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the business of funding startups with new and exciting products. Venture capital firms take on the financial risk of a new venture (called underwriting ) in exchange for an interest in the company. Chris meets with the venture capitalists at Big Ideas Venture Capital (BIVC) who agree to fund HealnnHeels. Engage students in a discussion: You will learn more about different types of capital in an upcoming lesson. Financial literacy includes understanding that capital is the life-blood of commerce and innovation. The demand (need) for capital to fund innovation has lead to the growth of a subindustry of venture capital companies that are in the business of supplying capital to startups. Facebook, Instagram, Twitter, and many other famous and not-so-famous startups relied on venture capital to get their products developed and on the market. Students will learn more about venture and other capital in a later lesson. 5. Federal Drug Administration. Chris wants to sell HealnnHeels as a “medically approved” weight loss product. However, products that make medical or health claims require premarket approval from the United States Federal Drug Administration (FDA), a government agency responsible for testing medical products for safety, and confirming the veracity (truth) of their claim in order to protect consumers . If he doesn’t receive FDA approval, he may still sell the shoes, but may not make any medical claims. Congratulations, to the team! The FDA approves the product. Engage students in a discussion: Government agencies support and foster commerce by preventing businesses from making false claims about their product’s abilities and safety. What effect does it have on commerce when consumers get injured or ripped off by a product? Answer: it can have a chilling effect on commerce because distrustful consumers will not spend money . A faulty or unsafe product can impact the sales of similar products , even though the similar product may be perfectly safe for the consumer. 6. Manufacturing and Supplies. Chris and his team have checked out their options and decided that the best place to manufacture HealnnHeels is Iceland, where there is a stable and low cost supply of morphopyropheous zignalus , the secret ingredient that goes into the soles of the shoes. It belongs to a community of Icelandic monks living on the slopes of a volcano high above Reykjavik. The favorable dollar-to- Icelandic krona FX (exchange rate), and pro-business policies of the Icelandic government make this a good place to manufacture the shoes. Chris strikes a deal with the friendly friars, and production begins. Engage students in a discussion: It is important for governments to provide safe and reliable transportation corridors, and fair and efficient laws that protect property and support the operation of businesses. A reliable workforce and low cost of manufacturing is also important. What effect can problems in any one of these areas have on a product? Answer: Problems in any one of these areas can delay or even prevent a product from getting to market, cause an increase in production costs (reducing profit), or even cause a company to fail. 7. Transportation. It’s an exciting day! The shoes are finished and ready to ship. Chris needs to get the team's sweet shoes from the mountain top monastery, across the Atlantic ocean to the U.S. Transporting the shoes via cargo ship is low cost and reliable. The finished shoes are picked up by a local trucking company, brought to the port in Reykjavik, and loaded onto the ship. Ten days later they arrive at their U.S. port of destination. After an inspection by the U.S. Customs and Border Protection , the container is lifted by crane on to a freight train which transports the shoes 400 miles inland to Chris's town. The shipment is picked up by a local delivery company, and brought to the HnnH warehouse. PRODUCT PREVIEW
195 THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY
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