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GolfGamez: Funding a Digital Startup
What are the critical questions that face MacTavish?
Mobile development has taken a different dimensions with new aspects of applications are discovered every now and then. MacTavish too has an explorative innovation of a mobile application called Golfgamez. Although he has a brilliant and successful banking career, he is determined to pursue this new adventure. The following are some of the four critical questions that face MacTavish:
Whether to develop the application on the Apple iOS platform or the android platform
How to go about building, distributing, and pricing the application once it is completely developed
What kind of start-up capital would be required and how to source the funding, from where would he get the funds to capitalize this venture
Finally, he critically is facing a marking dilemma whether leaving his successful banking career to take on this new venture is a risk to take on or not. He also has a choice of continue still developing this idea bit by bit as a part time venture while still working in the bank.
How would you prioritize these issues?
Any business venture bears its own risks and the owner of the business consumes most of the associated risks, especially if he or she stages on with the business alone. Venturing into mobile application venture like GolfGamez, is a risky move considering all the mobile apps in the mobile market. Its payoffs have extreme result, i.e. high return or low return. In order of prioritization therefore, among the four critical issues listed above, a decision should be made first if he, MacTavish is ready to risk his successful banking career in order to venture into this business or not. The decision that MacTavish make will determine whether to go ahead with the new venture or not.
Secondly, upon making decision in favor of the new venture, MacTavish should consider the start-up capital that would be required and how to source the funding, i.e. from where would he get the funds to capitalize this venture. Thirdly, the issues of whether to develop the application on the Apple iOS platform or the android platform comes in. the fourth and the last issue to be addressed in order of priority is how to go about building, distributing, and pricing the application once it is completely developed.
Should MacTavish quit his job to pursue this venture? If so, what are the implications of that decision?
Considering the circumstances that come with business ventures, MacTavish should quit his job once his capital source for the venture is secured. Full time involvement (dedication and leadership) is highly required in a new business venture especially in a highly competitive environment like the telecommunication industry with the changing innovations and technology. Moreover, MacTavish can still apply his banking and therefore financial background for the benefit of the new venture. Apart from that, another implication that can become the result of quitting his current job is the total dedication to pursue the venture and make new development as time goes by.
From the information provided in the (A) case, develop a spreadsheet to estimate the potential revenues as well as capital and operating costs, for GolfGamez. One person will be randomly selected to ‘‘show numbers’’. In your analysis, make clear what the assumptions you are making to derive the numbers.
Under the following assumptions, , operating the application would be very easy and the following spreadsheet shows an estimate of the potential revenues from the overall estimated 65 million golfers in the United States, capital and operating costs for GolfGamez.
GolfGamez leverage the global positioning system (GPS)
Golfgamez uses both the iOS platform and the Android platform concurrently
Over 50% of the golfers in the world already or soon would own a Smartphone
REVENUES STREAMS SIDE GAMES e.g. Nassau bets ($10/bet)
hole skins of specific value (between$1 to $5)
bingo, bongo monetary values attached to points
bets( ranging between $3 to $5) per hole and $18/round
SALE OF THE GOLF SCORING MOBILE APP Normally ranging from free to $4
with the GPS, using both platforms for $29.9
SALES FROM GOOGLE PLAY AND APPS STORE
GROUPON’S COUPON OFFERS OPERATING COSTS Rent $2,000
golf industry data fee $1,200
marketing and travels $1,500
telephone, internet, utilities and service fees $1,000
developer salaries (monthly) $8,827
marketing manager salary (monthly) $11,931
CAPITAL EXPENSES leasehold remodeling $4,000
office equipments and furniture $2,500
computer equipment, network and phones $7,500
software design and developer kit $3,000
golf industry database fee (one time fee) $12,500
rent-prepayments $4,000
licenses, professional fees &basic office supplies $1,000
From the information provided in (B) case, develop a spreadsheet to analyze the various funding options MacTavish is considering for GolfGamez. Based on your analysis, which option(s) would you pursue? Why?
DEBT FUNDING Personal loan $180,000
Parents co-signed loan $240,000
EQUITY FUNDING Family and friends $300,000
retired executive $250,000
Three professors $150,000
ACCELERATOR FUNDING Seed funding $14,000
loan $80,000
maturity loan $150,000
CROWDFUNDING Project loan $100,000
GOVERNMENT GRANTS Pays developer’s salary $91,000
ARP offer $50,000
I would pursue the first option, debt funding because most of it would constitute personal and parental funds. It is true that no business can operate without debts. However, debts coming from personal and parental loan would give the business some breathing space before picking up.
