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Professional Issues in Information Technology - Second edition by Frank Bott

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5 FINANCING A START-UP COMPANY

After studying this chapter, you should:

  • understand why start-up companies need capital;
  • be able to produce a simple business plan;
  • understand the different ways in which capital can be raised and the advantages and disadvantages of each.

5.1 WHY CAPITAL IS NEEDED

It is very difficult to start any commercial venture without having some money in hand, because your customers will not be willing to pay you until you have provided them with the service or the product they are buying. You, however, have to buy the things you need to make the product or to provide the service, and you have to live while you are making or doing it.

To take a very simple example, suppose that you are setting up in business painting houses. ...

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