We know that business owners need capital as important as we need blood to survive. The business running without sufficient capital will exhaust its resources and finally go bankruptcy. However, it is not always the principle that firm needs much capital. For a new venture, (s)he should raise funding after proven the business model.
On the one hand, it is easier to convince potential investors with initial development. In practice, venture capitalists would like to see a business move beyond the idea stage before they will consider financing. On the other hand, outside investors hinder entrepreneurs from their perspective in the uncertain environments that the business owners lose their right of making decisions and have less flexibility. There can also be problems with raising too much money. The money gets burned up quickly and it doesn’t produce either profits or sales. And, it is noticeable that in the early stage of start-ups new industries seldom get it right the first time. A wise entrepreneurs should have ability to generate sufficient capital in well-timed occasions after proven their business model.
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