Funding a business venture
Funding refers to the methods or ways a business or idea is sponsored to growth. This funding is mainly in monetary form though in certain aspects, materials are used. In this research paper, we look at a scenario of an inventor who likes to work around homes. We could name him John. John has a great idea about a new home appliance that meets customer needs. He has no management skills and little financial skills. His net worth is low and therefore cannot afford to see his business idea succeed without help.
The best funding option for John in this situation is Technology Licensing. Technology licensing occurs when there is an Intellectual Property (IP) with the absence of other equally important assets to offset a business idea. IP is referred to as a valuable intangible asset, and as such, its use is lawfully protected with agreements of its use. Therefore Technology Licensing occurs when one party has the IP and the other has other assets, these two parties come together in agreement, to equally share its benefit. It can be exchanged for money or other valuable items. With the legal rights protecting its use, it is difficult for the other party to abuse it. Technology Licensing occurs in certain rights only, i.e., for all IP rights of any kind. It also occurs in a relationship to other important agreements (Parr & Sulivan, 1996).
I decided to advice John on Technology Licensing after a process of considerations, exploring the other two options. Borrowing money was not a favourable option as it would still leave him with the lack of management and financial skills. These are important to plan for the money and manage the business venture. Selling stock is also not favourable in this case. Stocks are meant for an already established business needing expansion or improvements. Therefore as an idea, a stock is not the best alternative (Whitten & Cameron, 2007).
An investment bank, unlike other banks do not offer loans nor accept deposits from customers. It instead a financial institution offering securities in terms of shares and bonds to facilitate Merger and Acquisitions. Investment banks buys and sells financial products on behalf of its customers.
This is an investment option for individual stock investors, who trade the shares they own in a company in relation to their performance in the market. It is therefore a public marketing for trading company shares in form of auction, where buyers bid for the stock. Participants in this market are stock investors and hedge fund traders, stock markets are unfavourable with their unsteady behaviour as they are difficult to predict. They are affected by the economy and political temperatures of a country.
This is the ability of a company to access emergency funds to cover unexpected loss of a financial nature. Risk financing helps a company get back to business within a short period of undergoing a financial disaster. It can be inform of solutions, products or money. Risk financing involve risk retention, risk sharing and risk transfer (Ochtel, 2009).
This is the way company finances are managed in order to achieve financial goals. It includes financial planning, control and financial decision making. The three ensure funds are available at the right time when they are needed, funds and assets are utilized well and maximised to gain profit, and necessary investments are made.
Business finding is a critical stage to think about in a business venture, it is important to know hoe funds will be accessed, how profits will be utilized and how shareholders will be awarded. All these needs both financial and management skills. These skills can be hired if a proprietor does not have them end the best way to that is to license the business idea. With its legal rights, the inventor gets to benefit the advantages of fostering an idea and the ability to put it into action without loosing it.