Chapter 10.1 Flashcards
Bootstrapping
What are new business start-ups an important factor in?
Determining and sustaining long-term economic growth
Why do state and local governments invest heavily in things such as: industrial parks, new business incubators, and technology and entrepreneurial programs at state universities and two-year colleges
Because new business start-ups are important in determining/sustaining long-term economic growth
What is a limitation of government support in new business development?
While governments can encourage new business growth, they typically cannot provide the equity capital and initial support that new businesses need during their start-up phase.
Who are most businesses started by?
An entrepreneur who has a vision for a new business/product and a passionate belief in the concept’s viability
T or F new businesses are often started in large corporations?
F: They seldom are. In fact, entrepreneurs regularly leave large companies to start businesses, often using tech developed by these firms
What are large companies good at doing when producing goods and serves, and what do they struggle with?
Efficient at producing g&s and bringing them to market, but generally don’t excel at incubating new businesses
How do entrepreneurs often make their ideas operational?
First flesh their ideas and make them operational thru informal discussions w/ ppl whom entrepreneur respects + trusts (ex. friends and early investors)
What do initial entrepreneurial discussions typically involve, and what are they like?
Often involve issues related to tech, manufacturing, personnel, marketing, and finance.
Discussions far from glamorous; usually low-budget affairs that take place around kitchen table w/ lots of coffee
What type of bond do the founder of a new business and their advisers often have? Give examples
Common bond that has drawn them together.
Ex: graduated from same college, worked for the same company, some fraternal or family ties
What is bootstrapping?
The process by which many entrepreneurs raise seed money and obtain other resources necessary to start their businesses
What is the process by which many entrepreneurs raise seed money and obtain other resources necessary to start their businesses often called?
Bootstrapping
Where does the term bootstrapping come from?
The old expression “pull yourself up by your bootstraps” which means to accomplish something on your own
T or F: the ways in which entrepreneurs bootstrap their businesses are usually very similar to eachother
F: Vary greatly
Where does the initial seed money usually come from?
The entrepreneurs or other founders
Until the business gets started, what do the entrepreneurs often do?
Work regular full-time jobs
Why do the entrepreneurs still work regular full-time jobs until the business gets started?
Job provides some of the cash flow needed to launch the business and to support the entrepreneur’s family (although not always in that order of priority)
What are common sources of other cash besides from the entrepreneur’s job?
- Personal savings
- Sale of assets such as cars and boats
- Borrowing against the family home
- Loans from family members and freinds
- Loans obtained thru credit cards
At the bootstrapping/beginning stage of business development, are venture capitalists or banks normally willing to fund the business?
No
Where does the seed money go?
Most cases, spent on developing prototype of product/service and a business plan
What are the deliverables at the stage of developing a prototype and business plan?
Whatever it takes to satisfy investors that new business concept can become a viable business and deserves their financial support
How is movie producer Spike Lee a classic example of bootstrapping?
Financed his first film, She’s Gotta Have It, using credit cards and money from family and friends, shot it in four days with low-cost help from classmates, and used the film’s success to launch his production company.
Film’s out-of-pocket costs: $125,000, grossed: $8.5 million
