Starting a Business: Risks and Benefits of Investment Options

This article discusses the risks and benefits of investment options for starting a business, including angel investors and funding from friends and family. It also covers topics such as the initial funding for a business, the risks and benefits of waiting for granted patents, the advantages and disadvantages of attracting angel investors, and the importance of persistence for entrepreneurs. The article includes references to academic sources and is suitable for students studying entrepreneurship or business.

Running head: STARTING A BUSINESS
Starting a Business
Name or the Student
Name of the University
Author’s Note

1STARTING A BUSINESS
Table of Contents
Answer to Question 1......................................................................................................................2
Answer to Question 2......................................................................................................................2
Answer to Question 3......................................................................................................................3
Answer to Question 4......................................................................................................................3
Answer to Question 5......................................................................................................................3
References........................................................................................................................................4

2STARTING A BUSINESS
Answer to Question 1
From the provided case study of Craig Ciesla and Micah Yairi, it can be seen that the
initial amount funding for their business came from the investment of one of their friends, Nate
Saal. In the initial stage, their considered the investment from friends and family, but their
hesitated and cancelled the idea as they did not want to ruin relation with them. In case their
asked that time, they did not have to struggle for getting the money. Thus, they should have done
at the first stage (Abrams, 2017).
Certain risks are there in raising money from friends and family. There is a risk of losing
the relationship with these people in case there is loss of business. At the same time, there is a
risk of mixing the personal and professional affairs that can hamper the start-up. Most
importantly, there can be conflict with these people related to the implementation of business
strategies (Lee & Persson, 2016).
Answer to Question 2
The risks and benefits are mentioned below:
Risks: There is always risk involved in the waiting process as one may come up with the similar
idea that can harm the business plan. At the same time, the risk of not getting the required
investment increases in the long waiting process.
Benefits: The main benefit is that the presence of granted patents provides the investors with the
potential assurance of return from the investment. At the same time, the presence of patents
provides the entrepreneurs with the required support or back-up to present their business idea to
the investors (Abrams, 2017).

3STARTING A BUSINESS
Answer to Question 3
This idea has both advantage as well as disadvantages. This can be considered as a good
idea as it was helpful for both Craig Ciesla and Micah Yairi to attract the angel investors for their
business plan. At the same time, the main disadvantage of this process is that the investors use to
sell their equities at the time of the drop in the share market. This hampers the investment
process for the new business (Abrams, 2017).
Answer to Question 4
The entrepreneurs are needed to catch the right transition points so that they can
maximize the value of the company without putting it at risks. For this reason, they are needed to
consider and try different investment options for this business as the entrepreneurs have to
struggle even in the presence of good business plan. For this reason, they need to have the never
give up attitude and it makes them persistent (Vesperi, Reina & Gentile, 2015).
Answer to Question 5
The first option is Angel Investors which are wealthy and rich people provide required
financing in exchange for share and equity. They are experienced and provide helpful guidance.
However, the entrepreneurs are forced to give up some control to them in the business (Ding,
Sun & Au, 2014).
The next option is investment from friends and family due to the presence of personal
relationship. Quick funding can be obtained from them. However, there is a risk of losing
relationship with them in case there is loss in business (Lee & Persson, 2016).

4STARTING A BUSINESS
References
Abrams, R. M. (2017). Entrepreneurship: A Real-World Approach. Planning Shop.
Ding, Z., Sun, S. L., & Au, K. (2014). Angel investors’ selection criteria: A comparative
institutional perspective. Asia Pacific Journal of Management, 31(3), 705-731.
Lee, S., & Persson, P. (2016). Financing from family and friends. The Review of Financial
Studies, 29(9), 2341-2386.
Vesperi, W., Reina, R., & Gentile, T. (2015, September). Academic Knowledge Vs
Enterpreneurship: The Spin off way. In European Conference on Knowledge
Management (p. 828). Academic Conferences International Limited.