Trident MGt403 module 3 case


Modular Learning Outcomes

Upon successful completion of this module, the student will be able to satisfy the following outcomes:
•Case ?Identify challenges and difficulties in securing financing for a new business.
?Identify and analyze the benefits and drawbacks of different sources of financing available to entrepreneurs.

•SLP ?Identify potential expenses for a new business
?Identify and analyze financing options for a new business
?Present and explain expenses and financing options in a formal business plan

•Discussion ?Identify and discuss the main financing options for start-up companies.

Module Overview

No company get can off the ground initially unless it gets some form of financing. Some entrepreneurs use their own savings to start their company. Others find outside private investors to get seed money for their business in exchange for giving up a portion of their ownership. Once a company gets off the ground, it usually needs additional financing. Finance is a crucial factor in entrepreneurship, as lack of adequate financing is one of the single biggest reasons why new businesses fail.

Funding or obtaining enough capital to be able to start and develop a business represents a major aspect and challenge of entrepreneurship. New businesses can be started from scratch, bought, or inherited. The capital required especially for start-ups (from scratch) is fixed (such as land), working (day-to-day operations), and growth (development, cash-flow).

In this module we’ll examine issues associated with financing a new venture and get some insights applicable to both the Case and the current sections of the SLP.

Module 3 – Case


Assignment Overview

One of the newest forms of financing available to entrepreneurs is something called crowdfunding. Instead of traditional routes of obtaining funding through banks, venture capital, or wealthy individuals, a new breed of entrepreneurs are obtaining funding via numerous small donations using social media or new online platforms such as A recent example of a crowdfunded venture is the movie Veronica Mars, which was funded by numerous small donations from fans of the TV show.

Until recently, crowdfunding has been limited to donations rather than actual investments. Individuals who help fund the business have not received a share of the profits of the new venture. Instead, they typically get some kind of alternative reward. For example, people who donate money to finance a new film might get a chance to meet some of the movie stars or be given a small role in the movie. The reason crowdfunding has been limited to donations rather than investments is that once you start offering a share of the profit to those who donate you are subjecting yourself to huge number of laws and regulations designed to protect investors. But these laws don’t apply if you provide alternative rewards in exchange for donations.

But in an interesting development, in 2012, Congress passed the JOBS Act which removed some of legal barriers to using crowdfunding and now allows entrepreneurs to offer investors actual shares in the profits of the ventures rather than the small rewards typically offered to donors. This will potentially lead to a dramatic growth of opportunities for entrepreneurial financing. However, the removal of regulation may also lead to lawsuits or allegations of fraud against entrepreneurs whose ventures fail to make a profit.

Take a look at the following articles on crowdsourcing, and do some of your own research on this as well:

Mandelbaum, R. (May, 2014). Here comes everybody. Inc, 36, 110-114,120 [ProQuest]

ElBoghdady, D., & Harrison, J. D. (Oct. 24, 2013). SEC approves ‘crowdfunding’ plan. The Washington Post [ProQuest]

Tillotson, K. (Nov. 14, 2012). Crowdfunding gears up for a fresh start. McClatchy – Tribune News Service [ProQuest]

Case Assignment

After you’ve finished your research on crowdfunding, write a 4- to 5-page paper addressing the following questions:
1.Under what circumstances do you think it would be preferable for an entrepreneur to use crowdfunding instead of more traditional forms of financing?
2.Do you think the JOBS Act and its new regulations regarding crowdfunding will be beneficial in the long run? Or will it only increase fraud and lawsuits?
3.Which crowdfunding model do you think is preferable—offering rewards in exchange for donations, or offering shares in the company in exchange for investments?

Assignment Expectations
•Answer the assignment questions directly.
•Stay focused on the precise assignment questions; don’t go off on tangents or devote a lot of space to general background materials.
•List supporting references and cite sources in proper format.
•Use appropriate writing style in essay form (organization, grammar, and spelling).
•Review Trident’s “Writing Style Guide” for more detail on referencing and writing expectations. This guide is found under “My Resources” in the TLC portal.

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