1)  Find out  number of “resources” available from Small Business Administration (SBA) for entrepreneurs that may be useful in starting, financing, and managing an entrepreneurial venture.  The SBA Web site is http://www.sba.gov.  Also, search the SBA’s office of Advocacy website (http://www.sba.gov/advo/) for information relating to recent annual numbers of employers firms births and the importance of small businesses to the U.S. economy.

2)  Following are some pairs of entrepreneurs.  Using web if required, relate the entrepreneur with the companies the founded:  answer the problem, but also pick one of the companies and compose a short summary of it in your own words.

1.    Steve Jobs and Steven Wozniak             A.  Google
2.    Bill Gates and Paul Allen                B.  Ben & Jerry’s
3.    Larry Page and Sergey Brin            C.  Microsoft
4.    Ben Cohen and Jerry Greenfield            D. Apple, Inc.

Exercises/Problems

1) {Financing Concept} Following ventures are at different stages in their life cycles.  Recognize the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

A) Phil Young, founder of Pedal Pushers, has an idea for petal replacement for children’s bicycles.  The Pedal Pusher would replace existing bicycle pedals with the easy strap stirrup to help smaller children hold their feet on the pedals.  The Pedal Pusher will also glow in the dark and will provide a musical sound as the bicycle is pedaled.  Phil is seeking some financial help in developing working prototypes.

B)  Petal Providers is a firm which is trying to model the U.S. floral industry after its European counterparts.  European flower markets tend to have larger selections at lower prices.  Revenues started at $1 million last year when the first “mega” Petal Providers floral outlet was opened.  Revenues are expected to be $3 million this year and $15 million next year after two extra stores are opened.

2) {Life Cycle Financing} Following ventures have supplied information on how they are being financed.  Link type and sources of financing to where each venture is likely to be in its life cycle.

A) Voice River provides media-on-demand services via the internet.  Voice River raised $500.000 of founder’s capital in April 2008 and “seed” financing of $1 million in September 2008 from the Sentinak Fund.  The firm is presently seeking $6 million for a growth round of financing.

B) Electronic Publishing raised $200.000 from three private investors and another $200.000 from SOFTLEND Holdings.  The financial capital is to be used to complete software development of e-mail delivery and subscription management services.

3) {Financial Risk and Return Considerations} describe how you will select between the following situations.  Develop your answers from perspective of the principles of entrepreneurial finance presented earlier in the chapter.  You might arrive at your answers with or without making actual calculations.

A) You have $1,000 to invest for one year (this would be a luxury for most entrepreneurs).  You could set a 4 percent interest rate at the third first bank or a 5 percent interest rate at the first fourth bank. Which savings account will you select and why?

B) A “friend” of yours would lend you $10,000 for one year if you agree to repay him $1,000 interest plus returning the $10,000 investment.  A second “friend” has only $5,000 to lend to you but wishes total funds of $5,400 in repayment at the end of one year.  Which loan will you select and why?

C)  You have the opportunity to invest $3,000 in one of two investments.  First investment will pay you either $2,700 or $3,000 at the end of one year, depending on the success of the venture.  The second investment will pay you either $2,000 or $4,000 at the end of the year, depending on the success of the venture.  Which investment will you select and why?  will you answer change if your investment were only $1

D) An outside venture is considering investing $100,000 in either your new venture or another venture, or investing $50,000 in each venture.  At the end of one year, value of your venture may be $0 or $1 million.  Other venture is expected to be worth either $50,000 or $500,000 at the end of one year.  Which investment choice (yours, the other venture, or half and half) do you think venture investor will select? Why?