Finance – Crowd funding, Crypto-currency, Block Chain, Financial dealings, business planning
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Contents Part One 2 Introduction 2 Crowdfunding 2 Rewards and Returns in Crowdfunding 3 Cryptocurrency and Blockchain 4 Business Planning Challenges and Issues 5 Part Three 7 Critical Reflection of Entrepreneurship and Innovation Theories, Concepts and Techniques. 7 Conclusion 9 References 11
Finance 3 Crowdfunding, Crypto-currency, Block Chain, Financial dealings, business planning
challenges and issues
Part One Introduction
In entrepreneurial ventures, innovation is essential to ensure that the company thrives and survives despite facing inevitable completion in the industry. The need for innovation has given rise to advancements such as cryptocurrency. Cryptocurrency is a digital asset that, similar to physical currency, is used as a medium of exchange. However, in contrast to physical currencies, transactions conducted using cryptocurrencies are recorded on the blockchain rather than the traditional ledgers. The availing of cryptocurrencies has proven to be the future of trade through the substitution of physical currencies. As of recently, the collapsing of foreign currencies such as the Venezuelan bolivar has resulted in the Venezuelan citizens opting for bitcoin, the most popular cryptocurrency, rather than the U.S dollar for trade. Another instance that has evoked the use of cryptocurrency is crowdfunding. Crowdfunding for entrepreneurial setups and the conduction of other financial dealings have seen the acceptance of more cryptocurrencies such as ethereum, stellar, and ripple also stylized as XRP. However, with the inception of such innovation, conventional and modern business planning challenges have been experienced by startups as well as established businesses. Crowdfunding
Entrepreneurial ventures and established businesses can, at times, face financial challenges which can stagnate company operations. However, capital sourcing alternatives have been developed popularly through contribution options such as crowdfunding (Mollick, 2014,
Finance 4 pp. 2). Crowdfunding is the sourcing of funds from a large number of public investors who each contribute relative amounts to the establishment (Mollick, 2014, pp. 2). The various forms of crowdfunding are equity, market-lending, and reward-based crowdfunding, all of which are opted for by businesses in consideration of the benefits and disadvantages. Rewards and Returns in Crowdfunding
In opting for crowdfunding, certain can accrue benefits as well as risks. For example, one of the rewards credited to crowdfunding is its ability to attract potentially voluminous funds; however, low the probabilities might be as experienced in equity crowdfunding (Golić, 2014, pp. 40). An additional benefit attached to opting for crowdfunding is the ease of access to funds it provides for businesses. Traditionally, businesses experienced difficulty obtaining capital, which then delayed company operations dependent on the funds. Through market- lending crowdfunding, businesses access funds from alternative options that best banks. Market- lending allows businesses to access funds cheaply by offering lower interest rates than banks (Golić, 2014, pp. 42). An alternative crowdfunding option is reward-based crowdfunding, which rewards early investors with their products or services. For instance, a video game company can send a copy of their video game to its investors. Another benefit of crowdfunding
Despite its harmonious benefits when opted for by businesses as a means of sourcing capital, risks can also be experienced through crowdfunding. Prominently, in equity crowdfunding investment returns may take a long time to materialize, or worse, the benefits may never accrue to the investors as in many instances (Manchanda and Muralidharan, 2014, pp. 369). Therefore, it is imperative for investors to conduct paramount research on potential investments lest they lose their money. Additionally, regardless of the low interest rates offered
Finance 5 through market-lending, it predisposes the business to debt, which can be challenging to repay (Manchanda and Muralidharan, 2014, pp. 369). Another inherent disadvantage attached to the use of crowdfunding is the commission deduction attached to your accumulated funds, which despite being minimal, they decrease the number of funds which would have initially been accessed to the business (Manchanda and Muralidharan, 2014, pp. 369). As such, it is crucial for a business to conduct and opt for the most favorable crowdfunding option to ensure the company weighs minimal risks.
Cryptocurrency and Blockchain
Cryptocurrency is a digital asset that is used for the transaction while blockchain pertains to the digital distinguishing, verification, storage, and identification of information. The innovation behind cryptocurrency and blockchain is because of the need to establish a decentralized substitute to the conventional forms of currency (Guo and Liang, 2016, pp. 39). Blockchain and cryptocurrency work interactively to revolutionize payments by allowing trading parties to exchange value directly as widely evidenced by the capitalization of bitcoin (Guo and Liang, 2016, pp. 39). The revolutionary technology that cryptocurrency and blockchain are founded are generating impact worldwide hence giving people insight on a future of a decentralized financial system.
Impact of Blockchain and Cryptocurrency
Cryptocurrencies establish an alternative to fiat currencies in undertaking financial dealings. Unlike cryptocurrencies, fiat do not have intrinsic value as their value is attached to the trust of the public on central banks and governments; hence cryptocurrency decentralization (Hileman and Rauchs, 2017, pp. 14). Similarly, blockchain provides a decentralized, ledger for verifiable and transparent transactions permanently. Blockchain has revolutionized traditional
Finance 6 transactions by increasing speed, lowering costs, and increasing transparency. As such, entrepreneurs seek out such innovative technologies as blockchain eliminates the need for intermediaries in business.
The availing of decentralization by blockchain and most cryptocurrencies has increased and improved tolerance to faults and digital attacks. Decentralized systems more expensive to attack or fail as there is the absence of a single point of failure hence providing maximum security to business information (Guo and Liang, 2016, pp. 39).). Another impactful aspect of decentralization is the presence of consensus where the members are identified as the owners collectively as well as the decision-makers hence protecting the organization from the risks accrued to a single authority. Furthermore, decentralization cripples exploitation by deterring thus resisting collusion (Guo and Liang, 2016, pp. 39). As a result, participants are prevented from acting on self-interests at the expense of the other members. The success of bitcoin has highlighted the benefits accrued by blockchain as well as the principles that are aligned with it. Therefore, despite still being in the early stages, the adaptation of technology will avail a future financial system that is willed by the public rather than the governments and central banks hence creating a universally accepted financial system
Business Planning Challenges and Issues
Planning of the business is vital as it ensures its success. Several elements ensure the successful planning of a company as there are challenges and issues which arise in the process. One of the problems associated with business planning is the establishment of unrealistic financial projections (Glen, Suciu, and Baughn, 2014, pp.659). The establishment of such unrealistic expectations with no fundamental clarifications then creates a warning for potential
Finance 7 investors which can cause capital flight. Another issue that rises during business planning is the lack of focus on the competition. Despite the confidence in having a unique business, through research must be conducted to identify any potential competitors (Glen, Suciu, and Baughn, 2014, pp.659-660). However, if too much focus is given to competition, it can create the onset of worry among investors. The business plan should instead focus on the niche they offer the target market, how to survive in the industry, or even establish realistic projection for the business.
Most business plans tend to hide weaknesses identified primarily for fear of capital flight. In as much as weaknesses should not be focused on too much, hiding them can as well put off potential investors. It is recommended that, however, in creating a business plan, a coping mechanism for the weaknesses identified should be strategically detailed (Glen, Suciu, and Baughn, 2014, pp.662). Also, the provision of too much information can be challenging in the development of a business plan (Glen, Suciu, and Baughn, 2014, pp.662). Creating a business plan that entails too much information can prove a hindrance for potential investors as they mainly opt to be provided with the main outlines regarding the business.
Inconsistency is an additional issue attached to business planning. The quoting of conflicting and unfounded statistics, highlighting different markets, and having contradicting strategies along with the business plan can give rise to investors questioning and challenging any knowledge of the market (Glen, Suciu, and Baughn, 2014, pp.664). The lack of distribution channels for a product or service or resonating why they are the best options for the particular service or product can be challenging in establishing a worthy business plan. Strategy
Finance 8 articulation on distribution is vital for the business as it creates a distribution channel for ease of access by the target market.
Critical Reflection of Entrepreneurship and Innovation Theories, Concepts and
A lesson in entrepreneurship and innovation has availed me to various theories, concepts, and techniques. All the theories, concepts, and techniques are vital particularly for people and business ventures that are a focus and prioritized on the growth, development, and success of the business (Sarasvathy et al., 2014, pp. 71). Some of the concepts learned during the lesson are such as technology, market research, marketing, financial management, and human resource management.
Market research critical during the establishment as it highlights the viability of a business idea. One of the importance of conducting exhaustive market research is the need to understand competitors present in the market to avoid the failure of the enterprise. Also, market research establishes an understanding of the laws, rules, and regulations that ensure the businesses conducted are legal and abide by the rules and regulations guide them in their operations. Understanding the public reaction of a particular product or service also necessitates market research. In partaking in market research, the entrepreneur can gain valuable insight into the prevailing market conditions (Sarasvathy et al., 2014, pp. 71).
Secondly, learning entrepreneurship and innovation also reveals the importance of marketing a product or service. I discovered that marketing is crucial for entrepreneurial
Finance 9 ventures as well as established businesses. Marketing can generate public awareness for a company which is central to the business (Hägg and Kurczewska, 2016, 705). As such, it also provides a business the opportunity to distinguish itself from competitors. Marketing also enables businesses to acquire and retain customers primarily through promotional marketing tactics. Therefore, marketing can provide elements which can significantly influence the decision-making and hence the purchasing power of target markets.
Another important lesson learned in entrepreneurship is the importance of financial management. Financial management is crucial to the success of the businesses as it influences the decisions made regarding the business based on cash flows, profits, sales and the overall financial evaluation and performance of the business (Lans, Blok, and Wesselink, 2014, pp. 42). Also, financial management allows the company to operate cost-effectively through budget preparations. Businesses that operate legally must pay taxes to the government. Understanding the importance of a financial management plan allows the businesses to pay their taxes dutifully to the government accordingly and timely.
The other lesson that I learned was the importance of human resource management to the success of a business. Human resource management pertains to the company staff regarding their benefits, safety, training, and compensation. Human resource management is strategic in the management of staff and creating a conducive work environment and culture (Bae et al., 2014, pp. 220). Effective human resource management is a significant contributor to the accomplishment of the goals set by the company hence the direction that the company takes. Conclusively, strategic human resource utilization is essential due to the measurable influence that company staff has on the success of the business.
Finance 10 I also learned several benefits accrue to the incorporation of technology in business. Technology streamlines various aspects of the business such as communication, research, and marketing. Successful business operations are conducted effectively using excellent communication amongst the staff from the senior management to the subordinates. Also, communication is vital in the interaction of the business and its clients. The use of technology in business provides it with various communication channels to rationalize both internal and external communication (Lans, Blok, and Wesselink, 2014, 46). For instance, the use of social media facilitates the direct communication of business with their clients. In doing so, the business addresses customer complaints directly and understands the client expectations that they need to meet. Technology also enables the company to research the utilization of secondary data. Secondary data then provides the entrepreneurs and other businesses with in-depth knowledge about the markets before penetration (Lans, Blok, and Wesselink, 2014, 47).
Lastly, I learned the importance of innovation and competitiveness for business. Advancements in technology have prompted businesses to be innovative to adapt to the evolving market to compete effectively (Lans, Blok, and Wesselink, 2014, 39). Innovation propels the ability of businesses to receive information regarding company products and services from clients. In turn, companies can foster new ideas and perspectives that improve their products and services based on their clients' information. Innovation also helps companies cut down on production costs hence improving company profits. For example, the automation of sealing bottles in companies that produce drinks replaces human staff which not only reduces labor cost but also reduces accidents in the company caused by human error such as breakage.
Finance 11 Entrepreneurship is vital for the improvement of economies as it integrates both macroeconomics and microeconomics. The venture into entrepreneurship also provides entrepreneurs with alternatives for employment and generating employment for others as well. Additionally, entrepreneurs learn to explore unidentified opportunities or improve on them. An established business can also apply some of the entrepreneurial; concepts such as integrating technology into their business to ensure that they can survive to compete with the entrepreneurial ventures. In addition to technology, competition is vital as it ensures that competing businesses provide the target market with quality goods and services. Learning entrepreneurship is also beneficial to the business as they learn new ways to operate optimally to ensure they thrive and survive their respective industries successfully.
Finance 12 Bae, T.J., Qian, S., Miao, C. and Fiet, J.O., 2014. The relationship between entrepreneurship education and entrepreneurial intentions: A meta–analytic review. Entrepreneurship theory and practice, 38(2), pp.217-254. Glen, R., Suciu, C. and Baughn, C., 2014. The need for design thinking in business schools. Academy of Management Learning & Education, 13(4), pp.653-667. Golić, Z., 2014. Advantages of crowdfunding as an alternative source of financing of small and medium-sized enterprises. Zbornik radova Ekonomskog fakulteta u Istočnom Sarajevu, (8), pp.39-48. Guo, Y. and Liang, C., 2016. Blockchain application and outlook in the banking industry. Financial Innovation, 2(1), p.24. Hägg, G. and Kurczewska, A., 2016. Connecting the dots: A discussion on key concepts in contemporary entrepreneurship education. Education+ Training, 58(7/8), pp.700-714. Hileman, G. and Rauchs, M., 2017. Global cryptocurrency benchmarking study. Cambridge Centre for Alternative Finance, 33. Lans, T., Blok, V. and Wesselink, R., 2014. Learning apart and together: towards an integrated competence framework for sustainable entrepreneurship in higher education. Journal of Cleaner Production, 62, pp.37-47. Manchanda, K. and Muralidharan, P., 2014, January. Crowdfunding: a new paradigm in start-up financing. In Global Conference on Business & Finance Proceedings (Vol. 9, No. 1, p. 369). Institute for Business & Finance Research.
Finance 13 Mollick, E., 2014. The dynamics of crowdfunding: An exploratory study. Journal of business venturing, 29(1), pp.1-16. Sarasvathy, S., Kumar, K., York, J.G. and Bhagavatula, S., 2014. An effectual approach to international entrepreneurship: Overlaps, challenges, and provocative possibilities. Entrepreneurship Theory and Practice, 38(1), pp.71-93.
UGB362; Finance – Crowd funding, Crypto-currency, Block Chain, Financial dealings, business planning challenges and issues
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Finance – Crowd funding, Crypto-currency, Block Chain, Financial dealings, business planning