Question

Describe, explain, and give an appropriate example of the three sources of capital in new venture creation. (source of capital-exp: personal, friends and relatives, venture capitalists and bank).

Answer 1

The venture creating funding sources are many of which the three are discussed as below:

Personal Finance: A new venture can be opened by a venture capitalist who wishes to expand the business and its offerings. For example, the global chains of Hilton hotels are owned by a family that uses the capital of the business to grow further in other markets. The finance of the business entrepreneur was such that it grew enough to support his next project which created such a large chain of hotels across the globe.

Friends and Relatives: The famous business of Apple started from a garage where the family and friends donated to create the business which further expanded to be the global giant in the modern days. These projects are successful if the innovation is objective and can gain from small investments that one may gather from the people known to them is of great value.

Banks: The banks all across the globe earns from the depositor’s assets being used in the venture to generate the needed capital for the business. This generated the profits for the banking business so lenders like banks may have some form of deposit or guarantee of a return to loan a certain amount for a new business. The business of DHL, a construction giant loaned from the bank by mortgaging its huge land banks across northern India to get loans for its real estate projects.