Resource Mobilisation

About this unit

Every enterprise needs money to start and to grow. This unit explains where an entrepreneur can raise funds beyond personal savings and bank loans. It covers the capital market and especially the primary market, where companies issue new securities, and two important sources of risk capital for new ventures: angel investors and venture capital. Understanding these sources helps an entrepreneur choose the right kind of finance at each stage of the business.

Key ideas

• Capital market: market for long-term funds; divided into primary (new issues) and secondary (trading of existing securities) markets.
• Methods of issue: public issue through prospectus, offer for sale, private placement, rights issue and electronic IPOs.
• Angel investors: wealthy individuals who invest their own money in early-stage ventures, often with mentoring.
• Venture capital: professionally managed pooled funds invested in high-risk, high-growth businesses for equity.
• Stages of venture financing and exit routes.

How to prepare

• Learn the difference between primary and secondary markets and between each method of issue.
• Make a comparison of angel investors and venture capitalists on source of funds, size, stage and involvement.
• Expect case questions that describe a funding situation and ask which source or method fits.