Raising Capital in Entrepreneurship - Literature review Example

Raising Capital in Entrepreneurship By: Name: School: City: Raising Capital in Entrepreneurship Introduction Entrepreneurship requires funds to be successful. However, there must be an additional effort by the entrepreneur, for instance, taking risks and coming up with newer ideas in order to make it successful. Many scholars have explored capital raising in a bid to trying to understand how entrepreneurs work hard in raising funds. They have strived to show the desired criterion of getting extra funds to run the businesses or expanding them. Some entrepreneurs borrow funds from friends and family while others visit their nearest banks to obtain long-term or short-term loans. Finally, they all intend to see through a successful entrepreneurship (Bessant and Tidd, 2007). To understand raising of capital by entrepreneurs, published literature is therefore reviewed and then analyzed in-depth. Appropriateness of research methods According to JOBS (Jumpstart Our Business Startups) Act of 2012, many businesses fail because of inadequate capital. It goes ahead to give the problems that are facing small businesses and entrepreneurs regarding finances and revenue (Weerawardena et al., 2010). Many times they find themselves at crossroads due to inappropriate capital formation strategies. The approach in which JOBS (2012) talks about raising capital is that of viewing it in perspectives of the problems that face entrepreneurs when they are in the process of locating targets for their capital. It goes ahead to expound on such problems one being the lack of information on how to go about it. On the other hand, Vesper (1982) and Baumol (1993) view raising of funds as next step after coming up with a business idea (Miller and Garnsey, 2000). In this case, there is some difference in research methods that each of the above articles has employed so as to reach to such appealing conclusions. In Vesper (1982) and Baumol (1983), there was a broad range of data extracted from entrepreneurs from different social classes hence giving an overview of how they worked out with capital raising especially for startup businesses (Herbig et al., 1994). The research method used was a telephone interview. This method is not appropriate because not all the respondents are willing to give honest feedback. On the contrary, many people are reached at random based on their phone numbers. It is usually evident that capital is needed at each stage of a business for various reasons ranging from expansion and restocking. However, the two articles did not give the assumptions of the methods of data collection used (Bygrave and Zacharakis, 2009). Drucker (1985) also used some sound research methods based on raising capital for both continuing and startup businesses. He used focus groups as the primary research method hence drawing accurate information from the targeted respondents (Brenkert, 2009). Unlike the other counterparts, there is a possibility to obtain reasons for choosing various capital raising ventures because of detailed discussions that ensue between the researcher and the respondents. The researcher is also used literature search where he used existing work on the internet and other articles about appropriate avenues of raising capital for any business (Davis, 2007). This was a good move although it risks duplicating the work of previous writers without adding anything new. An excellent scholarly article should have applied sound research methods to arrive at the desired and possible conclusions (Stemler, 2013). Credibility of Results Reported According to Drucker (1985) and JOBS (2012), precisely eight out of ten entrepreneurs fail in the first eighteen months of startup due to inappropriate capital raising ventures. This is a well thought of finding based on the interviewed respondents. In most cases, people do not make it to the top because they lack the capital to advance their businesses (Mollick, 2014). Many businesses need a lot of money depending on what they deal in. It is up to the management to understand how it should go about in this venture. On the other hand, Vesper (1982) and Baumol (1993) found out that raising capital for any startup is one of the highly rated challenges that need to be addressed for a country’s economic development to rise. This was based on the in-depth research that was carried out in a vast geographical area (Nicholls, 2006). However, there were many generalizations to a country level that might have overstretched the intended findings. This may have been exaggerated because there are some other burning challenges that an entrepreneur faces which include a development of a business idea, finding and maintaining an appropriate customer base, coming up with viable business location and many other problems (Busenitz, 1996). According to Greenbaum, Stuart I. and Anjan V. Thakor (2007), there is an in-depth linkage between financial systems and how they help in achieving economic growth. It was based on the United States hence, the appropriateness and applicability of the findings can be supported because the data was obtained from United States’ Survey platform that is trusted for its wide range and quality data (Gustafsson, 2006). It shows how entrepreneurs should strive to understand their finances before planning to expand their business. Such is because the more the customers, the more the responsibilities because they need more goods and services. Risk management should also be encouraged among entrepreneurs for them to be willing to invest more of their capital. In this case, such a finding can be applicable because an attribute of any successful entrepreneur is to be willing to risk in a manner that the outcome will be desirable (Ward, 2011). Measures used Some authors depict evidence of crosschecked finding based on some measures that have been put in place. For instance, Drucker (1986), Vesper (1982) and Baumol (1993) are more inclined to referring raising of funds as a crucial step in any entrepreneurship (Kuratko, 2005). They also continue listing other steps that define a successful entrepreneurial venture. Therefore, it can be related to by many entrepreneurs who strive to leave their mark in the field of entrepreneurship. Appropriate statistical measures should be applied as in the case of using statistical software that tests relevance and credibility of findings that have been derived from a detailed research (Beck, 2011). Greenbaum et al. (2007) did not apply notable statistical measures to test the reliability of data. Such might be because of the assumption that the data had already been tested and confirmed to be fit for public consumption. However, there should be no more speculations rather the data should be subjected to due process of checking for the appropriateness of the measures that had been used by the researchers involved. JOBS (2012) did not also give a guideline on which statistical measure was applied in coming up with the criterion of testing findings (Thakor, 2007). Assumptions Any researcher usually comes up with a list of assumptions that are in line with the research. The assumptions are often based on the statistical methods used in extracting data and analysis that follows it. Most of the articles have got assumptions although they are less. An excellent scholarly article should list all possible assumptions in order to guide the reader on what should be expected from the already done research (Roy et al., 2010). Some of these articles with listed assumptions on the publication on raising capital for entrepreneurship include Ducker (1986), Vesper (1982) and Baumol (1993 and Greenbaum (2007). However, such articles have also focused on a well-scheduled format that can easily be followed by the reader. On the other hand, Vesper (1982) and Baumol (1993 are short meaning that the information written was compressed hence possibility of leaving out additional information that would be crucial to the targeted readers and scholars (Colombo, 2013). Suggestions for improvement of research However much the scholarly articles have been highly rated on how they had elucidated on the topic of raising capital, there is still space to add on the existing research findings in order to make it more appealing and more detailed (Illig, 2012). It is evident that capital is a driving force in many aspects of life especially businesses, hence the need to research more on this topic. One can go ahead and collect more detailed data from wide range of companies other than focusing on few of them. It should also spread across both developed and developing countries to obtain their view of capital for entrepreneurs and other businesses. By getting a full perspective, it would give the reader wide range of choices to understand the particular topic (Mayer et al., 2012). Nevertheless, it is important for a researcher to focus on more present research methods that give more accurate and honest responses. Such methods include focus groups, face to face interviews, and questionnaires (Thakor, 2012). On the other hand, there should be less usage of telephone interviews and mail questionnaires in that they might give responses that might not reflect the situation as it is on the ground. People tend to hide some crucial information, or they shy away from giving answers to some sensitive questions. There is no need to ask personal questions that might attack the conscience of the respondents (Mayer, 2009). Raising of capital by entrepreneurs should also be broken into smaller bits, for instance, one could deal with startups separately from already established or existing businesses. In most cases, it is evident that startups face more ups and downs as compared to a stable or already existing business. It should also try to unravel the main steps that a person should follow when focusing on capital raising ventures (Piccolo et al., 2010). Such stages include; venture capital, family, and friends, and consulting traditional lending institutions. Family and friends are a source of income that many entrepreneurs and startups use because of its availability. However, it is limited because of the less amount that is at disposal by such group of people. They might not be reliable stage hence need to explore other additional steps that would be instrumental and productive. Venture capital widely deals with equity financing. Less is known about such stage of capital raising hence need to be elucidated more by future researches (Starbuck, 2009). However, I advocate for future individual researchers to address this issue to the latter. One should avoid duplicating findings of studies of his or her predecessors. New and well-planned studies will ensure that more is added to the nuggets of wisdom based on the topic at hand (Kanchana et al., 2013). Conclusion Capital is crucial in any form of entrepreneurship. Lack of it means that the business startup will collapse as early as possible. Vesper (1982) and Baumol (1993) are known for their advocating for the capital raising as a crucial stage of any entrepreneur. One should find a wide range of sources of capital in order to facilitate business venture at hand. Research methods used in coming up with an article are also instrumental in determining the credibility of findings. There is a necessity to carry out more studies on capital in entrepreneurship in order to add to existing knowledge. Bibliography Bessant, J. and Tidd, J., 2007. Innovation and entrepreneurship. John Wiley & Sons. Bygrave, W.D. and Zacharakis, A., 2009. The portable MBA in entrepreneurship (Vol. 35). John Wiley & Sons. Brenkert, G.G., 2009. Innovation, rule breaking and the ethics of entrepreneurship. Journal of Business Venturing, 24(5), pp.448-464. Busenitz, L.W., 1996. Research on entrepreneurial alertness. Journal of Small Business Management, 34(4), p.35. 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