Initial Capital for the Technological Enterprise
|Primary Sources of Capital|
|Family and friends|
|Private individual investors (angels)|
Larger Initial Capital Associated with|
|Outside initial investors|
|Larger co-founding team|
|Full-time, rather than part-time, commitment|
|Specific plans for business development|
|Hardware focus, rather than software or consulting|
|Initial product available or targeted|
their seriousness of intent to build a successful growth company. For example, more funds are both contributed and raised by the larger groups of co-founders, especially when they are involved in the companies from the outset on a full-time basis. Specific plans for the company lead to greater initial capitalization, as well as to raising outside capital. The needs for initial capital vary enormously by amount and intended use as a function of the type of business being started, with consulting firms and software companies requiring far less than hardware developers and producers. This is reflected in the positive effect of product orientation upon initial capital. Prospective entrepreneurs need to express, in actions and in writing, their aspirations, the rationale for potential attractiveness of the contemplated businesses, their strategies for achieving corporate growth and success, and their personal commitments to those objectives. Larger initial capital base is at least one likely outcome of this behavior.
D. N. Allen, D. R. Costello, & J. P. Danford. "Seed Venture Capital and University Research Commercialization:The Zero Stage-Penn State Connection". Unpublished paper ( State College, PA: The Pennsylvania State University, 1989).
J. D. Aram. "Attitudes and Behaviors of Informal Investors Toward Early-Stage Investments, Technology-Based Ventures, and Coinvestors", Journal of Business Venturing, 4, 5 ( 1989), 333-347.
G. Baty. Initial Financing of the New Research-Based Enterprises in New England ( Boston: Federal Reserve Bank of Boston, Research Report No. 25, 1964).
G. B. Baty. "The Role of the Venture Advisor in High-Tech Startups", Review of Business ( New York: Business Research Institute, St. John's University), 10, 1 (Spring/ Summer 1988), 12-15.