Entrepreneurs encounter lots of problems while trying to start up businesses but the major problem faced by most entrepreneurs is issue of inadequate capital. Money they say is not everything but in terms of starting up a business, money is almost everything because without money, all the excellent ideas is of no use. Capital in a broader sense is not just money, it may be seen to include machines, equipment, building etc. But all these items have monetary value therefore we can use capital and money interchangeably.
We will be looking at ways to tackle this problem of inadequate capital. If you ask someone ways of tackling this problem, he will definitely suggest that you obtain a loan either from banks, cooperative societies or friends. But here, we will be looking at another way of tackling this problem of inadequate capital. Few who are well informed have tried the method and it has worked out for them. Many people have excellent ideas but cannot execute those ideas because they don't have capital. Banks on its own have not given this kind of people easy access to loans to execute their ideas. Their stringent laws have scared prospective entrepreneurs away. Young people with the ideas have not been able to meet up with the collateral securities demanded by banks. Even when they sacrifice their family lands and building, the high interest rate charged by banks discourages them from obtaining the loan due to fear of bankruptcy. Although entrepreneurs are risk bearers but there's a limit to every risk above which a young entrepreneur may be bound to failure. Also, the government has not done so much to support individuals with good business ideas by way of grants, interest free loans or even loans with interest. People with business acumen have been unable to take advantage of business opportunities and these ideas end up dying off.
It is important that I introduce to you a new, unpopular but highly effective funding measure called Venture Capital. This type of funding is not yet popular in most African countries but it has proved to be an effective way of funding business ideas. In every country, there must be people who are extremely talented in bringing up wonderful ideas but have no money. Also there are people who have the money but don't have that kind of brain that brings up ideas. These are people who have money and are ready to invest it in other to make more money but don't know what to do with the money or where to invest it. Venture capital has to do with the fusion of this two sets of people. When you have a good business idea, what you need to do is to locate those individuals that have the money and show your business plan to them, if they sense that your proposal quite feasible and will bear much fruit in future, they will definitely give you the money after some agreements has been reached between the two of you. The way venture capital works is that the financer is entitled to a proportion of the profit for a particular period of years after which the business automatically becomes yours. The ideas talked about here are not common ideas, it must be innovative and inventive in nature. You may not be able to convince someone to assist you in opening a shop at Onitsha Main Market to sell Cloths. He would rather open the shop and employ you to work for him than giving you the capital and then be receiving a proportion of the profit. Many individuals have turn to business owners through venture capital. Also, wisdom should be applied while presenting your business idea because some financers will show little interest in your proposal but end up executing your ideas. Therefore, not all information about your operation should be disclosed. The proposal should be in a form that will make him understand that you are the only person that can successfully run the business.