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Financing Start-ups: Problems inherent with family funding

Birkenhauer, Julia (2019) Financing Start-ups: Problems inherent with family funding.

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Abstract:This research explores the challenges of financing start-ups and especially investigates the complications inherent with family funding. In the first part of this exploratory study, the characteristics of a financial deal between the external investor and the entrepreneur where identified, which form the basis of any financial deal. Six characteristics were found and define: the stage of the start-up in which the funding takes place, the role of the investor, the type of the contract, the influence of the investor, the amount of investment and the reward structure. To test the six characteristics, seven start-ups, which obtain family funding, were interviewed with semi-structured questions, to collect primary data. The research findings revealed, that the financial deal between the family investor and the entrepreneur can be regulated very flexible and for the benefit of the entrepreneur. Especially in the initial stage, family funding provides sufficient amounts of funding without trade-offs asking for influence or compensation, unlike any external investor does. However, family funding can come along with negative side effects, particularly when the investor lacks the skills and appropriate expertise to detect a failing business and is not able to provide the entrepreneur with strategic advice.
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:International Business Administration BSc (50952)
Link to this item:http://purl.utwente.nl/essays/78565
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