Pre-Launch and the Acquisition of Start-up Capital by Small Firms
Vol. Volume 5, Number 2 August/2000
Howard E. Van Auken and Lynn Neeley
This paper examines the relationships between pre-launch preparations and the acquisition of start-up capital for small firms. Specifically, the study investigates the relationship between pre-launch preparations and (a) the size of initial capitalization, (b) percentage of start-up equity in initial capital structure, (c) use of supplemental financing and (d) difficulty of raising start-up capital. The results show that firms that are more involved in pre-launch preparations are launched with smaller amounts of capital, use less equity, use more supplemental financing, and have a greater difficulty of raising initial capital as compared to firms that show less evidence of pre-launch preparations. The results are useful for policymakers, consultants, and educators who offer information on the potential use and availability of the various alternative sources of capital to their respective constituents. Information on the importance of pre-launch preparations and the use of financing alternatives can increase the efficiency of financial markets by assisting new business owners in evaluating and developing better financing strategies.
Business planning, capital acquisition, pre-launch preparations