CHAPTER 10 GETTING FINANCING OR FUNDING

2B ACTIVITY: Read Chapter 10 before answering the following and the answer per group (write
the names of group members). Submit your assignment with filename Group# EE2B Ch10 Activity
on or before May 19, 2020. (50 pts.)

1. Samantha Smith, a friend of yours, was recently telling you about a company that her
father is starting in the solar power industry. Samantha’s father is using a technology he
developed, which has received favorable write-ups in several technical publications. He
has been approached by two angel investors who are eager to invest in his proposed
venture. He’s also been offered a spot in a prestigious technology incubator, where he
can maintain an office and a lab to work on his project. Samantha says that her dad has
turned away the potential investors and is opting to work out of a shop on some property
he owns, rather than move into the incubator. He’ll be able to fund the company from
personal savings, at least for the first two years. Do you think Samantha’s dad is making
good decisions? What are the pluses and minuses of his decisions? (10 pts.)
2. Jim Carter, a classmate of yours, is preparing to launch an e-commerce company to sell
home repair guidebooks, tools, how-to videos, and related material for home repair and
remodeling projects. He just told you that he talked to his paternal grandmother over the
weekend, and she has agreed to lend him $25,000 to launch the firm. When you asked Jim
what arrangements he has made with his grandmother to formalize the loan, he looked
puzzled and said, “She plans to send me a check in a week or so—she just needs to get
the money out of her savings account.” Jim seemed concerned by the worried look on
your face and said, “Tell me what you’re thinking. I really want to do the right thing here.”
What advice would you say to Jim? Justify and explain your answer. (10 pts.)
3. Imagine you invented a new type of car seat for children, which is lighter and safer than
the car seats currently on the market. You have a business plan and have won two business
plan contests based on your idea. You also have a working prototype. You’d like to find
an angel investor to fund the launch of your firm. Describe how you’d go about finding an
angel investor in the area in which you live. Make a list of the specific steps you’d take,
and the specific people you’d talk to, to try to locate an appropriate angel investor. (10
pts.)
4. Joshua Sherman, who lives near Vancouver, Canada, is preparing to pitch an idea for a
social gaming website to a group of angel investors. The site has some new and novel
aspects to it. He made a practice presentation in front of his advisory board, and one
question that an adviser urged him to prepare for is “If you’re successful, what’s to prevent
Facebook from launching a similar product?” Joshua frowned, and said he thinks it’s
unlikely he’ll be asked that question. What do you think? If you were Joshua, how would
you prepare to answer that question? (10 pts.)
5. Jackson Peterson has launched a firm selling swimming pool supplies. Most of his clients
are local swimming pool builders and smaller firms that serve homeowners and a few
businesses by cleaning their pools on a regular basis. While Jackson’s firm is generating a
reasonable amount of business, cash flow is a problem. A main reason for this, he thinks, is
that most of his customers are also small companies and are struggling to have enough
cash on hand to operate themselves. In listening to Jackson, you determine that factoring
might be a way for him to raise cash for his business. When you mention this possibility to
him, he looks puzzled and says: “I do not know what you are talking about. What is
factoring and why should I consider using it?” How would you answer Jackson? (10 pts.)