Many people are interested in becoming entrepreneurs but not many are successful. Most failures were due to lack of funding. But the fact is the limited knowledge of the source of funds. Not understanding how to find sources of financing. Do not know how to open the doors financing sources. Financing sources were available ubiquitous. Because there is so much money saved and all need a channel to gain profit. At this point, the entrepreneur needs to have a good business plan needed to be a partner. One source of financing is through a channel "venture capital.
Early-Stage Companies. Companies are usually started by a single entrepreneur or a small group of entrepreneurs. These founders frequently work for no pay, a situation that is referred to as “sweat equity.”1 The initial cash needed is likely to be provided by the founders, but may be supplemented by money from friends and family members who have a variety of reasons to want to be a part of what the founders are doing. This type of funding is sometimes referred to as “seed capital.”2 The founders may also seek bank financing, but if the bank is willing to extend credit it will probably be based on their personal assets or borrowing capacity. Banks rarely lend to companies that do not have a track record of revenues and profits.
Venture capitalists generally expect to see that the founders have put in a combination of sweat equity and personal cash, and they prefer to see that they have raised some money from friends and family. After exhausting these sources, entrepreneurs may think it is time to approach VCs to raise the funds they need to grow their business. In fact, although VCs did invest smaller amounts in the 1970s and 1980s, they are now much larger funds and tend only to invest when companies need multiple millions. As this transition was taking place, angel investors began to fill the gap between friends and family and VCs.
Angel Investors. Typically, angel investors are thought of as wealthy financiers who want to fund startup companies that have a change-the-world idea or invention. They do usually have some wealth, but it is not necessarily the case that they are extremely rich. Successful business men and women may be sought out by entrepreneurs for their particular expertise. These individuals may not have previously thought of themselves as angels, but they may become interested in the business and impressed by the entrepreneurs and decide to invest. On the other hand there are those who regularly look for such opportunities. Angels generally invest in companies in their local area so they can keep an eye on their money.
Beginning in the mid-1990s, angel investors began to realize that there were some disadvantages to being a lone investor. For example, it is unlikely that one or even a couple of people possess all the knowledge necessary to make wise investments. They may have knowledge of many aspects of the business they are considering, but they are not likely to understand everything about the business and how to structure the investment. Additionally, a single investor would have to put a fairly large sum in a single company to have any real say in the business. A group of angels is more likely to have a breadth of knowledge and, by pooling their funds, an impact on the company.
Angel investment groups have been forming over the past 10 to 15 years, and there are now several hundred such groups in the
Finding angels requires networking. Ask attorneys and accountants, especially those who frequently work with and specialize in start-up companies. If your business is technical in nature, you might contact consultant, and you should certainly try to make contact with current and retired executives who come from industries related to yours.
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