Initial capital for the new technological enterprise

An assessment of the capital market for technology-based firms is presented, with emphasis on the links between the stages of evolution of a firm and the investment preferences of various capital sources. These factors lead to an expectation that initial capital will be supplied most frequently by the entrepeneurs themselves from their own savings, secondarily by their families and friends and by private investors, all these being sources of capital outside of the formal channels. More substantial but still initial funding from `wealthy family funds´, special `seed´ funds, and somewhat more conventional venture capital funds, are expected to be the primary complements of the informal sources. Data from studies of new technological firms support these expectations, providing evidence of the usual small initial capital base (almost half with less than $10000) and the dominance of personal savings as the principal source of initial capital (74% of the companies). Specific plans for the company are associated with grate initial capitalization, as well as with raising outside capital, as is also true for the effect of having an initial product. The needs for initial capital vary enormously by amount and intended use as a function of the type of business being started, with consulting firms and software companies requiring far less than hardware developer and producers