New Venture Financing Essay

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New Venture Financing New Venture Financing by Stevenson discusses the numerous ways of getting capital for new business. The numerous ways of obtaining financing for new businesses include: • Bootstrapping. • Private investors or angels. • Venture capital. • Public equity markets. • Corporate partners. • Debt capital, which entails asset-based financing, and cash flow financing. • Hybrid financing, which include venture leasing, subordinated debt, • Internally generated financing. Bootstrapping This refers to self-financing whereby entrepreneurs do not require outside financing, but use their own funds to start a business. They use their personal savings, credit savings or selling their property in order to raise capital. This financing has several characteristics. It applies to businesses, which do not require huge capital investment. Therefore, one must embark on a business with minimal capital requirement. Another characteristic is that it applies to businesses that can generate cash quickly. However, it has both advantages and disadvantages. The main advantage is that it guarantees the entrepreneur 100% ownership. This means that no other party who has any right over the business. Additionally, it is easy to make decisions because there are no many people for consultation. On the other hand, it has some disadvantages. It has no shared risks and in case of a misfortune, the entrepreneur must bear it alone. Private Investors This refers to a scenario whereby entrepreneurs seek capital from outside people called angels. Angels are individuals willing to invest in a business. However, the entrepreneur must approach them and ask for funds. One of its characteristics is that it requires a business plan. This is because angel investor must see a business plan before they decide

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