Financing Projects. Projects can be financed in different ways and often a mixture of different financing instruments will be used. The listing below is a very brief guiding note to be used when considering how to finance projects. These funding opportunities are listed in the sections below. Equity Business Angels: Start-up support could be provided by entrepreneurs with enough capital to fund initial product development and sales so that the company can later raise additional capital through other sources. In general business angels are wealthy individuals, often with considerable business background and industry expertise, who allocate some of their resources to invest knowledge and seed money in new ventures. During a company’s seed phase, business angels are often the only source of external financing for a project. Provide capital from shareholders: Projects might provide capital by establishment of a shareholder company. The shareholders might acquire certain company rights which can range from controlling and participating rights to a share of profits. Partners usually require a share of equity of at least 20 to 30 percent. In most cases, start-ups have to rely solely on financing through equity. Venture Capital: It’s often required for the financing of high-tech, high-risk projects. VC is provided by VC companies who manage funds from private, institutional, and/or public investors. VC participation is limited to a specified period of time, at the end of which the VCs “cash out” by selling their shares and realizing profit at a margin of between twenty to thirty percent. Private Equity: This is privately traded capital provided by private equity companies financed by institutional funds (e.g. pension funds) and private investor. Like venture capital companies, private equity companies provide funding to a company for a fixed period (usually three to seven years). The participation of a private equity firm is often concluded by a trade sale (i.e. the selling of shares to another company).
