3. FINANCING THE VENTURE

Cards (14)

  • Business Financing
    Access to capital for a business, even large companies routinely seek capital infusions to meet short-term obligations
  • Typical Financing Sources
    • Personal investment
    • Love money
    • Venture capital
    • Angels
    • Crowdfunding
    • Business Incubators
    • Grants and subsidies
    • Loans
  • Personal investment
    Investing your own money, either in the form of cash or collateral on your assets, to prove to your banker that you have a long-term commitment to your project
  • Love money
    Money loaned by a spouse, parents, family or friends, considered as patient capital that will be repaid later as your business profits increase
  • Love money
    • Family and friends rarely have much capital
    • They may want to have equity in your business, be sure you don't give this away
    • A business relationship with family or friends should never be taken lightly
  • Venture capital
    Funding source for technology-driven businesses and companies with high-growth potential, venture capitalists take an equity position in the company and expect a healthy return on their investment
  • Angels
    Wealthy individuals or retired company executives who invest directly in small firms, they contribute their experience, network, and technical/management knowledge
  • Angels
    • Tend to finance the early stages of the business with investments in the order of $25,000 to $100,000
    • Reserve the right to supervise the company's management practices, often involving a seat on the board of directors and an assurance of transparency
  • Crowdfunding
    A form of fundraising where a business asks the public for a contribution, usually in exchange for equity in the company
  • Types of Crowdfunding
    • Equity crowdfunding
    • Debt crowdfunding
    • Donation/rewards-based crowdfunding
  • Business Incubators
    Provide support for new businesses in various stages of development, commonly inviting future businesses to share their premises, administrative, logistical and technical resources
  • Business Incubators
    • Generally focus on the high-tech sector
    • The incubation phase can last up to two years, after which the business usually leaves the incubator's premises to enter its industrial production phase
    • Businesses that were supported by an incubator have a better success rate over five years
  • Grants and subsidies
    Funding provided by government agencies to help cover expenses such as research and development, marketing, salaries, equipment and productivity improvement
  • Loans
    The most commonly used source of funding for small and medium-sized businesses, start-ups have a harder time accessing loans than established businesses