Author Question: Your friend, Samantha Arturo, has what you think is a great idea for a Web site that will post ideas ... (Read 43 times)

cabate · **on:** Jul 7, 2018

Your friend, Samantha Arturo, has what you think is a great idea for a Web site that will post ideas for inventions submitted by creative thinkers around the world. Samantha wants to solicit feedback on the ideas using social media and then fund the development of the ideas that get the most positive feedback. She realizes that she will need to raise substantial capital to launch the site and fund the development of each invention. In fact, she is thinking that she will need several hundred thousand dollars during the first three years before any of the inventions start to generate significant profits. Her Uncle Dave has offered to invest 100,000 in the business to help get things going. She has taken her idea to several banks, but they all told her that her business was too speculative for them to lend her large amounts of money. Samantha has heard about angel investors and venture capitalists and asks you for more information about them. Use your favorite search engine or the resources of your library to learn more about angel investors and venture capitalists and then write about 100 words in which you explain to Samantha what angel investors and venture capitalists are, how much money she is likely to be able to raise from each, and what the advantages and disadvantages of using them are.

Question 2

In two or three paragraphs, explain why the head of the business management function of an electronic commerce initiative should be an employee of the company implementing the project, even if most of the work is outsourced.

wfdfwc23 · **Reply #1 on:** Jul 7, 2018

Answer to Question 1

An angel investor is a business person, with money, who funds startup companies. In return for her capital, the angel investor becomes a stockholder in the business and often owns more of the business than the founder. Typical funding by angel investors would be between a few hundred thousand dollars and a few million dollars, which is substantially more than most entrepreneurs can raise from relatives and friends.
Venture capitalists are very wealthy individuals, groups of wealthy individuals, or investment firms that look for small companies that are about to grow rapidly. They invest large amounts of money (between a million and a few hundred million dollars) hoping that in a few years the company will be large enough to sell stock to the public in an event called an initial public offering (IPO). In the IPO, the venture capitalists take their profits and once again search for a new small company in which to invest.
This system of financing startup and initial growth of online businesses has both benefits (it provided access to large amounts of capital early in the life of the business) and costs (angel investors and venture capitalists got most of the profits and put great pressure on the business to grow rapidly) for the founders of those businesses.

Answer to Question 2

Using internal people to lead all projects helps to ensure that the companys specific needs are addressed and that the initiative is congruent with the goals and the culture of the organization. Outside consultants are seldom able to learn enough about an organizations culture to accomplish these objectives.