Question

1. Entrepreneurship: Urban Escape case study

Watch the video in which Maia Josebachvili and Bram Levy discuss starting Urban Escapes, which has since been bought by LivingSocial. Then use your knowledge of entrepreneurship to answer the questions.

Video Script:

>> So my dad once told me that the recipe for success is hard work, intelligence, and luck. I'm Maia, founder of Urban Escapes, and now National Director of Living Social Escapes. So after college I actually did the thing that you're supposed to do, which is get a real job. I worked on Wall Street for two years. And every weekend, I literally said, like okay, "Well, this weekend I need to get out of the city." So I'd organize some trips and I'd get friends to come on my trips. And it was called actually Maia's Trips, and it wasn't a company, it was just I wanted to get outside on weekends and I figured it was cheaper to do it with groups. And I remember it was like one night around the campfire, I had people I didn't even know who came with us, and they were like, "You need to do something about this. Like, this needs to be your job." And I thought about it for a day, and I said, "Yeah, this needs to be my job." If I told the real story, I think it wouldn't be very inspirational, but when I first made my business model -- because my parents were like, "You can't do this without a business model -- I concluded that I could make $12,000 in my first year. So I didn't really think it was -- I didn't know if it was going to work. I knew that it was a cool thing to try. I started in basically May of 2008, so I left Wall Street for a year, traveled around the world, and figured out exactly what it was I wanted to do, and then I came back and e-mailed 200 people and said, "Hey, I'm starting a camping company, come camping."

>> I'm definitely more of the business side of Urban Escapes. Hi, I'm Bram. I'm one of the owners of Urban Escapes, and now the National Director of Living Social Escapes. I think I was able to help a lot with the structure of the business. I think Maia is a real genius when it comes to what is exciting, what is interesting to people, what people really get motivated about, and I was able to help organize the business a bit more, figure out where we needed to go, figure out how to keep things a bit more logically structured and a bit -- I think a bit more disciplined?

>> Where did you get the money?

>> What money? I started with about $4,000, I got a really cheap apartment, and I worked from home and from coffee shops. And after the first bit of money came in from my trips, I invested $2,000 in a website. And then the next bit of money came in from my trips, and I invested the next $2,000 for my website.

>> We've got kind of a front-loading business model where people pay for events and the events occur later. And so the costs occur after the deposits happen. So in that sense, we didn't have a need for a ton of investing. Looking back on it, could we have used that for marketing, for accelerated growth? Absolutely. As things started to come up, as opportunities presented themselves, we took them.

>> Within I think the first year, I realized that this was something that really worked in every single city that had young professionals, which is, every single city. And so within the first year, we said, well, let's expand to Boston. And while we thought about it, we were like well, it's probably like X amount of work to expand to Boston, probably only 2X to expand to Boston-Philly and D.C. at the same time so we just went and started up three more cities a year ago.

>> The smart thing to do would have been to develop a sophisticated plan and figure out where we're going to go in one week, one month, six months, two years. We never did it. It truly was organic growth, both in the terms of the business model and the financing of the business. You know sometimes in life you take risks and you work hard, and you get lucky, and sometimes you don't, and in this case we got really lucky."

Question:

Many entrepreneurs enjoy the challenge of starting a new business so much that when the business grows, they sell their ownership stake and start another new business. If Maia and Bram decided to start another new company but did not want to risk what they had earned from Urban Escapes, what sources of financing should they consider? Check all that apply.

a) A venture capital company

b) A small-business investment company (SBIC)

c) A loan from an individual or financial institution

d) Earnings from jobs worked while the new business gets off the ground

Answer 1

Answer= b) A small-business investment company (SBIC)

d=Earnings from jobs worked while the new business gets off the ground

Reason= As Maia and Bram want to start the new business without selling the stake in the last business, they should go for the loans from small-business investment companies (SBIC) as these organizations facilitate the financing of the small organization both in terms of equity and debt. While at the same time they can start working in other jobs and get funds from the salary