Using Personal Savings is the Norm for financing a new business

From a Kauffman Foundation Study – November, 2009

Using Personal Savings is the Norm, Venture Capital Comes to the Experienced, and Friends and Family are Always There.  The average number of companies started by the company founders in our sample was 2.3 and 41 percent were running their first businesses.

We analyzed the sources of funding for the businesses started by the serial entrepreneurs:

• The most significant source of funding for all businesses was company founders’ personal savings: 70 percent said they had used personal savings as a main source of funding for their first business, more than four times the number chiefly financed by any other type of funding.  Even in subsequent startups,  more than half of the entrepreneurs relied on their personal  savings.

Venture capital and private/angel investments play a relatively small role in the startups of first-time entrepreneurs, but the percentage who took venture and angel funding increased with subsequent business launches, with 26 percent and22 percent, respectively, of entrepreneurs’ most recent startups receiving such funding.

Friends and family provided funding for 16 percent and banks provided funding for 16 percent of the respondents’ most recent startups. Corporate investments played the major role in 7 percent.

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