1) WHAT SOURCES OF FUNDING ARE AVAILABLE TO ENTREPRENEURS AT THE EARLY STAGE OF THE COMPANY?
The sources of funding that are available to entrepreneurs at the early stage of the company are:
- Self-funding
- Moonlighting and consulting
- Bootstrapping
- Family and friends/angels
- Micro-equity, Micro-loans
- Personally secured bank loans
- Factoring and supplier financing
- Government programs
2) WHAT ARE “VIRTUAL” COMPANIES? WHAT TOOLS HELP THEM FUNCTION? WHY ARE THEY OF INTEREST TO AN ENTREPRENEUR?
Virtual companies are companies that move quickly, change direction without disruption, and use the best resources without taking on long-term liabilities. They have no offices, and have very few employees, no communication costs, and also low legal costs. Some tools that help them function are some virtual applications such as Skype for video conferencing, BaseCamp for project team and document management, ADP for payroll and tax management. Virtual companies are of interest to an entrepreneur because they help conserve cash, help reduce the level of fixed costs to a minimum while also maintaining flexibility, and help the entrepreneur collect validated learning about customer with the least effort.
3) DESCRIBE SEVEN TECHNIQUES FOR BOOTSTRAPPING THAT YOU COULD USE IF YOU STARTED A COMPANY.
Some techniques for bootstrapping that could be used when starting a company are:1) No or low rent: saving money by trying to minimize rent expenditure and keeping it to a minimum, 2) Renting of leasing equipment: some equipment are only needed at the start-up phase, it is better to rent than buy in this kind of case, 3) Used equipment: reduce expenses by using used equipment that help achieve the same results as a new equipment would instead of spending more money buying a new equipment. 4) Contingent litigation: a lot of money can be saved if we can find a law firm that would take the case “on contingency,” 5) Access to expensive equipment: access to equipment can be obtained through the programs offered at universities and government labs. 6) Outsourcing: some services needed for the company can be obtained by outsourcing; activities such as bookkeeping, tax-return preparation, payrol services. 7) Cooperative purchases: companies can work with small companies and create a buyer’s club and this could help reduce some costs in certain areas such health insurance costs for example.
4) WHY IS BOOTSTRAPPING IMPORTANT FOR (A) CLOSELY HELD COMPANIES AND (B) EARLY-STAGE, HIGH-GROWTH COMPANIES SEEKING EQUITY INVESTORS?
Bootstrapping is important for closely held companies and also early-stage, high-growth companies seeking equity investors because it can reduce costs from the current operation and overhead, helps become more efficient and costs conscious. Bootstrapping will help the entrepreneurs to be in a stronger position to qualify for additional financing and in this way they can get through the early stages either to defer the search for equity funding or to retain control of the company.
5) WHAT IS MEANT BY FACTORING OF PURCHASE ORDERS?
Factoring of purchase orders consists in using purchase orders from reputable customers as security for a loan. This method is an alternative to conventional bank loans and the lenders are private, they lend only a percentage of the sales order and charge high interest rates.
6) HOW CAN SUPPLIERS HELP IN PROVIDING WORKING CAPITAL?
Suppliers can help in providing working capital by sharing market data, reports, access to experts, access to supplies of test materials, access to theirs customer networks, technical support, all with the hopes that in the future, that the company becomes a major customer to them.