ENTREPRENEURIAL FINANCE Harvard Case Solution & Analysis

ENTREPRENEURIAL FINANCE Case Solution 

Introduction

It is the study of resource valuation and allocation according to the circumstances and needs of the ventures. Moreover, the study focuses on a key question which challenge all the entrepreneurs that how much money should be raised and what will be the sources of this amount and when the money should be raised. However, these conditions vary from situation to situation. The last question and the most important question which the study focus is that what will be the funding contract and exit decision form a venture. There are several financing trends which falls under the domain of entrepreneurial finance these trend will be discussed in the next section of the study. (resource, 2016)

In the study the major focus will be towards five trends and after the explanation of these trends the most effective trends will be discussed which can be the movers and shakers of entrepreneurial finance. These trends include Crowdfunding, micro lending, credit unions, bootstrapping, and the slow money movement. These trend will be discussed in detail in the next section.

Crowdfunding

The basic concept was firstly introduced by Kick starter. Under this condition or trend a group of wealthy people started to fund potential ideas and helped the innovators to turn their idea in to reality. The idea was popularized by many people later on, however the mode of return in the initial stages were that those ideas which were converted into reality gave goods and services in return to their parent investors. Moreover, sometimes, innovators only gave a well-crafted thank you or sometimes, interest or other stakes. Nowadays, the idea is considered as a major source of fund raising since, it is easy to grab funds from pool of investors instead of single investor. However, Diaspora, a tech company recently wants to develop a social network to compete with Facebook and the firm already has collected almost $200,000 from the same approach. (Gunn, 2016)

Microlending

It is the idea which was initially developed to help poor people to start small businesses and to support their family. Normally this approach was used by many donors to help women to start a tiny business and to cover their necessities. This loan was typically under $100. Moreover, this idea was also used by many governments to reduce poverty from many underdeveloped countries. Later on, the idea was adopted by many banks and DFIs to raise fund for innovators and to help them to give a practical from to their ideas. General, the banks are charging a minor interest on these loans and there are several DFIs which are giving this type of loans ranging from $100 to $5000. However, Accion was the first non-profit organization which turned this approach in to reality and now this company has a wide range of microlending options.

Credit unions

Credit unions are very similar to microlending but there are some variations and changes among both of the approaches which differs them from each other. However, microlending is supposed to fund innovators on low or no interests and spreads. While credit unions consider interests and spreads as their basic source of income. However, findings also reveals that loan under microlending are tiny as compared to credit unions. Since, a recent report uncovered a fact that US’s credit unions are now have almost $33 billion in business loans and their default rate is also very low, this allow credit unions to further expand their business and to make a more profitable and stable capital and business structure. (Gunn, 2016)..............

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