Running Head: The Wisdom Of Capital1. The Wisdom Of Capital10.

The primary sources of equity financing are from corporations, foundations, individuals and bequests. This money totals in the billions for each organization.

Mankind has thrived off of the dependability of ideas and the application of them for centuries. Moreover, humans have sustained healthy lives through developments and inventions that have improved the world around them. From the earliest Mesopotamian creation of the wheel to Apple’s recent release of the iPhone 7, groundbreaking revelations have perpetuated and molded human survival in some aspect. Anyone can generate an idea, but rather, it is the ability to transform that idea into a development that is valued by many--which is what makes being an entrepreneur remarkable. Entrepreneurs are some of the keenest, most creative, and passionate people that walk the earth.

This document is authorized for use only by Rachel van Munster in Entrepreneurial Law and Finance taught by Rafael P. Ribas, at HE OTHER from February 2015 to March 2015.

When contemplating expansion and growth, it is imperative to understand the advantages and disadvantages as they relate to funding. Internal financing, or using profits for new investments, is advantageous as it is available immediately, there is no associated interest, there aren’t any restrictions imposed by outside parties, and overall, grants flexibility. However, it can be disadvantageous, as it is not tax-deductible, capital is not increased, and there is more available capital available on the outside market.

With nearly 80 percent of all new business startups failing, entrepreneurship has proven itself to be a great risk in this economy. The book A Raisin in the Sun points out essential flaws and weaknesses in many venture capitalists’ thinking. A Raisin in the Sun exhibits a man named Walter

Note on the financial perspective: What should entrepreneurs know? William A. Sahlman, Harvard Business Publishing (9-293-045)

There are several factors that guide the choice among debt financing and equity financing such as potential profitability, financial risk and voting control. Equity financing is a method used to obtain capital in order to finance operations, growth or expansion. Sources of equity financing are extremely important. Major sources of equity financial are Retained Earnings, sale of stock, and funds provided by venture capital firms. Profits that are kept and reinvested are called Retained earnings, which is a very attractive source fund due to the savings it provides to the entity by not paying the interests, dividends or underwriting fees related to issuing securities. This source of financing does not dilute ownership, but it

cash from sales) and external sources of finance from outside the business (e.g. a bank loan)." There is a need of external financing for the expansion through acquisition. External financing is a good source of raising money besides internal funds. As per business finance, "external financing can take the shape of two different types of financing, debt or equity. Debt financing includes bank loans where a company gets financed by issuing debentures which they have to pay back after a certain period of time. It is called debt financing because the company is in debt to the bond holders and if they were to go bankrupt, the bond holders would have claim to any remaining assets. In this case these are secured business loans. Equity financing is when a company decides to give up ownership in the company to raise funds. This is usually done by selling company stock to investors. Sometimes this could include seeking out angel investors or venture capitalists. If you are expecting to get external financing through equity financing make sure that your business has a product or service that is unique, and that there is a high demand for your product or service. Most venture capital investors or even angel investors will not look at an offer unless they see a large growth potential." (2)

Financing is a process of providing additional capital by investor or financial institution to the strapped for money entrepreneurs for companies’ needs such as inventory or equipment purchase, advertising campaign, development, etc. If truth be told, alternative

Starting a business is the latest trend. Just take a look at Instagram. Several profiles have the caption ‘Entrepreneur’. At this very moment, there is someone, somewhere working on an idea, a business plan or launching a startup. Entrepreneurship is on the rise like never before. The flexibility and independence that comes with being one’s own boss is attractive and worth taking the leap in starting a business. However, most people don’t know that being an entrepreneur is a grueling journey that can be very lonely and stressful at times. According to the Small Business Administration (SBA), 50% of businesses fail during the first year. Starting a business can be a scary task, but the

Venture Capital is one of the fastest emerging sources of finance for new entrepreneurs. In spite of its increasing popularity, funding via Venture Capital is faced with a number of difficulties. Thus, it is important to study the various aspects of raising funds through Venture Capital.

Entrepreneurship is difficult to define throughout its history research. Even nowadays, this concept is still a debatable point (Rajendra, et al., 2017). Based on four decades of research, Gartner (1988) concludes that entrepreneurs are founders of new firms. Shane and Venkataraman (2000) consider entrepreneurship as “a new venture’s risk-taking endeavor seeking an opportunity” and Fortunato (2014) adds innovative value into the concept of entrepreneurship. Thus, research on the definition of entrepreneurship continue. According to those diverse views, I will interpret six unique entrepreneurial characteristics and theoretically analyze each one. Risk taker, need for achievement and proactivity as my strengthens will be illustrated with my experience. Innovativeness, internal locus of control and tolerance for ambiguity are my weaknesses, thus I will describe relevant successful Entrepreneurs’ experiences.

Angel investors are those investors that are particularly interested in investing in companies early stage companies. Their investment capital is generally limited and if relevant, it has been advantageous for them to pool their funds as a group to not only participate in larger deals but also to diversify risk. They invest in exchange for ownership equity or convertible debt.

Venture Capitalists- these are people who invest in new and up-and-coming risky ventures, usually in return for a share of the ownership. An advantage of venture capitalist is the establishment in the business environment they might have, if you were inexperienced you could use their knowledge of the corporate business industry, methods, tactics and strategies to make it as a new business or survive as a present business. A huge disadvantage about Venture Capitalists could be the agreements you make for instance if they wanted a short term pay out from the owner, which was a high amount and a big interest rate it might be hard to pay in the time required in the contract. Many venture capitalists would specify upon agreements that the original owner of the business has to pay back a large amount of the money invested with a usually high interest rate in a short time period. The reason for this is the Venture Capitalists want their money back and profits either made from the business or out of

Investment in New Initiatives: Entrepreneurs generally vacillate to invest in risky areas. Therefore, banks provide short-term and long term loans to entrepreneurs and investors