Three students proposed to start a startup; a smoking lounge in Missoula, Montana. They prepared a business plan for 'bootstrap' requiring $30,000 of capital. They entered in the University of Montana's business plan competition. An investor, Steve Anderson, approached them, as the contest came to an end. He said he would supply the investment capital if a larger facility start-up supplied a reasonable yield. Two days later, Brian, the prime mover behind the project, met with Steve and they developed the financial numbers and assumptions for the startup costing $520,000. Steve told Brian,' analyze the company threats and develop the pro forma financial statements for the bigger facility'. With his team members now consecrated to other enterprises, Brian must create the pro formas and choose whether to: (1) begin small using his own resources, (2) start with a bigger facility using Steve's resources, or (3) not pursue the investment. Additionally, Brian faces a fundamental ethical issue.
This is just an excerpt of the case.
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