What is the first phase capital?
The first phase of capital is the money provided to business efforts to develop a product, method, or process in the start -up phase before income can be generated from the sale. Those who provide this capital may include angel investors or risk capitalists. Family and friends are common sources of the first phase capital. This type of investment is usually considered a high risk, but also as a potentially offers a significant level of return if the company succeeds. Some start -ups can reap bonanzy for investors, but it is common for a large percentage of businesses to fail in the first phase, negotiating any return on those who provided the first phase of capital. The time required to reach a turning point, where generated revenue equals or exceeds the level of rhovna expenditure increases to continue their efforts, often lasts for several years. As a result, a certain method of increasing capital in the first phase is usually required for any commercial enterprise.
family members and close collaborators are a typical source of the first phase capital. Both family and close friends may be more willing to invest in a new business due to expectations of support and trust generally introduced in these relationships. An extensive knowledge of the character of an entrepreneur is also a common factor in the decision to provide capital for the opening. Entrepreneurs who have previously demonstrated a credible character to family members or collaborators can find more willingness by these people to commit support for this effort. The willingness to discharge some money in the hope that there will be a great revenue, if the company is successful, is almost always a factor in the investor's decision.
The amount of the required capital of the first phase depends on several factors. One of the time is the time that is estimated that the product or process will bring to the market or to a point in development where other funding may be available. Two examples of another finAncutions include sales shares or providing commercial loans.
If the first phase capital is not sufficient to bridge the cash requirements of the initial period, the effort may stop. In this case, those who provided capital are likely to lose their investments. Risk capitalists usually expect a successful startup to bring a sufficiently high yield to compensate for those businesses that fail. The probability of failure far exceeds the chances of a successful business.
Many efforts of the first phase will not achieve profitability. For investors, there is usually a decisive moment when the investor reduces his losses and pulls out of the company. Sometimes new investors can be successfully recruited to continue developing a business. Other times, the company is lost, with the original investors being lost.