Raising Money from Friends and Family: Risks and Alternatives - Essay Sample

1. Craig Ciesla and Micah Yairi eventually turned to friends and family for funding. Should they have done this first? What are the risks of raising money from such individuals?

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There was no need for Craig Ciesla and Micah Yairi to contact friends and family because they could automatically locate venture capital companies involved in the investment. Raising money from friends and family possesses the risk of unnecessary interferences, a controversy that can result in derailing investment (Dalic et al. 2017). Also, reliance on friends and family for money creates inconsistency in payment due to informality payment method.

2. What were the risks and benefits of waiting until they had been granted patents to ask for customer feedback?

Craig Ciesla and Micah Yairi waiting to be granted patents possed the risk of delay in receiving venture funding. The setback will also derail the partners from gaining the approval of venture capital investment with the customers having a negative image of the business.

The benefit of Craig Ciesla and Micah Yairi waiting to be granted patent is that they will have time listening to customers' view on their product, and this, in turn, will enable them to improve on the product to gain a competitive advantage in the market.

3. The partners gave up equity in their company – part of the ownership – to get the help they needed. Was this a good idea? Why or why not?

Craig Ciesla and Micah Yairi giving up equity is a good idea that occurred at a time that there was a significant fall of investment banks. The partner's depicted flexibility during the tough economic period by lower the investment amount required in their business to keep the Tactus Technology's in operation. Craig Ciesla and Micah Yairi funded the most crucial parts of the company department, and this ensured the company operates smoothly in the market.

4. Why do you think, even with such bad luck, Ciesla and Yairi stuck it out? What would it take for you to be so persistent?

Craig Ciesla and Micah Yairi remained confident since they were innovative in producing superior products that were preferred globally. Also, they were passionate about introducing new products which they believed would impact on consumers' lives.

It takes confidence, passion, and trust to achieve persistence. Persistence effectiveness is achieved when partners produce a product that is unique and scarce in the market. The scarcity depicts the possibility of purchase and company attainment of competitive advantage in the market. Additionally, it is necessary to acknowledge the fact that one cannot prevent unplanned situations and thus, it is vital to be persistent in all life situations.

5. Building upon the business you would like to open up, what funding source or sources would you take advantage of to initially fund your company? What are some of the advantages and disadvantages of choosing the funding source or sources you would use?

I would initiate my company by using personal investment funding. The advantages of Personal investment are that it grants the business owner more control, thereby gaining full ownership of the business (Nelson & Tyson, 2019). Also, personal investment enables a business owner to avoid excessive spending and instead prioritizing the business majors. Personal investment saves the owner time of actualizing a company operation. The company owner does not necessarily have to hold meetings to persuade financiers to finance the company. Such that the company owner does not have strings attached to the financiers. Additionally, personal investment exempts a company owner from payment schedule and interest accruing that exerts pressure on a company's operations.

The disadvantage of personal investment is that it risks the family's well-being when the business experiences financial constraints or even collapse. A business owner also can lose savings, and this endangers plans and personal finance. Personal investment constraints the company from getting mentoring opportunities and contacts with other competitive businesses in the market and this creates a slow business development.

References

Djalic, I., Terzic, S., & Novarlic, B. (2017). The role of venture capital in the development of the SME sector. The European Journal of Applied Economics, 14(2), 58-69. doi:10.5937/ejae14-14391

Nelson, B., & Tyson, E. (2019). Starting a Business All-In-One for Dummies. For Dummies.