Venture capital financing and value creation
Entrepreneurial firms can generate capital either internally or externally. The desire to raise a specific form of capital depends on the entrepreneurial firm’s level of development, profitability, revenue and growth trajectory, market share, risk tolerance, the industry, and strategic planning. While entrepreneurial firms in the later stages of development can take advantage of a wider array of financing alternatives, the choices for younger firms are more limited. If the firm has been operating for some time and is profitable, it may be able to support its expansion using its own financial resources. If the entrepreneurial firm is not profitable, it may be able to manage its working capital in such a manner that it is able to settle its liabilities (including the capital expenditure program) on time. External capital can come to entrepreneurial firms from multiple sources: banks, the government, public institutions, private markets, friends and family, business angels, suppliers, venture capital, etc. (note that many of these sources are discussed in more detail in the following chapter).