Entrepreneurship, Second Edition

9.5. CONCLUSION

Financing is a necessary but not a sufficient ingredient for an entrepreneurial society. It goes hand in hand with entrepreneurs and opportunities in an environment that encourages entrepreneurship.

Grassroots financing from the entrepreneurs themselves and informal investors is a crucial ingredient for an entrepreneurial society. Close family members and friends and neighbors are by far the two biggest sources of informal capital for startups. Hence, entrepreneurs should look to family and friends for their initial seed capital to augment their own investments in their startups. Many entrepreneurs waste a lot of valuable time by prematurely seeking seed capital from business angels and even from formal venture capitalists—searches that come up empty-handed almost every time. Entrepreneurs must also understand that they themselves will have to put up about two-thirds of the initial capital needed to launch their ventures.