Expert Answers
pohnpei397 eNotes educator| Certified Educator

The sources from which an entrepreneur can get seed capital depend to some extent on the type of business they are trying to start and how much money is needed.

For small start ups, many people get money either from their own savings (or by taking out something like a home equity loan) or from family members.

For people attempting to create firms that need more equipment, etc, it is often necessary to seek outside help.  In the technology and software industry there are many stories of "angels."  These are rich people who hear proposals from entrepreneurs and give money to those they think will give them a return on their investment.

giorgiana1976 | Student

The reason of venture capital funds  is given by the inadequate offer of capital made by financial institutions and the high demand for funds for new firms or those that present a high risk but they have a great potential of development.

Therefore, venture capital (venture capital), provide financing for the first stage of bussiness or financing for the expansion of these companies.Initially, the venture capital funds are seeking to meet the needs of young companies for seed capital and for start-up financing.

Seed capital is directed to research and developing activities, for new products and technologies, before starting commercial production. The amount of funds is limited, the investment has a large time horizon,the risk of bankruptcy is very high and further financing for production is very high.

Venture capital is classified according to the time of investment, so that seed type financing  occurs in the product research phase, before the product to be ready for market.

The source of venture capital,seed capital, are true business partners, that supports the risks of business  and offer their experience and advice. The source requires no warranties and it does not attract personal liability.