a way of life.  In South Omaha, for example, the Hispanic population knows this concept well.  There are numerous small, independently owned grocery stores.  However, they hold much more meaning to those who own and run them.  They are a way of life.  They are income.  They are subsistence.  They are pride and success.   They are life.  Without these stores, many of these people would not be able to provide for themselves and places to come together and to be surrounded by things that are familiar.  They are reminders of home and they provide a comfort to patrons.  They are not just grocery stores.  (Nolle and Soucie)

When your survival depends on the grocery store (Polito and Roth)

Prices doesn't necessarily equal value in the case of any business.  Price is determined by the cost of the materials used to make the product, the cost of the labor that went into the product, and all of the other costs (such as marketing and promotion, storage, etc.) that are tied to the product.  Value, on the other hand, is essentially determined by the individual consumer.  We all place different values on different products depending on how scarce it is or even how we use it.  These things are  often independent of price.  Value could be defined as the maximum price a consumer would pay for a certain product.  The producer of a product determines its prices, while the consumer of a product determines its value; this is true for any business.  (Nolle and Soucie)

Price is determined by an equilibrium of supply and demand while value is the intrinsic benefits associated with the given price. (Dell and Wittman)

Price may not equal value in a small business because a small business, in order to compete in the market, must differentiate itself in a certain way.  Due to economics of scale, a small business may not be able to compete with price, but they may be able to remain competitive with value or quality even though they charge a higher price.  (Brinkmann)

There are things such as knowledge and intangible assets that must be considered.  These things bring value to the table, but price may not always reflect them.  (Pickman)

A small business is risky.  Therefore, people may be willing to pay less than its true value if the business goes on the market.  Furthermore, most small businesses are not liquid (meaning one cannot necessarily transfer ownership easily), which could lead to larger differences between price and value. (Warwick)

Minority discount:  the reduction from share value to reflect the absence of the power of control.  Control Premium:  the higher value associated with a majority voting power (Polito and Roth) (Huelskoetter and Stansberry)

http://www.jacompton.com/prem_dis.html Minority Discount:  discount is generally applied against the inherent value in a closely held business because minority owners don't have control of the business.  Control Premium:  The amount above the inherent value that a buyer would pay to have controlling interest. (Briggs and Vacanti)

Return on Investment (ROI) measures the annual compound rate of return from an initial investment, taking into account growth in value of the investment as well as periodic cash flows received from the investment.  For a past investment, these are known values and the calculation is just a matter of plugging in the numbers for PV (the original price paid), the CFs for each year of ownership, and the FV (the price received at the end of the ownership period), and then finding the discount rate which equates the PV to the CFs and FV.  For a future investment, it is the same process except that the CFs and FV are expected values, rather than known with certainty.  The concept is exactly the same for both the entrepreneur and the venture capitalist.  However, the specific CFs to be expected, the PV and the FV are different, yielding different answers.  (JAG)

ROI is profit divided by the total capital used for a project.  However, this simple equation is complicated by small business.  Simply measuring monetary investment for an entrepreneur doesn't reflect the tru investment an entrepreneur pours into the company.  An entrepreneur spends long hours improving the buisness.  In addition, it is hard to value the worth of the intangible things an entrepreneur invests in a business, such as using a patented idea, or using personal assets in the business.  For example, the pizza store owner may use his own car to make deliveries.  Also failure for a venture capitalist is a red number on a sheet of paper.  What happens to Bill after "Bill's Bowl-O-Rama" goes out of business is more personal.  For these reasons, while the equation may be the same for both the entrepreneur and venture capitalist, determining the level of investment is much harder for an entrepreneur.   (Moothart and Kraemer)

Return on investment is calculated by taking all expected future cash inflows and discounting them back or forward to determine capital gains and losses.  An entrepreneur judges ROI by if any  earnings were made after all debts and creditors are paid off; this includes cost of operations.  A venture capitalist views ROI as whether or not they gained a required return based on an evaluation of the small business.  (Brinkmann)

Probability of failure if inveswt in one:  90%^1 = 90%.  Probability of failure if invest in two:  90%^2 = 81%.  Probability of one of the two succeeding:  100%-81% = 19%.  To achieve a 70% probability of at least one success, the business angel would have to invest in 11 or 12 ventures:  (90%^11 = 31.4%; 100% - 31.4% = 68.6%) or (90%^12 = 28.2%; 100% - 28.2% = 71.8%)  (Brennan)

Probability of failure of one=90% (10% probability one succeeds).  Probability of failure if invest in two = 90%*90% = 81% failure (19% of one success).  Probability of failure if invest in three = 72.9% failure (27.1% probability of one success).  . . . . . between 12 and 13 will generate a probability of 70% or more that you would have at least one success.  (Ripp and Heine)  Invest in 11 or 12 to have probability of success of one up to near 70%.  (Warwick)

The entrepreneur (BUSINESS ANGEL) has been misled.  The 90% figure includes failure of firms because they didn't have sufficient funds, so the probability of failure is probably less than 90% when funded. (Shafar and Vaccaro)

All three used bootstrap financing to start their businesses, which have become huge companies.  For example, Lillian Vernon started her mail order/catalog business, which is now also available on the Internet, with a couple thousand dollars that she and her husband received as wedding gifts.  Furthermore, the business was started out of her own home.  For fiscal year 2002, Lillian Vernon's revenues amounted to $259.6 million.  Tom Golisano founded Paychex, Inc., a company that provides payroll and human resource services to business, using $3,000 that he obtained by maxing out his credit cards and taking out myriad consumer loans.  Also in the beginning, he employed relatives who worked free of charge.  His company yielded $869.9 million in revenues in fiscal year 2001.  Dave Packard started Hewlett-Packard with co-founder Bill Hewlett with $538 of personal money and began their business in a rented cottage behind Bill Hewlett's house.  In fiscal year 2001, the company produced net revenues of $45.2 BILLION dollars! (Brennan)

All three of these people are bootstrap financers who started out small and eventually created huge, multi-million dollar companies.  Tom Golsano is the CEO of Paychex, a $500 million a year payroll services provider with 100 facilities.  When it began, over 30 years ago, it had 0 facilities and no money.  By wisely using his limited cash supplies, Golsano managed to cultivate enough customers to stay in business.  Lillian Vernon was a German immigrant who started a mail order service from her home selling personalized handbags.  She began with a $495 add in a newspaper and got $34,000 in orderers.  Today. Lillian Vernon Corporation has amassed $240 million in sales.  In 1939, Dave Packard, along with fellow Stanford graduate Bill Hewlett started out by constructing an audio oscillator in a garage.  In 1999 Hewlett-Packard was a $40 billion a year industry.  The common thread connecting all three of these entrepreneurs is a humble beginning  They had an idea, were willing to work hard and take risks to get their idea off the ground, and eventually got through the tough early times to build thriving, world-renowned corporations.  (Moothart and Kraemer)

Lillian Vernon, Tom Golsano, and Dave Packard are all examples of entrepreneurs who stared businesses that have grown into large corporations and have been very successful.  Lillian Vernon created a mail order catalog company in 1951.  She started with $2,000 and an ad placed in Seventeen Magazine.  This ad brought in $32,000 in sales and the company has grown ever since.  The company's first mullion-dollar year was in 1970, proof of its explosive growth.  Lillian Vernon Corporation went public in 1987 and the company continues to grow today.  Tom Golsano created Paychex, Inc. in 1971 with one employee and forty clients.  Paychex, Inc. offers a variety of different services to it clients, including tax services, 401(k) plans, payroll services, and worker's compensation services.  In 1983 the company went public.  It has been named several times over a s a company to watch because of its growth and success.  Even today, the company is ranked on several lists of importance for its different service divisions.  Paychexs, Inc. continues to grow and acquire other companies in 2002.  Dave Packard, along with Bill Hewlett, created Hewlett-Packard, a leader in the compute and technology industries, in 1939.  They started in Dave's garage with $538 in cash and a drill press.  The company grew rapidly, even within the first few years, with revenues jumping from $5,369 in 1939 to $953,294 in 1943.  In 1957, the company went public at $16 per share.  HP continues to grow and expand by developing innovative products and by improving upon the technology that already exits.  The company's first billion-dollar year was1977, and revenues today are expected to exceed $45.2 billion.  (Nolle and Soucie)

They were all bootstrappers (Hughes and Evans)

ROI = return on the amount an individual invested in an enterprise; ROA = return on the assets owned by the organization (i.e., how well they used their assets to make money); ROE = return on the equity of the organization (i.e., how well they firm used the equity to make money). (Warwick)

ROI = the return you receive from investing in a business; ROA = the return you get from the assets that you purchase; ROE = the return you get from buying stock in a company (Pickman)

The question is whether you should present your true beliefs about the business prospects or paint an optimistic one.  

	Suppose the entrepreneur presents her true belief that the project will be valued at $100.  If the investor does not believe the entrepreneur, the investor may discount that to $50.  If the investor overstates the value at $150 and the investor does not believe it, the discounted value is $75.  If the probability of being believed is 50%, then the entrepreneur should always overstate the value because the expected value of the overstate case is .5*$150 + .5*$75 = $112.50.  On the other hand the expected value of the tell-the-truth case is .5*$100 + .5*$50  = $75.  So from the entrepreneur's point of view:  overstate.
	From the investor's point of view, the expected value of the overstate case is $12.50 higher than the project's true value.  This is because the investor assumes a 50% chance of overstatement.  However, if the entrepreneur ALWAYS overstates, then the investor is tricked.  If the investor assumes that the entrepreneur will always overstate, the the project is undervalued by $25.  So the entrepreneur won't get enough money if the project really needs more than $75.  If the project needs less than $75, the ownership stake demanded by the investor will be too great and the entrepreneur will deny the money offered.
	The entrepreneur, then, needs to figure out a way to credibly commit to being truthful and the investor needs to figure out a way to monitor that action.  Then they can come to agreement for the supply of the needed funds to the entrepreneur for the appropriate amount of ownership stake to the investor.   (JAG, from Smith and Smith, Entrepreneurial Finance, 2000)

An entrepreneur has certain cards to play to win money of a business angel or venture capitalist.  The entrepreneur must determine what the outside investor requires and the outside investor is doing the same thing about the entrepreneur.  Both of these individuals must play off one another in order to determine what can be gained or won.  They each must play their cards right to win the business of the other.  (Brinkmann)

PV = 1, FV = 10, n = 6, solve for I/Yr = 47%  (JAG)

"A little more drive, a little more pluck, a little more work--that's luck"  Jean Cocteau (1889-1963)

	Luck may just stumble upon you at times but real luck is created through hard work and a strong drive.  Entrepreneurs can create their own luck if they have the drive to stick by their ideas and work hard to make them a reality.  People will fee off of their enthusiasm and work ethic and believe in the entrepreneur's project.  (Hill and Heller)
	This quote can be applied to entrepreneurs.  In this line of work, hard work is rewarded greatly.  It is no surprise that some of the richest business owners are some of the hardest workers.  When my dad began his business, he put in many long, hard hours and was not even compensated very well for this.  He could have easily make more money at his previous job.  With all of his months of hard work, he soon realized that he became "lucky" in his entrepreneurial ventures.  Luck has nothing to do with it, but just stresses the fact that eventually good things will happen when you put everything you have into a business.  (Hancock)
	Work hard, be in the right place at the right time.  (Shafar and Vaccaro)
	Luck: a positive gain or positive occurrence.  This cannot happen without motivation, drive and hard work (Hughes and Evans)
	You create your own breaks.  If you work hard, knock on every door, and dedicate yourself to your business, you will find a little "luck".  (Warwick)
	Humor award:  Shows how we are going to receive A's in this class because of drive, pluck and luck. (Ripp and Heine)

"I make money using my brains and lose money listening to my heart.  But  in the long run my books balance pretty well".  Kate Seredy (1939), The Singing Tree.

	Even though it is important for an entrepreneur to be smart and to know what he's doing, character and ethics are also very important.  The entrepreneur must not only prove to the investors that the venture is worthwhile, but must also prove that he or she is worth doing business with as well.  After all, there are such things as character loans based on the personal characteristics of the entrepreneur.  Ethics is a very important issue in today's business world--no one wants to be associated with someone who operates dishonestly.  This is where listening to one's heart comes in.  Acting morally and ethically may come at a price in the business world, but in the end, it will pay off and there will be no regrets.  (Nolle and Soucie)
	An entrepreneurial business is an individual's own personal business.  Because of this, brains are used in business decisions, but due to the personal nature of the business, emotion or heart also comes into play.  This may hurt the small company, but it still balances all out.  (Brinkmann)
	To be an entrepreneur, you have to use both your brains and your heart. (Wichman and Ebert)
	Sometimes you have to make decisions you don't like, in order to make more money.  However, money isn't everything and business owners must balance between money/profits and ethics.  (Warwick)
	Sometimes money is made when listening to your heart even when you think you would lose money.  (Ripp and Heine)

"I'm self-employed".  Prince Phillip.  

	This somewhat ironic quote from a member of the Royal Family speaks to what is probably the number one reason a persona would start their own business.  Being self-employed harkens back to the American ideals of independence, autonomy, hard work, and the belief that a person controls their own destiny.  The attraction of owning one's own business is that he or she is now the boss, answering to no one.  Of course, the tradeoff is that you are responsible for everything, and the onus of success or failure falls entirely on your shoulders.  For an entrepreneur, however this could also be an advantage, since you are in the position--to some extent--to control your future. (Moothart and Kraemer)
	Whether you are an entrepreneur or an intrapreneur (take an entrepreneur's attitude i nthe company you work for) you work for yourself at the end of the day.  If you hold this attitude you will be successful.  (Romanovsky)
	He answers to no one.  (Dantas and Ekanem)  He doesn't work for anyone.  (Meyers and Ratino)
	Alternatively, maybe he answers to and works for everyone in his sphere of influence!   (JAG)
	Humor Award:  Consort of Queen Elizabeth II, answering a query as to what nature of work he did!  (Reuter and Kolar)

"Nought venter nought have." John Heywood (1497-1580)

	This timeless piece of advice applies perfectly to entrepreneurs hoping to start their own business.  So many business students graduate from college and go out to the real world, getting normal jobs and finding success, all the while harboring dreams of their own business.  They may fell like they have a perfect idea, or they have a passionate interest in something that they believe they can market, but they never take the risk of trying to start a new business.  Without the risk, there can be no possibility of reward.  In entrepreneurial finance, this means taking out loans, running up charges on credit cards, and dipping into your own savings in order to provide the needed capital.  All this money that you put up on the table could eventually be lost, especially since so many new businesses fail.  However, there is always the chance that things will work out, the business will be a success, and that all the hard work and sacrifice was a small thing compared to what was gained.  One can never know if this will be the case, however, unless a person is daring enough to try.  (Moothart and Kraemer)
	If you don't take risk, you will never get anything.  (Warwick)
	No risk = no reward.  (Ripp and Heine)
	Without taking chances, there is nothing to gain out of investing.  (Dell and Wittman)

"I have never seen a greater monster or miracle in the world than myself".  Michel de Montaigne (1533-1592), Of Cripples. 

My take on this is that I can do wonderful things, but I also make horrendous mistakes and I can't blame anyone else but myself for making those monstrous mistakes.  Sometimes, my "wet noodle" whipping of myself goes along the lines of:  "How could someone with a Ph.D. be so stupid?"  (JAG)

"Vessels large may venture more, but little boats should keep near shore."  Benjamin Franklin (1706-1790), Poor Richard's Almanac. 

This quotation can be applied to the practices of large businesses versus small businesses.  A big company is going to be able to take more risks.  It will have more outside investments and larger cash flow to enable them to expand and seize market share.  Small businesses, however, cannot hope to compete head-to-head.  They have limited access to capital and thus will not have the ability to provide as many goods and services as a large company.  The advice for a small company, staying near the shore, would be to find a niche.  As a small business, you will not be able to overwhelm your competition; however, you can do one thing that they don't do or something they don't do well, and capitalize on that.  (Moothart and Kraemer)

If you have more money, you can afford to take more risk and be rewarded with a greater return.  However, if you have little money, you should not take as great of a risk.  (Warwick)

"I might have been a gold-fish in a glass bowl for all the privacy I got".  Saki (Hector Hugh Monroe, 1870-1916) The Innocence of Reginald.

	Running a business will probably require you to open up your financial affairs to others to see, in order to get additional help from outsiders.  (Warwick)
	Humor award:  If you are a goldfish, fear being flushed down the toilet, not your lack of privacy.  (Polito and Roth)
	When I am successful, everyone will be watching me, trying to model themselves into a successful individual.  (Hughes and Evans)

"It is always worthwhile asking a question, though it is not always worthwhile answering one."  Oscar Fingal O'Flahertie Wills Wilde (1856-1923).  Pose a question that is worthwhile asking, although answering it might not be of much value.

	"Are you busy?"  "Do you have a minute?" (Wiese and Zaruba)
	Humor award:  Is this scavenger hunt ever going to end?  (Ortman and Bazal)
	What are your dreams and your hopes?  (Hughes and Evans)
	Humor award:  What prize do we get?  (Warwick)
	Should I be a venture capitalist or a business angel?  (Ripp and Heine)

"i am not you anymore / i am my own collection of / gifts and errors."  Saundra Sharp (1991), Double Stitch.

	My take on this one is that I may imitate a mentor; I may aspire to someone else's role model, but I have a different genetic and social makeup and living and working environment, so things will turn out differently for me.  (JAG)
	Parents often raise their children such that their children resemble them to some extent.  For example, some parents try to raise their children to become what they aspired to be but were never able to become.  However, at some point in life, everyone becomes their own person, who is defined by their own collection of rewarding experiences and mistakes.  To relate this to entrepreneurship, think about those people who become entrepreneurs because they witnessed how hard their parents worked for other people and what little they received in returns.  The entrepreneur, driven by such an experience, may believe that by owning his own business, he will have more control over his work life and lifestyle than did his parents.  In essence, the entrepreneur has learned from his parent's mistake of working for someone else.  However, the entrepreneur may soon realize that he has his own victories and defeats ahead of him.  (Brennan)
	Once an entrepreneur gets past the start up stage they will be able to eventually move away from the core support of venture capitalists and business angels.  Just as a child moves away from parents and goes to live on their own, so will a new business.  Once they are on their own they will make good decisions but just like a child they will make mistakes as well.  But with development they will be able to deal with these things on their own without the support of the help that they had in the beginning.  An entrepreneur has the abilities and the knowledge to do their own thing.  They have unique ideas that make them successful entrepreneurs in the business world.  (Kavan)
	This is a great entrepreneurial quote.  It is a quote of a person who started out in the business under someone's wing.  Using this person or business as a mentor and a guide to the tricks of the trade.  Now the young company has sprouted out to be its own independent company and has succeeded and has shed the cloak of the senior company.  (Hill and Heller)

"First honesty, then industry, then concentration", Andrew Carnegie (1835-1919)

	"Get busy livin' or get busy dyin' "  Red, from Shawshank Redemption.  (Ripp and Heine)
	The most important element in running one's own business is being honest with investors and customers.  With such a large number of businesses failing, it's important to not shoot yourself in the foot by being dishonest or offering a less than quality product.  (Huelskoetter and Stansberry)

to promote and develop by use on one's own initiative and work, without reliance on outside help (Hughes and Evans) (Huelskoetter and Stansberry) (Dell and Wittman)

taking a step that you think is on the path, learning from it, and using it to lift up to the next level (Reuter and Kolar) (Wichman and Ebert)  

This comes from building a suspension bridge, using a thin cable to hoist a larger, thicker one, and making the bridge stand.  (Polito and Roth)

Bootstrapping is an informal form of new venture financing, in which the entrepreneur is financing his or her own firm from personal sources such as savings or mortgaging property. (Dantas and Ekanem)

A process of creating a theoretical spot rate curve, using one yield projection as the basis for the yield of the next maturity (Schmitz and Schumacher)

The leveraging of a small initial effort into something larger and more significant; leverage yourself to success from a small beginning.  (Pickman)

No percentage ownership is appropriate unless there are other cash flows along the way.  (Shafar and Vaccaro)

60% * 40% = 24% (Hughes and Evans)

40% (Pickman)

60% (Meyers and Ratino)

$1.2 million (Ripp and Heine)

Comes from the Arabic word "Mezalaic", which means "one with the wolves".  (Ripp and Heine)

A company's progress makes positioning for an IPO viable.  Venture funds are used to support the IPO.  (Dantas and Ekanem)

Usually the final round of financing before an IPO (Schmitz and Schumacher) (Huelskoetter and Stansberry) (Wichman and Ebert) (Pickman) (Dell and Wittman) (Polito and Roth) (Shafar and Vaccaro) (Reuter and Kolar)

NPV = -$5,000,000 + $25,000,000 discounted at 16% for 5 years = $6,902,825 (Warwick) or $11,902,825.39 - $5,000,000 = $6,902,825 (Hughes and Evans)

How much outside involvement/control you want.  Amount of money needed.  Size to which you want to grow your company.  Future anticipation of an IPO.  (Huelskoetter and Stansberry)

I would decide whether or not I plan to go public one day.  The type and size of business and location.  Do I want the investor's advice and involvement in the business or do I just want the money?  (Dantas and Ekanem)

--the image of venture capitalists among many in the technology community has moved from generous "angels" into powerful wizards hidden behind velvet curtains.--the relationship between entrepreneurs and venture capitalists can be very complex.  --huge mess of dot com companies in recent years went bankrupt but many of them were started up by money hungry VCs who may not have been as careful as they should have been.  --most VCs maintain that company execs should never be surprised when the funding gets pulled from them.  --if you only get funding from on VC and they don't want to give you a second round, you're as good as dead.  --some entrepreneurs don't have positive returns, which is not viewed to be good news for the VCs and lately is due to the downturn of the market and the economy.  (Kavan)

If Jiffy Lube were to shut its doors down over a year's time, its liquidation value would be as follows.  Current assets would remain largely the same value.  Assets such as inventory would be given a full year to realize the value of, as opposed to having no time if the liquidation took effect immediately.  Over the course of a year, a buyer could be found, and much of the other assets' values could be realized as well, minus, perhaps, the intangible assets.  Taking out the liabilities from these adjusted assets leaves a liquidation value of $93,339 - $50,752 = $42,587.    The liquidation value would be much smaller if the doors were to be closed immediately.  This is because any buyer would have the advantage of a distressed seller (Jiffy wanting out quickly) and could obtain the assets for lower values.  As a going concern, Jiffy can rid itself of assets over the course of the year rather than immediately, netting higher values for its assets.  The main adjustments would be in the assets leased to franchisees--since the franchise is no longer a going concern, there leases would not hold up, and the company would have property on its hands that it could not fill the space of quickly.  Thus a buyer could garner these properties for much less than their stated values.  Reducing this value by half leaves a liquidation value of $64,648 - $50,752 = $13,896.  This is obviously a significant drop in liquidation value, but shows, for instance, how bankruptcy assets can be purchased for such a small amount relative to their going concern value.  (Martin, Kissel, Wilson, Shea, and Buffum)

David Wtherell is the founder of CMGI, a successful internet entrepreneur.  Booklink was the first company CMGI took under its wing, and Yesmail is CMGI's latest acquisition.  CMGI sold Booklink to AOL and used that money to finance their other ventures.  This kind of innovative financing made CMGI one of the few internet companies to find continuing success.  (Moothart and Kraemer)

Founder of CMGI, David Wetherell, purchased Booklink and Yesmail.  By purchasing these online marketing firms and sites, CMGI is able to direct traffic to UBid and other online auction sites that CMGI owns, which will increase their income.   (Briggs and Vacanti)

59%, 43%, 38%, 25% (Schmitz and Schumacher)

ETHICAL BEHAVIOR SYSTEM USED FOR THIS EXAMPLE:  Universalist.  Moral standards are applied to the intent of an action or decision; the principle is that everyone should act to ensure that similar decisions would be reached by others, given similar circumstances.  If I was in the initial lender's situation I know I would not think that this was a very fair way of distributing the money.  How can the entrepreneur be sure that the initial lender would not want to lend you additional money?  They are the ones who took on the majority of the risk at the beginning of the business and thus they should be rewarded first.  The other company should understand that they are a secondary lender and should not have senior status.  The entrepreneur needs to make the decision that would be agreed upon by all.   

ETHICAL BEHAVIOR SYSTEM USED FOR THIS EXAMPLE:  Personal Liberty.  The ethical system of personal liberty says that moral standards are based on the dominance of the value of liberty.  It states that everyone should act in such a manner as to ensure the greatest freedom of choice.  Doing so promotes the market change that is essential for social productivity.  A person following the personal liberty system would resolve this dilemma by signing over senior status for the debt to the new lender, giving them primacy in the event of a default.  The rationale for this act would be that it promotes greater liberty for the company receiving the loan.  In other words, the company should do whatever it has to do to get the new loan, including giving seniority to a lender that is actually subordinate, since the company will have more choices and greater freedom with the increased money inflow.  The assumption here is that the latitude given the company by the loan will lead to improvements in their performance.  This performance will translate into a better marketplace, therefore guaranteeing social productivity.  (Moothart and Kraemer)

ETHICAL BEHAVIOR SYSTEM USED FOR THIS EXAMPLE:  Utilitarian.  The answer to this dilemma would rest on whether or not my firm will be successful.  If I knew for sure that I would be able to employ 10 people and not go bankrupt, then I would borrow the money with senior status debt.  I would not be harming my first lender, and that would be to the benefit of more than 10 people.   On the other hand, if I do not feel comfortable predicting a positive outcome, then I would not borrow the money because I would harm more people than I could help.  It is very hard to act on utilitarian behavior because you cannot measure the amount of "goodness" to compare with the amount of "wrongdoing".  You could harm some one person more than you could help several other people, or vice versa.  It is unmeasurable.  (Dantas and Ekanem) 

ETHICAL BEHAVIOR SYSTEM USED FOR THIS EXAMPLE:  Distributive Justice.  You made an agreement with the first company first so that is the first obligation of the entrepreneur and should be handled first.  Each lender should have equal opportunities.  (Wichman and Ebert)

ETHICAL BEHAVIOR SYSTEM USED FOR THIS EXAMPLE:  Utilitarian.  We think they should act in a way that would benefit the largest number of people.  In this case, borrowing additional money and transferring senior status may be the key to benefiting both parties who lent money because the additional money may help the firm survive.  (Schmitz and Schumacher)