The relationship between entrepreneurial venture financing and the Term Paper

The relationship between entrepreneurial venture financing and the life cycle of a venture - Term Paper Example In the final stages i.e. at the maturity stage the businesses make use of more traditional sources like issue of additional equity or internally generated funds for financing the expansionary programs. Introduction The word ‘life cycle’ in the context of ventures is used in reference to the various stages of its evolution. The initial stages begin with the commencement of the new venture in the form of efforts and intentions of the nascent organization. This stage is accompanied by the procurement of requisite non-financial and financial resources. Here it is important to highlight that finance forms the ‘backbone’ of every venture. Even the most successful business plans may not eventually be carried out in the event of fund shortage. However, the level and form of financing required for each stage of the business is different. In the initial stages when the entrepreneur has just chalked out the plan for the initiation of the venture some amount of funds ar e required for assessing the viability and financial feasibility of the proposed venture. This is a part of the early stage financing required by the business. The fund that puts the business in operational mode is referred to as ‘start up capital’. The next stage of financing is for meeting the development or expansionary needs of the business (Parker, 2006, p.1). Problem Statement- The venture life cycle has an impact on the financing pattern of the business venture. In this paper it will be shown how the financing needs of the business is aligned with the various stages such that the entrepreneur can maximise the value of the business venture. Importance of paper- The paper shows that the various stages of business require varying sources of financing. While in the initial stages it may not be possible for a newly formed business to seek for outside equity or lending. In such instances the entrepreneur of the business has to arrange for funds from internal or known s ources like family or friends. Again after this the business reaches the development and the growth stage. During these stages the business can seek for external sources like equity capital or venture funds. At the same time it can tap the banks and financial institutions for loans and overdraft facilities. At the maturity stage the business may not have to rely on outside sources as the retained earnings generated over the years can be used for financing the future growth and expansionary plans of the business. This paper manly highlights the importance and the use of various avenues of funds at the various business stages. This can give an entrepreneur an idea as to how to meet the funding requirements or which sources to be tapped at each stage of the business. Hypotheses- This paper assumes that the sources of funds to be employed in the various stages of the business also vary as per the strength and longevity of each stage. Methodology The paper is based on the secondary sourc es of data. To highlight the various types of funding requireme