in this analysis. The question to nascent and young firm was phrased slightly differently and the results should therefore be interpreted with care. What is most striking about the data in Table 2 is the limited use of many sources. Only one source—personal savings—is used by more than 50 per cent of all start-ups. Despite frequent references to the Fs’—friends, family and fools—most firms do not rely on such sources. Apart ‘3 from credit card debt, even a major source such as bank funding is used only by a minority. In a random sample, funding by business angels and venture capital firms is close to non-existent. This is quite different from the picture of start-ups from the business press or business “typical” school textbooks. The similarity in the patterns for nascent and young firms also suggests that there is usually no radical change in the funding pattern from inception through early life. This again underscores the modest nature of the majority of start-ups. However, this is not the only reason. Just over half of the firms are started by individuals or teams who have previous experience from starting businesses, and some of these may have accumulated sufficient resources to fund the early stages of a more ambitious start-up. Further, doing much with seemingly little, and letting revenue from the market fund the development of the business, are hallmarks of skilled entrepreneurs. 2: Per cent of nascent and young firms using different sources of funding Source Not used Minor source Major source NF YF NF YF NF YF Personal savings 13 25 15 24 72 51 Personal credit card 55 53 25 28 21 19 Money from another business that the 85 96 6 2 9 2 founders’ also own Government grants 93 94 5 5 2 1 Delayed payment terms from suppliers 87 78 8 13 5 9 Advance payment from customers 86 78 9 14 5 8 Loans from family members 86 91 9 6 5 2 Loans from friends, employers or 95 96 4 3 1 1 colleagues Founders’ personal secured-bank loans 83 84 4 6 12 Founders’ other personal loans, overdraft 85 84 9 9 6 6 or other credit facilities from a bank Secured bank loans to the business itself 92 91 3 4 5 6 Other loans, overdraft or other credit 94 92 5 6 1 2 facilities from a bank to the business itself from any other organisation to the 96 94 3 3 1 2 business itself Equity from family members 95 91 4 6 1 2
in this analysis. The question to nascent and young firm was phrased slightly differently and the results should therefore be interpreted with care. What is most striking about the data in Table 2 is the limited use of many sources. Only one source—personal savings—is used by more than 50 per cent of all start-ups. Despite frequent references to the ‘3 Fs’—friends, family and fools—most firms do not rely on such sources. Apart from credit card debt, even a major source such as bank funding is used only by a minority. In a random sample, funding by business angels and venture capital firms is close to non-existent. This is quite different from the picture of “typical” start-ups from the business press or business school textbooks. The similarity in the patterns for nascent and young firms also suggests that there is usually no radical change in the funding pattern from inception through early life. This again underscores the modest nature of the majority of start-ups. However, this is not the only reason. Just over half of the firms are started by individuals or teams who have previous experience from starting businesses, and some of these may have accumulated sufficient resources to fund the early stages of a more ambitious start-up. Further, doing much with seemingly little, and letting revenue from the market fund the development of the business, are hallmarks of skilled entrepreneurs. 2: Per cent of nascent and young firms using different sources of funding Source Not used Minor source Major source NF YF NF YF NF YF Personal savings 13 25 15 24 72 51 Personal credit card 55 53 25 28 21 19 Money from another business that the founders’ also own 85 96 6 2 9 2 Government grants 93 94 5 5 2 1 Delayed payment terms from suppliers 87 78 8 13 5 9 Advance payment from customers 86 78 9 14 5 8 Loans from family members 86 91 9 6 5 2 Loans from friends, employers or colleagues 95 96 4 3 1 1 Founders’ personal secured-bank loans 83 84 4 6 12 Founders’ other personal loans, overdraft or other credit facilities from a bank 85 84 9 9 6 6 Secured bank loans to the business itself 92 91 3 4 5 6 Other loans, overdraft or other credit facilities from a bank to the business itself 94 92 5 6 1 2 from any other organisation to the business itself 96 94 3 3 1 2 Equity from family members 95 91 4 6 1 2
AustralianSmallBusinessKeyStatisticsAndAnalysis.docx