Class 4

Question 1

How to find financial resources:

Answer 1

Equity vs non-equity—equity funding provides funds in exchange for ownership.
Non-equity provides funding in the form of loans, donations, or future receipt of goods.

Question 2

Reasons to bootstrap:

Answer 2

It forces you to focus on what’s important. You have more independence to pursue your interests. It can be hard to recruit investors in the early stages. When you start giving up equity, you will likely have to continue giving up more equity. Investors want to see that you have skin in the game or sweat equity.

Question 3

Even more reasons to bootstrap:

Answer 3

Better to start small than to start big and run out of cash. You can take time to fully understand your customers. You can start your business while holding another job. You have more control over hiring decisions.

Question 4

Ways to bootstrap:

Answer 4

Get creative. Bricolage—tinkering with what you have available to make a solution.
Effectuation—finding ways to make things happen.
Cash is king, make sure you never run out of money and have a healthy cash flow. Expand your network. Do your research, learn as much as you can on your own.

Question 5

Crowdfunding vs crowdsourcing:

Answer 5

Crowdsourcing—generating ideas by recruiting many different contributors.
Crowdfunding—raising funds by acquiring different sources.

Question 6

Four types of crowd funding:

Answer 6

Donative—donations, low information, low level of professionalism, new business.
Debt—loans, medium information, low-medium professionalism, new business.
Rewards—products/services in exchange, low amount of information, medium level of professionalism, new business.
Equity—ownership in exchange, high amount of information, high level of professionalism, established business.

Question 7

Four types of crowd funding, funder characteristics:

Answer 7

Donative—amateur investor experience, low liability, low minimum investment, 1 time commitment, prosocial return.
Debt—amateur investor experience, low-medium risk, low minimum investment, short term commitment, repayment return.

Question 8

Reasons for crowdfunding:

Answer 8

Increases market reach. Allows you to market potential and gather feedback. Generate market demand and enthusiasm before spending money on the product/service. Enables you to appeal to a wide range of potential investors. Give you more control over which type of investment you want.

Question 9

Crowdfunding DO’s:

Answer 9

Solve a real problem. Test and refine your idea. Be prepared, half-baked campaigns rarely successful. Seek and accept advice. Generate buzz before launching your campaign.

Question 10

Crowdfunding DO’s:

Answer 10

Set realistic fundraising goals. Focus on the pitch, videos professionalism and enthusiasm generate more support. Continue marketing after the campaign launch. Commit to your campaign, follow up quickly to customer requests. Honor your commitments.

Question 11

Crowdfunding Don’ts:

Answer 11

Choose wrong crowdfunding platforms. Set unrealistic goals. Not engaging with social marketing. Lack of communication with backers. Failure to gather feedback in advance. Insufficient media coverage. Failure to deliver the product/service post-campaign.