Financing strategies Flashcards
Name a few sources of financing for a new venture
- 3 Fs (founder(s),friends and family)
- Banks
- Venture capital
- Business angels
- Govt sources
- Other sources
Name three sources of rasising funding
- Personal funding
- Equity funding
- Debt funding
Describe what business angels are
A Business Angel investor uses their personal disposable
finance and business or professional experience to invest in the
growth of a small business, generally in start-up or early stage.
Business Angel investors can make investments on their own or
as part of a group.
A well-off individual looking for an investment opportunity, who will:
•understand how to grow a business, and have considerable
experience:
•have lots of useful contacts:
•have a strong interest in the field and/or business
opportunity.
•whereby they provide funding and often expertise and
mentoring, in exchange for an equity share of the business.
Describe the concept: Crowdfunding
Crowdfunding (also known as crowd financing or crowd-sourced capital) involves a number of people each investing, lending or contributing smaller amounts of money to your business or idea. This money will then be pooled to reach your funding target.
Your idea will usually be showcased through a crowdfunding website.
FUNDING STRATEGIES:
Discuss advantages VS disadvantages with individual savings
Advantage:
- Identification with enterprise
- Protection of ownership rights
Disadvantage:
- Limited amount
FUNDING STRATEGIES:
Discuss advantages VS disadvantages with equity from management/employees
Advantages:
- Motivation and ensuring commitment
Disadvantages:
- Mainly small amounts
FUNDING STRATEGIES:
Discuss advantages VS disadvantages with Venture Capital
Advantages:
?? Discuss
Disadvantages:
- High financing costs
- Controlling and voting rights
FUNDING STRATEGIES:
Discuss advantages VS disadvantages with Business Angels
Advantages:
- Low financing costs
- Management support
Disadvantages:
- Participation in ownership with controlling and voting rights (lack of control)
FUNDING STRATEGIES:
Discuss advantages VS disadvantages with Crowdfunding
Advantages: it provides an alternative to funding from conventional means, e.g., bank loan you can raise finance relatively quickly, often without upfront fees it can raise awareness of your new business
Disadvantages:
- your idea could be copied if it’s not protected with patent or copyright
- Any money you raise will normally be returned to investors
What is financial bootstrapping?
•Get what you can for free:
-Example: asking family members to help out with some work at no
cost
•Borrow, share & exchange resources
-Example: sharing office space with another company
Describe bricolage
Resourced are recombined and used in ways for which they
were not originally designed (Baker & Nelson, 2005)
