MBA603 - New Venture Capital Raising: Risks and Ethical Issues

This report explores the risks and ethical issues associated with launching and investing in a new business venture, using Jet.com and Flatiron Health as case studies. It analyzes potential risks from both the entrepreneur's and investor's perspectives, including product risk, market risk, and the risk of changing trends. The report also addresses ethical issues such as business licenses, trademark infringement (illustrated by the PayPal and PayTM case), the desire to achieve rapid success potentially leading to shortcuts, and the cultural and societal impact of entrepreneurial activities. The top three priorities identified are the ethical issue of lacking infrastructure, risks due to changing market trends, and product-related risks. The analysis emphasizes the importance of ethical conduct, adaptability to market dynamics, and product viability for the success of a new venture. Desklib offers a platform to explore more such solved assignments and past papers.

Running Head: NEW VENTURE 1
New Venture Capital Raising

NEW VENTURE 2
Table of Contents
Introduction......................................................................................................................................3
Risk assessment...............................................................................................................................3
Ethical issues...................................................................................................................................5
Top three risks and ethical issues....................................................................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

NEW VENTURE 3
Introduction
Business could be everyone’s cup of tea but succeeding at it, is not. And hence starting a
business has been never so easy. Commencing a new venture is a complex task and that
comprise of execution of various operations and functionalities and adoption of various
approaches and models is also required to be done. There are varied ranges of factors that will be
stimulating the business environment and will surely affect the start-up of the business. The
prime factors required for starting up a new venture are methods, manpower, material and
machines (Arregle, et al. 2015). There are the major ingredients that will be aiding an
entrepreneur in the process of commencement of a new venture. Furthermore, the process and
operations that are executed for the commencement of the new business venture are also exposed
to various risks and ethical issues and the same are required to be dealt in a professional manner
for the success and growth of the start-up. The below presented summary has been focused on
the various risks and ethical issues faced while launching and investing in start-up. Jet.com and
Flatiron health are the two start-ups that will be used in the below presented report as case
studies. These business organizations are new ventures and are commencing business operations
from last five years stepping towards success.
Risk assessment
As mentioned above planning for a thinking and planning for a new start-up is an easy task but
commencement of the same is not everyone‘s cup of tea. Starting a business has been so easy.
The economy has been offering varied range of opportunities but just like everything has its own
pros and cons and also has fully high rated risks (Ben-Ari, and Vonortas, 2017). But once the
entrepreneurs are able of analyzing the risks associated with the commencement of the new
venture they are required to make essential provisions for the same for attaining success and
growth in the business: The below presented are the 3 potential risks that can be faced by a new
venture and the mentioned risks are demonstrated from the entrepreneur’s and investors point of
view:
Product risk: What to be produced is one of the initial decisions while starting a new venture.
This has been considered as one of the most crucial decision while commencing a business as
business totally depends upon the delivery of the goods produced and sold. There are various

NEW VENTURE 4
risks that will be faced by an entrepreneur while before and while producing a product. For
instance, the management of Jet.com is deciding for the product on the basis of market analysis
and other surveys executed, screening of the products for checking the feasibility so as to get
aware that the product is enough capable of surviving in market and also making the customers
satisfy (Li, 2014). If the products are unable to satisfy the customers’ demands then it will be
considered as a risk on the entrepreneur’s perceptive. Moreover, the investors also make their
decision of making investments in the venture after monitoring the feasibility aspect of the
product. One of the greatest risks from the investor’s point of view is that the inefficiency of the
products in meeting and accomplishing the demands of the consumers. This risk will be affecting
the investors while deciding for investments in new venture (Skripak, 2016).
Market risk: This is one of the biggest and common risks that will be affecting both the
entrepreneur and investors decisions on large scale. For instance, if Flatiron health is the
entrepreneur and founds itself unable in collecting the proper knowledge and data of the market
then it will be problematic for the venture. In-appropriate knowledge and data about the market
will lead in development of a product that won’t be able in satisfying the demands of the
customers (Kvedaraite, 2013). And this situation can be considered as a risk for the new venture
from the entrepreneur’s perspective. Investors also have various market risks such as fluctuations
in the market due to the political and governmental interference.
Risk of Changing trends: This one of the most stimulating factor or can also be considered as
the biggest risk that will be directly affecting the entrepreneur and indirectly to the investors
(Van Aardt, and Bezuidenhout, 2014). Such as the changes in the market trends such as any up-
gradation in the technological sector, changes in the perception of consumers, fluctuations in the
taste and preferences of the consumers will have direct impacts on entrepreneur. For example,
Flatiron health is a software company and any of the changes in the IT sector is required to be
considered as an essential part for the business firm. And if the business firm fails to capture
such data then it will be proven problematic for the entity and will overcome as an issue (Burns,
2016). Change in the norms and regulations relating to the new venture will affect the investors
largely. The investors will have to execute detailed research on the related aspects before making
investments. Failure in any such aspect will lead to generation of threats and risks for the
venture.

NEW VENTURE 5
Ethical issues
Business ethics has been considered as one of the integral components and essential
requirements for starting a new venture. And this concept has also been considered as one of the
biggest issue for an entrepreneur and also for an investor (EuroLogo Marketing, 2018). There are
various ethical dilemmas that will be faced as issues by the investors and entrepreneurs in
different forms while commencing a new venture and the same are presented as follows:
Business licenses and Trademark:
Business licenses are the permit that is taken from government of the country. Without getting a
legal permit, the business does not have authenticity. So, ignoring the legal documentation can
create an ethical issue to the organization and it can halt the business operations permanently.
Moreover, it is very important for the companies to trademark the business. Trademark is the
representation of the business among clients and customers. Generally, start-up businesses do not
consider the trademark protection as a significant factor. It can lead the start-up to an ethical
issue of trademark infringement. The major example of this issue is the case of PayPal and
PayTM. Currently, PayPal has alleged PayTm of copying its business logo to enhance its
customer base (Chell, et al, 2016). It has affected the business of both the companies. If the
business does not get trademark copyrighted, then it can shake the base of business. In addition
to this, it may influence the sales of business in the market and it may have adverse impact on the
investment decision on investors. It is one of the major issues to entrepreneur that needs to be
considered while starting up a new venture (Klotz, et al, 2014).
Desire to achieve: An entrepreneur decides for starting a business and or a new venture because
he/she has an idea for a new product or services. A passion and commitment is required for that
idea and never-give-up attitude for gaining knowledge and learning and also dealing though
others might perceive as failure (Kirzner, 2015). High level of courage and strength is required
and furnace a new path for the idea of a business. It will also require the entrepreneur to make
serious efforts in terms of money, time and energy and will also take him away from his family
and other relations for time being. And thus for coming over all these challenges the business
entrepreneurs may opt. for shortcuts for heading towards success with a greater speed. And
opting for shortcuts will lead in development of an ethical issue.

NEW VENTURE 6
Cultural and societal impact: On the basis of the research executed it has been analyzed that at
societal level the entrepreneurship is held responsible in significantly influencing the lives of the
individuals in upcoming times (Vonortas & Kim, 2015). To the extent that the lives of
individuals are molded by the marketing activities will bring a change in the way of living driven
by the entrepreneur’s. These are the prophets will be developing and commercializing the new
products and services for which no presence of market was there. An entrepreneur possesses the
power of shaping and shifting the paradigm in ethics and community services by making use of
leadership skills. By utilizing these visions the entrepreneur will be able in developing new
products, innovations, technologies, concepts or services creating demand for the brand in the
new market regions (EuroLogo Marketing, 2018). Such business corporations not only exercise
tremendous economic power but also symbolic power as they become the role models for the
next generation of organizations. Entrepreneurs face arduous encounters and, certainly, leading
the societies with values based management, being intensely conscious of some of these burdens
and an emphasis on ethical issues in business might aid the creative thinkers in the attainment of
their dreams.
Top three risks and ethical issues
On the basis of the current analysis it has been evaluated Jet.com and Flatiron health ate the two
new ventures that are establishing the business in their concerned markets regions. The report
has been basically designed and developed on the thought that the new business start-ups face
various risks and ethical issues and these ethical issues and risks are classified as per the
perceptions of the entrepreneur and investor (Brenkert, 2017). Further, the report has been
presented for focusing the most prior risks and threats from the above presented one:
The first factor that has been nominated at the top of the list is the ethical issue due to lack of
infrastructure and this has been kept at the top most priority. As infrastructure is one of the basic
requirements for commencing or starting the business. Building up framework, office premises
for staff and execution of tasks at the underlying stage has been considered as a moral issue for
the business visionary of any of the new pursuit. The business person should himself oversee and
execute the dealing with and observing tasks and functionalities. The business visionary itself
will assume a few parts, for example, checking the conduct of group, guaranteeing the bearing of
endeavors towards expanding productivity in this manner making a corporate culture (Shaw and

NEW VENTURE 7
Barry, 2015). All of the above are the operations and functionalities that are required to be
executed by an entrepreneur for conducting a business in an ethical manner. And hence this is
the reason due to which this ethical issue has been considered on priority.
The second one is the risk due to the changing trends in the market that has been considered in
the priority list and is held liable in stimulating the business environment for the new venture
while launching the business. Market is the place where the outcomes that are the products and
the services are expected to be sold and are the revenue generators for the business firms. And
hence the trends and fluctuations in the market are required to consider as significant while
deciding for launching the new venture and making investments in the same (Hyytinen,
Pajarinen, and Rouvinen, 2015). The updated data regarding the changing trends of the markets
will enable the business ventures to make changes accordingly and keep them a step ahead in the
competitive environment. Maintainable a sustainable position will also be made possible as at the
initial stages it will be very tough for the business entity to survive in the business environment.
The last but least is the risk due to product point that can be considered in the list of priority.
Product is the final outcome of all the efforts made by the team within a business venture and is
one of the integral factors that will aid the entity in earning profitability. And hence developing
and designing a product, that is enough capable of satisfying the consumers requirements has
been considered as an essential process to be executed by the new venture. And if not done, then
the business entity will be facing several issues and will be at risk.
Conclusion
In the limelight of the above executed analysis it has been inferred that commencing a new
business venture is a crucial task and this process is associated with number of risks and ethical
issues. These risks and ethical issues are required to be considered by the entrepreneur while
launching the business and even by the investors while making investments in the same. The
above report has been presented focusing towards the ethical issues and risks pertaining that will
be faced by the entrepreneur and investors while commencing a new venture.

NEW VENTURE 8
References
Arregle, J.L., Batjargal, B., Hitt, M.A., Webb, J.W., Miller, T. and Tsui, A.S., 2015. Family ties
in entrepreneurs' social networks and new venture growth. Entrepreneurship Theory and
Practice, 39(2), pp.313-344.
Ben-Ari, G. and Vonortas, N.S., 2007, Risk financing for knowledge-based enterprises:
mechanisms and policy options”, Science and Public Policy, 34(7), 475-488.
Brenkert, G.G., 2017. Entrepreneurship, ethics, and the good society. In Entrepreneurship (pp.
85-128). Routledge.
Burns, P., 2016. Entrepreneurship and small business. Palgrave Macmillan Limited.
Chell, E., Spence, L.J., Perrini, F. and Harris, J.D., 2016. Social entrepreneurship and business
ethics: Does social equal ethical?. Journal of business ethics, 133(4), pp.619-625.
EuroLogo Marketing, 2018, Legal/Ethical Issues to Consider When Starting a Business,
available from https://www.eurologo.org/legalethical-issues-to-consider-when-starting-a-
business/ (Accessed on 31 March 2018).
Hyytinen, A., Pajarinen, M. and Rouvinen, P., 2015. Does innovativeness reduce startup survival
rates?. Journal of Business Venturing, 30(4), pp.564-581.
Kirzner, I.M., 2015. Competition and entrepreneurship. University of Chicago press.
Klotz, A.C., Hmieleski, K.M., Bradley, B.H. and Busenitz, L.W., 2014. New venture teams: A
review of the literature and roadmap for future research. Journal of Management, 40(1), pp.226-
255.
Kvedaraite, N., 2013, Reasons And Obstacles To Starting A Business: Experience Of Students
Of Lithuanian Higher Education Institutions, Management, 19 (1), 1-16.
Li, W., 2014. Risk assessment of power systems: models, methods, and applications. John Wiley
& Sons.

NEW VENTURE 9
Shaw, W.H. and Barry, V., 2015. Moral issues in business. Cengage Learning.
Skripak, S.J., 2016, Entrepreneurship: Starting a Business, Pamplin College of Business and
Virginia Tech Libraries.
Van Aardt, I. and Bezuidenhout, S. eds., 2014. Entrepreneurship & new venture management.
Oxford University Press.
Vonortas, N.S. & Kim, Y., 2015, Managing Risk in New Entrepreneurial Ventures, Available
from http://www.ige.unicamp.br/spec/wp-content/uploads/sites/15/2015/07/Book-
Chapter_Vonortas-Kim_2015.pdf (Accessed on 31 March 2018).