CASE STUDY

Case Study

Case Study

Case Overview

Venture capitalist Kevin Semcken discovered Able Planet, a small startup in Wheat Ridge, Colorado, that produces headphones with an imbedded magnetic coil to enhance sound quality, at a technology conference in Denver, Colorado (www.ableplanet.com). The company was running smoothly, until the time the Bank refused to finance the upfront cost of Able Planet's operations. This led Smecken in great distress, as regardless of contacting 15 banks, he remains unsuccessful in raising a $1.5 million of capital in order to continue his business (Kripke, 2009).

Experts say that entrepreneurs who need between $100,000 and $3 million face the greatest obstacles when raising capital for their businesses, why?

In today's era of global economic crisis raising capital for starting a new business venture or to expand an existing one is quite an arduous task. Majority of the entrepreneurs, especially those who operate in industries which are less lucrative or those who have just started a new business venture, face a number of complexities in searching outside source of financing the business. Numerous banks are reluctant to provide loans for start-up businesses. Not only this, the venture capitalists are now more risk averse as compared to the earlier times, and are now shifting their capital from new to well-established businesses. Even private investors are now more cautious and making public offerings of company stocks is only suitable for those organizations which have a promising future, in terms of fast growth and those who have an excellent track record. As a consequence of all these factors combined, a credit crunch aroused for entrepreneurs who are seeking for a reasonable amount of capital in order to start their business. Those businesses owners and entrepreneurs who need capital between the range of $100,000 and $3 million are hit the hardest because of the ...