Chapter 12

Question 1

Capital Management Plan

Answer 1

process of budgeting: identify current and future capital needs, and developing strategies and projects/resources to address those needs

Question 2

Capital Management Class Defintion

Answer 2

self-fund or seek capital from external sources

Question 3

Equity Financing

Answer 3

selling a percentage of ownership in the venture, ownership dilution

Question 4

Equity Financing Pros and Cons

Answer 4

Pros: equity co-venture shares the risk (if fails, no repay)
Cons: equity co-venture shares the reward (equity is forever, infinite cost)

Question 5

Debt Financing

Answer 5

Take out a loan and have inflexible obligation etc interest and principal

Question 6

Debt Financing Pros and Cons

Answer 6

Pros: finite cost
Cons: lender does not assume risk (repay debt irrespective of success/failure)

Question 7

Bootstrapping

Answer 7

process of building or starting a business with no outside investment, funding or support.

Question 8

Bootstrapping Key Idea

Answer 8

Find creative ways to access resources available to launch business while minimizing cash you spend

Question 9

2 benefit of bootstrapping vs external financing

Answer 9

acquire resources without accessing long term external financial sources etc capital or loans

entrepreneurs self-fund or fund from families/friends to maintain control and autonomy

Question 10

2 external financing vs bootstrapping

Answer 10

• gain advice and guidance from experience people
• get contacts, connections, and exact money you need

Question 11

What is the ideal bootstrap pace

Answer 11

steady and slow, achieve and set milestones

Question 12

Sweat Equity and example

Answer 12

non-monetary investment that increases the value or ownership interest. Created by hard work for no compensation. Etc renovate houses and save on labour

Question 13

Bootstrapping ideas to save money but access resources to launch business

Answer 13

work from home, never buy new when can lease or obtain for free, use network connections, hire help when needed, take little salary

Question 14

Crowdfunding

Answer 14

raising cash for a new venture from a large audience typically though internet

Question 15

Crowdfunders

Answer 15

people using crowdfunding

Question 16

Backers

Answer 16

people who contribute financial support to venture

Question 17

Crowdsourcing

Answer 17

using internet to attract, combine, and manage inexpensive or even free labor from enthusiastic customers and like-minded people

Question 18

Crowdfunding vs Crowdsourcing

Answer 18

Funding is resources for money and sourcing is resource for talent/labour

Question 19

4 types of crowdfunding

Answer 19

patronage model, lending model, reward-based, investor model

Question 20

Patronage Model

Answer 20

backers do not expect direct return for their donation/investment

Question 21

lending model

Answer 21

funds are offered as loans with exception that money will be repaid

Question 22

reward-based

Answer 22

rewarding backers for supporting a project in form of early access, discounts, trials instead of giving away shares or equity stake

Question 23

Investor Model

Answer 23

gives backers an equity stake in business in return for funding