Harvesting ◾ 337
3. Desiring to change lifestyles
4. Desiring to become a serial entrepreneur
15.3 Capitalization Principles
“I have seen that déjà vu before.” —Yogi Berra
In business, capitalization means the following:
1. In accounting terms, it is where costs to acquire an asset are included in
the price of the asset.
2. The sum of a corporation’s stock, long-term debt, and retained earnings,
also known as “invested capital.”
3. A company’s outstanding shares multiplied by its share price, bet-
ter known as “market capitalization.” For example
if a company has
1,000,000 shares and is currently trading at $10 a share, their market
capitalization is $10,000,000.
In general, there are six types of capital, as shown in Figure15.2.
15.3.1 How to Capitalize Your StartUp
The founders typically capitalize their “seed capital” activity by any of the
methods shown here:
◾ Sweat equity (bootleg)
◾ SBIR (Small Business Innovation Research grants)
◾ Friends, Family, Fools (the 3 Fs)
e Six Types of Capital
Working capital (current assets – current liabilities)
Capital assets (aka ﬁxed assets)
Invested capital (equity + long-term debt)
All assets (aka everything you own)
Figure 15.2 Capitalization—The capitalization process from seed to IPO as a staged
series of events.