Financing your Venture: Sources of Finance and Critical Analysis of Lenders' Investment Strategies

This report discusses the financing of a hypothetical venture named “Womensverse” in the fashion industry. It provides a literature review of sources of finance available, problems faced by new businesses with finance, and critical analysis of lenders' investment strategies. The report concludes that angel investing is the best source to fund the start-up in the fashion industry.

Financing your
Venture

Contents
EXECUTIVE SUMMARY.............................................................................................................3
INTRODUCTION...........................................................................................................................4
LITERATURE REVIEW................................................................................................................4
What does Entrepreneurial world look like?...............................................................................4
Problems faced by new businesses with finance.........................................................................4
Sources of Finance available.......................................................................................................4
DISCUSSION..................................................................................................................................6
Overview of the entrepreneurial venture.....................................................................................6
Reasons for selection of a funding source...................................................................................6
Critical analysis of the lenders’ investment strategies.................................................................7
Structuring of financial plan for the investor including an exit strategy.....................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

EXECUTIVE SUMMARY
This report provides information on entrepreneurs' perspectives or decision-making in relation to
business plans. An entrepreneur is the key of business to a start-up or an established business. In
this following report, the company women verse critically analyse the business plans by some
sources of finance such as influence commercial banks, angel investing, Venture capital, and
crowdfunding or invest in the business by providing startup capital in the form of debt or equity
financing. The women verse is a small finance startup business in the “Fashion Industry”
market. This company's main focus is to empower the women's condition in today's economic
world.

INTRODUCTION
Financing a small firm, particularly a start-up, is a difficult task in a crowded market. It's no
secret that acquiring money through traditional channels is more difficult in the present
economic situation. But just because it's a struggle doesn't imply they brilliant business idea isn't
worth it (Rahman, 2019). The business financing is a crucial part for a business and more
importantly a start-up. The following report highlights the financing of a hypothetical venture
named “Womensverse”. A supporting literature review is being conducted in the report
following the case of hypothetical start up. of Different sources of financing will be discussed
here under and one of the fund will be chosen and an exit strategy would be discussed for the
investors after the business starts flourishing.
LITERATURE REVIEW
What does Entrepreneurial world look like?
Entrepreneurial Venture refers to an organisation which is created by the focused
individuals or a group of individuals who takes into account innovation and opportunism in the
organisation and deals in the production of something of economic value (Yeremchenko, 2019).
The venture is new and is expected to create a social value and an economic value in the market.
In the recent times, the COVID-19 pandemic have affected the Entrepreneurial world as
there have been shortage of funds and the required capabilities of taking risk in the potential
entrepreneurs due to the negative impacts of pandemic. The developing countries are seen to
have a better and increasing number of new start-ups and the finances are better in these
countries as the country is open to investments to increase their GDP.
Problems faced by new businesses with finance.
The major problem which is being faced by the new Entrepreneurial ventures is the
availability of finance (Nigam, Benetti, and Mavoori, 2022). The business is required to receive a
constant inflow of funds to manage the different activities of business. A new start-up is required
to take up a better and efficient source of finance to meet its requirements.
Sources of Finance available.
An Entrepreneurial Venture needs to be funded well and in advance before starting its
operations (DeFrancesco, 2021). The financial funds form the basis of the business and unit and

measures how the business will be performing in the market. There are different forms of
financing available with the Entrepreneurial Venture and they can decide which form of
financing they need to take up for their own business unit. Following are the three sources of
finance available with the business of Womensverse:
 Venture Capital: This form of sourcing a business is related to the private equity. The
investors of the start - up invest in the small businesses with the belief that these
businesses will be continued for a long term and they hold a great potential in the market.
Venture capital is usually funded by rich investors, investment banks and the other
financial institutions who provide services and funding to new businesses (Trachenko,
and Kozhanova, 2019). These investors are generally provided with attractive payoffs for
their investments. In addition, large ownership chunks are usually created under this
source of finance and these are then sold to few investors with the view of limited
partnerships. These investors can be either individuals or several group of individuals or
enterprises.
 Angel Investing: Angel investors are the private investors, seed investors or the angel
funder who usually have a high net worth and backs a small and medium start – ups in
return for the ownership of the equity of the company. These are usually among the
family members or friends of the entrepreneur which are taking up the start - up project
(Nigam, Mbarek, and Boughanmi, 2020). Angel investors engage in businesses in their
early phases and offer small-scale financing to cover expenditures during the period when
venture capital firms aren't interested in them. This is because venture capital firms are
usually only interested in investing once the business has used the angel investor's money
and grown a little.
 Crowdfunding: Crowdfunding is a means of obtaining modest monetary contributions
from a large number of individuals using online platforms in order to finance a
commercial enterprise, project, or cause. Friends, relatives, admirers of their r product,
backers who want to see the product come to life so they can purchase it, supporters in
any mission, cause, or area of expertise, or even sympathetic outsiders, depending on
what they're attempting to finance, can all give dollars (Gornall, and Strebulaev, 2021). In
the case of equity crowdfunding or dilutive crowdsourcing, money can be obtained from
a large number of small investors. Because crowdfunding allows entrepreneurs to

advertise their product, service, or endeavour to a broad group of investors with little
financial risk, it's critical to understand how it works, as well as its benefits and
drawbacks.
DISCUSSION
Overview of the entrepreneurial venture
The entrepreneurial venture being undertaken and needs the financing is “Womensverse”,
A fast - growing fashion brand. This business is being set up in the heart of England and this
venture capital will be taking into account the social cause related to women empowerment in
the UK and less developed nations. The main focus of the business is to grow its business
internationally and increase job opportunities for the women all around the world and
importantly in the developing and underdeveloped nations. The business of Womensverse will
be requiring the financial funds to start the operations in the business and create a brand image in
the market. As the business is related to the fashion industry, the production of clothes and
designing of new trends is the major operations of the business.
Reasons for selection of a funding source
The funding source which is being selected for the start – up of “Womensverse” is Angel
Investors. As the business is being started, funding from angel investors would be a really good
option for the business. The biggest benefit of getting funds from an angel investor is that it is
less risky than taking out a small company loan. An angel investor, unlike a bank, does not need
repayment because they receive stock in exchange for capital. Angel investors are often seasoned
investors that have a long-term approach to investing and are aware that they may not see a
return on their investment for a long time. In addition to investment opportunities, many angel
investors are seeking for personal chances.
Angel investors can also give guidance to the start-up because they have a lot of business
expertise. They are invested in the company's success and can provide crucial advice and insight.
According to research, firms funded by angel investors are more likely to develop significantly,
provide a higher rate of return, and stay in business for a longer length of time.
In comparison, crowdfunding is not so good option for the business. Raising the necessary
funds for larger initiatives requiring millions of dollars can be quite difficult. If the campaign is

successful, it implies business were able to raise a big sum of money from a limited number of
investors. Depending on the business idea, crowdsourcing may not be the best option for
funding.
And in the case of venture capital, it lowers the control of the management. As the start-up idea
is new and progressive, there are risks that the idea about the business is stolen. When you use
venture capital to support the firm or start-up, management give up some control to the investor.
This implies owners will no longer have complete control over the decision-making process. Of
course, if they have made a commitment to an investor who doesn't share the vision and beliefs,
this may rapidly turn into a problem. Indeed, if they sell more than 50% of firm’s the shares to a
single VC, they will no longer have majority control over the company, and their choice will take
precedence.
Critical analysis of the lenders’ investment strategies
Following are the different possible strategies about why the angel investors invest in a start-up:
 Sophisticated investors aiming for a high return on investment are looking for indicators
of significant revenue growth with low extra costs.
 The technique used by the start-up to realise the full potential of its concept is crucial. For
any investor, a practical, viable method to recruiting and converting the consumers
required to expand and flourish is a major plus (Suzuki, and Karjoth, 2021).
 Start-ups that identify an addressable market that may be exploited or disrupted for profit
have a better chance of attracting funding.
 While some angel investors choose to stay anonymous while their money rises in value,
others want a share of the action. Growing a business is a journey that many investors
like being a part of, despite the challenges.

Structuring of financial plan for the investor including an exit strategy
After the business of “Womensverse” is successful and the business is flourishing, the
growth strategies will be discussed and as the business has a vision of growing its businesses in
underdeveloped nations to fund women empowerment, the business will provide options to the
angel investors if they want to sell their shares or convert them into equity or preference
shareholders. This is because the business is now required to go public as it has more promising
for the business that are in growing stage and providing this option to the angel investor will
guarantee their trust in the organisation as they are the ones who are important for the business as
they invested and brought the business to its current position (Santo, and Puca, 2020).
CONCLUSION
From the above-mentioned report, it can be concluded that Angel investing is one of the best
source to fund the start up in the fashion industry and the business of “Womensverse” will make
good use of the funds provided by these angel investors. The angel investors will be interested to
invest in the business of “Womensverse” as the idea is related to a social cause and empower the
economic conditions of women in the developing nations. The angel investors believe that the
business will be a success as most of the employment will be given to women in backward
region and the business will be working in the fashion industry.

REFERENCES
Books and Journals
Rahman, A.A., 2019. Disclosable Restructuring and (or) Additional Financing Paper-Kenya
Climate Venture Facility-P154586.
DeFrancesco, L., 2021. Financing breaks all records in 2020. Nature Biotechnology, 39(2),
pp.133-135.
Trachenko, M.B. and Kozhanova, A.V., 2019. Specifics of Startup Financing at Different Stages
of the Life Cycle. Finansovyj žhurnal—Financial Journal, (5), pp.90-103.
Nigam, N., Mbarek, S. and Boughanmi, A., 2020. Impact of intellectual capital on the financing
of startups with new business models. Journal of Knowledge Management.
Gornall, W. and Strebulaev, I.A., 2021. A valuation model of venture capital-backed companies
with multiple financing rounds. Available at SSRN 3725240.
Yeremchenko, Ð.A., 2019. Corporate venture capital: global trends and evaluation of russia’
s prospects. The Economics of Science.
Nigam, N., Benetti, C. and Mavoori, H., 2022. Access to venture capital: Does gender (still)
really matter?. Strategic Change, 31(2), pp.239-248.
Suzuki, A. and Karjoth, A., 2021. Venture Debt Financing–Aus Gründersicht.
In Praxishandbuch Finanzierung von Innovationen (pp. 237-248). Springer Gabler,
Wiesbaden.
Santo, A.D. and Puca, A., 2020. Seed Stage Valuation and the Venture Capital Method. Early
Stage Valuation: A Fair Value Perspective, pp.81-110.