Section outline

  • The preceding section has shown that staged financing can have many advantages in the entrepreneurial setting. The convincing element is that staged financing allows investors to learn about the venture before committing significant investment funds to, say, build production facilities or finance market entry.

    The simple logic of learning before committing is also the basic idea behind experimentation. Experimentation allows investors and entrepreneurs to reduce the riskiness of the project before committing the full capital. As a result, projects that are not feasible with full up-front investments often become financially very attractive once we allow for experimentation.

    This section shows how and why experimentation is so valuable in an environment with large uncertainty. It also looks into the key value drivers of experimentation. 

    • This section's reading assignment and review questions are listed below:

    • Reading: Financing and Experimentation Book
      Students must
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