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Old September 23, 2003, 12:24 AM
Thomas Rice
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Default Venture Capitalists and Entrepreneurs

Hi Azlee,

1) I don't think entrepreneurs are created through the educational system. You will have entrepreneurs in most educational systems. I don't think people become entrepreneurs due to economic pressure, either.

Economic pressure may play a role, but I'd say it cuts both ways. Someone who is under a lot of economic pressure may feel more inclined to pursue higher-achieving results, which may lead to entrepreneurship. At the same time, someone from a wealthy background who is under no economic pressure may have more leeway to try new ideas and thus that may be an influence on the decision to become an entrepreneur.

2) Venture capitalists help raise financing. At a basic level, entrepreneurs create businesses, and businesses often cost money to run. Early stage businesses sometimes will temporarily lose money as it develops a market, and growing a business can be costly.

If you are setting up a retail chain, for example, you may start with one store and it may be profitable. If you want to expand to another five stores, you may think they will all be profitable but there may be an upfront cost you cannot afford to pay for.

In this situation you would need financing. Financing basically comes in two types -- debt and equity.

Debt is where you borrow money and repay it later, such as a bank loan. Equity is where you sell part of your company to somebody else.

Venture capitalists basically invest in early stage companies, but they typically invest larger amounts after a company has started to go.

If financing is required, most entrepreneurs raise money from their own savings, friends, and family. They may also raise money from "angel investors", being wealth individuals who invest relatively small amounts in start-up and growing businesses.

I'm not sure of the exact figure, because I'm not that experienced with the venture capital world, but I imagine venture capitalists invest at around the $5 million plus mark.

After venture capitalists the next source of funding is usually an initial public offering (IPO), if your company is large enough, which is where you list on a stock exchange and raise capital from public shareholders.

Hope this helps!

- Thomas.

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