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Which source of capital does an entrepreneur use?

August 7, 2007

by Tetsutaro Mameda

A venture needs to generate capital because many entrepreneurs cannot cover entire business cost from their saving account or personal loan. There is a difficult decision which sources of capital an entrepreneur uses. Debt or Equity? Internal or External? Angel or Venture Capital? I heard that entrepreneurs started their business but those entrepreneurs were not the business owners at the end based on which source of capital they used. In Eastwind Trading Company case (9-393-119, Harvard Business School), Gail and Martha chose a bank and friends to gather capital to run their business. They could not continue their business even though they found good market at the end of their business because their cash ran out.

If they used other source of capital, maybe they would have found the better market before cash ran out?

In my opinion, venture capital is better source than family and friends even though there is more risk to lose control a business. This is because venture capitalists more attempts to involve a business than family and friends. However, they have ideas and knowledge in the specific firm. I believe that it is responsibility of an entrepreneur to be successful on the business by using whatever possible way because he/she started the business.

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2 comments

  1. How many venture capitalists do you think focus in the area of antique pearl buttons? Of fabrics? Of one-of-a-kind inventory?


  2. I concerned that how many venture capitalists existed in the area of antique pearl buttons or fabrics. Those venture capitalists may have been very few or have not existed. However, I thought there were venture capitalists in retail or distribution industry because the industry is broader than antique or fabrics industry. I also think it was hard that Gail and Martha got a venture capital but they did not know the industry, and therefore they needed an advisor to deal with the unknown market.



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