New Venture Capital Rising: Risks and Ethical Issues for Entrepreneurs and Investors

Running head: NEW VENTURE CAPITAL RISING
New Venture Capital Rising
Name of the Student
Name of the University
Author’s note

1NEW VENTURE CAPITAL RISING
Introduction
To describe and define the concept of a start up in the simplest form is that a start up is a
business venture that has just begun its operations in the industry. Many people have vision for
the products or services that they want to offer a target market and therefore create a company,
but the success or failure of the organisation depends upon several factors. This assignment is
going to give an understanding regarding two most important stakeholders perspective in an
organisation that has just begun its operations or is not even at an incorporation state. These
stakeholders are the entrepreneurs and the investors (Marques et al. 2013). The companies that
are going to be studied in the assignment are UBER, Airbnb and Sellanycar. Uber is a company
that allows the customer to hire a ride; the company operates by using mobile phone application
and a website. Airbnb is a company that offers accommodation option to the travelers and
connects local people with the tourist, this is a social media platform that allows the customers to
post reviews and rate the accommodations as well. On the other hand sellanycar is a service that
allows an individual to sell any car in any condition the company auctions the car to the other
vendors.
A: As an entrepreneur
An entrepreneur is a person who is the owner of a business organisation. The concept of the
business model is the brand child of the entrepreneur. The entrepreneurs of the companies are:
Uber: Travis Kalanick and Garrett Camp; Airbnb: Brian Chesky, Joe Gebbia and Nathan
Blecharczyk; Sellanycar: Saygin Yalcin.

2NEW VENTURE CAPITAL RISING
Risks / Risk Assessments
Execution risk:
The risk of being a failure, this is the most important risk that the entrepreneur has until
the business has gained some momentum. As a considerable amount of liability lies in the
shoulders of the entrepreneur it is his or her duty to ensure that the company is able to meet the
requirements. There is always a risk of aligning the idea of the entrepreneur with the requirement
of the target market if this is missing then there is a risk of failure in terms of the idea
(Kozubíková et al. 2013). The case of Uber can be a good example here, the business model is
based on the efficiency of the drivers therefore executing such an idea is challenging especially
when the idea is innovative there is yardstick or any evaluation process of previous organisations
to measure the outcome.
Financial risk:
The second risk that the entrepreneur bares is the financial risk, launching a business idea
ensures that the owner has a incorporate capital in terms of finance, as investing in an idea can be
risky based on the success or failure of the endeavourer as discussed above (Sadgrove 2016). If
the idea is a success the company starts generating revenue which is further used as capital but if
this is not the case then the money that has been invested is waste. For example: in the case of
Uber the risk of using an internet based platfrom to book a cab was completely new to the target
market, the entrepreneurs of the company has invested a large amount in developing the website
and curetting taxis, if the plan did not work out, there would be a major loss (Verbano and
Venturini 2013).

3NEW VENTURE CAPITAL RISING
Market risk:
This is one of the most significant risks that are associated with the entrepreneur, it is
essential to understand and analyze the customer in order to understand the reason and the
procedure the target market is related or will be motivated to buy the product or service.
Furthermore, Verbano and Venturini (2013), state that it is essential to understand the
competition in the market in terms of direct as well as indirect competition. Therefore it is
essential to undertake proper market research in order to reduce this market risk. It also helps in
understanding the gap in the requirements that are in demand (Verbano and Venturini 2013). The
business model of Airbnb is explained as a disruptive innovation model, in such cases, there is
high market risk associated as the customers as well as the investors are unsure regarding the
service and the quality and utility of it.
Ethical Issues
Most of the time for a start up finance is a major issue, in that case the entrepreneur
should ensure that the process of incorporation and formulating policies for the company should
be adhere to the norms and regulations of the country of operation like labour law, taxation
policies etc. there are several instances where start-up companies are caught in illegal activities
in terms of the proceedings and operations (Verbano and Venturini 2013). In order to attract the
customers or investors, entrepreneurs may be lured in to exaggerating and making up things
regarding the products which may turn out to be false; this is one of the most important ethical
considerations that entrepreneurs must have while launching an idea (Hansen 2015). The
entrepreneurs make false promises and portray different things in order to gain for the company
but are this kind of effort ethical? While expanding in other countries Uber has faced a lot of