Investing into various stages during a company's life cycle

IF you look at it from an overall basis, there are two types of persons in the economy. First are those who have set up and run a business on their own.

- PANKAJ CHOPRA

We call them entrepreneurs. The second category is of people who work for a remuneration from either the Government, a public sector enterprise or a private company. We call them the salaried class.

The salaried class progresses as they go through their career and keep saving for their various requirements, including a rainy day. They are therefore net savers and investors into the financial markets.

Typically, as entrepreneurs grow their business, the funds that they have at their disposal start to limit their ambitions. They then, if they are convinced of the long-term prospects of their business, look out for external sources of funds. This category, therefore, usually borrows from the financial markets.

As you are aware, there are several means in which these firms can raise funds. It starts with friends and family who support for some time. Then it is the formal markets. If the business has enough assets and a concrete plan, it may be able to raise debt from the various institutions and banks that lend to companies.