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Capital Funding
Peer to Peer Lending, Incubator, Loan
Capital, Crowdfunding and Angel
Investors
Introduction
Young entrepreneurs find it very challenging to get funding
from contemporary financing channels and institut...
Funding Types Described
• Crowdfunding
• Crowdfunding stands for networking individuals who
pour their money to support an...
• Peer to Peer Lending
• Peer to peer lending is rather non-institutional since it by passes the traditional
financing sys...
Finnvera – A Loan Capital
• Finnvera
• Finnvera is a Finnish capital financing service that funds enterprises at growth, s...
• Factors in evaluating potential investments
• Finnvera’s evaluation for potential investment involves ensuring the
limit...
• Types of financing
• Finnvera offers multilateral financing arrangements like
seed loan, internationalization load, entr...
Conclusion
In this report we have discussed different capital funding
methods with their instances to different questions....
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Capital funding - A review and comparison of Angel Investors, Early and Later Stage Seed Funding Venture Capitalists, Public Private Partnership, Corporate Risk Capital Fund and Crowdfunding

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A review of the contemporary capital funding options and sources to support businesses, enterprises and entrepreneurs at different stages of life cycle with a comparative review of key indicators like size of venture fund, number of investments, types of industries, types and sizes of companies invested in, major factors for evaluating potential investments, valuation methodologies and application procedure and financing types and success rates.

Young entrepreneurs find it very challenging to get funding from contemporary financing channels and institutions to finance their unique business ideas. Established financing institutions lack of interest in exploring entrepreneurial potentiality have taken such a conservative form that newer breeds of capital financing have emerged on the horizon over last few decades. Especially since the wide spread-out of social media and people contacts over internet has made the growth of KickStarter, GoFundMe, IndieGoGo etc as part of modern financing history. This paper describes such five capital financing options for innovative business minded people, entrepreneurs and young startups with their instances in detail.

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Published in: Economy & Finance
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Capital funding - A review and comparison of Angel Investors, Early and Later Stage Seed Funding Venture Capitalists, Public Private Partnership, Corporate Risk Capital Fund and Crowdfunding

  1. 1. Capital Funding Peer to Peer Lending, Incubator, Loan Capital, Crowdfunding and Angel Investors
  2. 2. Introduction Young entrepreneurs find it very challenging to get funding from contemporary financing channels and institutions to finance their unique business ideas. Established financing institutions lack of interest in exploring entrepreneurial potentiality have taken such a conservative form that newer breeds of capital financing have emerged on the horizon over last few decades. Especially since the wide spread-out of social media and people contacts over internet has made the growth of KickStarter, GoFundMe, IndieGoGo etc as part of modern financing history. This paper describes such five capital financing options for innovative business minded people, entrepreneurs and young startups with their instances in detail.
  3. 3. Funding Types Described • Crowdfunding • Crowdfunding stands for networking individuals who pour their money to support any initiative on internet platform by any entity. It is an adapted form of crowdsourcing and differentiates itself by focusing on the intent of the concept that to be funded through individual contributions. CircleUp stands as one of the most popular crowdfunding service at the moment. • Angel Investors • In general terms Angel Investors are those individual or group of individuals who invests in start ups in exchange of ownership stakes.
  4. 4. • Peer to Peer Lending • Peer to peer lending is rather non-institutional since it by passes the traditional financing system and relates unrelated individual to lend money. Nowadays this has taken the form of using internet platforms where each funding requirement are different in its terms and scopes but enjoys some common security arrangement invested by the internet platform. • Incubators • Incubators are rather all inclusive approach to financing where lead entrepreneur’s personal conceptualization of the business are mostly supported with office space, shared administrative support, financial support and mentoring. This differs from other capital financing in many ways because such programs provide an opportunity to groom up an entrepreneur and empowers him with greater ability to get funding from different sources. • Loan Capital • Loan Capitals are defined as structural funds for SMEs in private sector where the interest rate get subsidized or rebated in repayment. An important difference prevails with loan capital and other loans. These are meant for those funding requirements where administrative procedures are burdensome. These funds are disbursed on individual and group basis and are quite adaptive of the development sectors microcredit lending.
  5. 5. Finnvera – A Loan Capital • Finnvera • Finnvera is a Finnish capital financing service that funds enterprises at growth, start up and for internationalization. It has multiple arrangements like venture capital investment, export credit, loans and domestic guarantees. It is run and managed by the State of Finland. • Size of Venture Fund • As of December 31, 2014 Finnvera has over 2.8 billion Euros outstanding commitment in SME financing and 12.2 billion Euros in export financing. Currently there are 28800 customers. • Number of Investments per year • Over 2208 enterprises were financed at growth level and 3247 start up enterprises in 2014 while the SME financing was 1003 million Euros and export credit was 5034 million Euros. • Types and Sizes of companies invested in • The Finnvera entrepreneur loans are targeted to any sector except farming, realty, forestry sectors. However, any other industry that is beyond the reach of contemporary financial institutions are also the one where Finnvera holds strong interest in investing. Generally, these loan amounts vary with upper limit set to 100000 Euros.
  6. 6. • Factors in evaluating potential investments • Finnvera’s evaluation for potential investment involves ensuring the limited liability status of the company where the applicant must be having atleast 20 percent of all voting and shareholder rights. At the same time, it must also comply with the basic general guideline of preferences detailed by the EU’s SME initiative. Applicants do not need any collateral to deposit as Finnvera’s financing decisions are solely based on the prospect of the business. • Firm Valuation methodologies • Finnvera’s perspective of financing is slightly different that others as it believes entrepreneurs seeking funding must be having a complete financing plan for the business. As such applicants funding request from Finnvera is just only one part of the entire financing plan and that financing plan can should include complete targets, strategies, plans, market situation assessment and should clearly visualize how the financial plan is going to get returned with profitability and sustainability. • Requirement on Entrepreneur’s proposal’s length, structure and details • Finnvera has downloadable application form on its website which needs to be filled up with all required details and submitted to the site. Upon review of the application form Finnvera it will make contact with the applicant to describe the future procedures.
  7. 7. • Types of financing • Finnvera offers multilateral financing arrangements like seed loan, internationalization load, entrepreneur loan, Finnvera loan, financial bridging loan, grants and bond financing. Also there is a 3.25% interest fee and six months grade period and repayment can be extended upto 10 years. Applicants own share in the stock is assumed as a security and the whole process has a nominal fee. • % of applicant and financed • Finnvera stands as one of the most popular financier in the EU only due to its flexible terms and supportive nature. It has strong number of applicant who are already financed with billions of Euros while few billion Euros are still left with the organization to finance. At estimate 25% of all applicants are successful in getting funding however those who require less than 35000 Euros are even more highly successful in securing Finnvera financing.
  8. 8. Conclusion In this report we have discussed different capital funding methods with their instances to different questions. The intention was to familiarize the growing forms of capital funding and it included Peer to Peer Lending, Incubator, Loan Capital, Crowdfunding and Angel Investors. Each has its own way of working and purpose, while all of them are desperately looking to find that unique business where they can invest the money. It is their form of business – if they cannot invest in time, they will not run profitably in the future. They will not be able to grow. And if an entrepreneur can present a sustainable, unique and competitive leverage based business plan; these capital financers will jump in to join the entrepreneur with their money. The fact is, there is money if one has a plan.

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