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Venture Capital: New Businesses

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What sorts of asset or capital availability for a new business owner-small start up
How does each sort of capital assist in start up and continuing business operation over the first few years
What is the specific responsibility venture capital has in a start up new business and first few years

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Solution Summary

This solution explains the role of venture capital in starting business and in the initial stages of business. The sources used are also included in the solution.

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In accordance with BrainMass standards this is not a hand in ready assignment but is only background help.

Step 1
There are several types of capital availability for a new business owner or small startup. The first type of venture capital availability is seed capital. This form of capital is required when there is not product or organized business. The second type of capital availability is the startup capital. This capital is provided by venture capitalists when the sample product is available and the entrepreneur is working full time. The third type of capital is early stage capital. This is provided by venture capitalists when the company has commenced operations, the management team is functioning and the sales are increasing (a). The fourth type of capital is expansion capital. This venture capital is provided when the business is properly established and capital is provided to take it to new levels of growth. The fifth type of capital is late stage capital. This capital is provided by the venture capitalist when the company shows excellent sales and revenues and at least two levels of management are in place. In such companies funds are required to augment capacity, widen marketing, and higher working capital

Step 2
Each sort of capital assists in startup and continuing business operations over the first few years in several ways. Seed capital is required for creating a new product, a sample of the product, and to pilot test a product. Such capital is also used for carrying out market research to identify segments that have demand for the product, identifying the appropriate pricing, negotiating with channels of distribution, and planning marketing communications (b). The startup capital is required recruiting important mangers and staff. The startup capital is also required for finishing the ...

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