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4.3.3. Funding from Venture Capital, Private Equity and 
Hedge Funds 
The venture capital and Private Equity, are investment 
vehicles that purchase business shares in exchange for the 
acquisition of shares ranging from a small minority to the 
majority ownership of the company (Divakaran et al. 2014). 
Usually, investors hold these securities for a period of three 
to seven years, with the expectation of creating attractive 
returns, when exiting the investment. The financing of the 
operation of venture capital may be carried out at various 
stages of the business life. Thus, there may be funding the 
exploration stage of a business idea, up to the final stage of 
development of the business in order to meet the l isting 
requirements of a stock exchange (Cochrane 2005; 
Divakaran et al., 2014). 
4.3.4. Business ‘Angels’ 
Business angels are a form of business financing that has 
shown significant activity in the last ten years. As noted in 
the Ahmad and Hoffmann (2012) study “it is believed that 
total funding by business angels is several times greater than 
all other forms of private equity finance. Governments in 
many countries try to cultivate business angels by organizing 
networks and giving special investment tax incentives. 
Several countries have also tried to improve information 
flows between angels and potential entrepreneurs that 
otherwise tend to be informal” (Ahmad and Hoffmann, 2012, 
p. 26). An important aspect of business angels is the non-
financial dimension of their contribution, as they often have a 
placement on the board of the company, providing their 
personal knowledge and contacts in the company and take 
initiatives. In a survey of 31 business angels in the UK, found 
that the greatest contribution of business angels was to advise 
the formulation of business strategy (Mason and Harrison 
1996, as mentioned in Politis 2008). Despite the fact that the 
operation of a business angel is similar to that of venture 
capital and all types of financial institutions, there are three 
important differences (Coweney and Moore, 1998). First, 
business angels make their investment in an SME with less 
bureaucracy, since they do not usually ask for the details 
required in the other forms of financing. The key element in 
business angel investment is the personal relationship of the 
business angel with the entrepreneur. Second, the size of 
investment in most cases is less than the venture capital and 
therefore is a more accessible source of capital for new 
SMEs. Third, business angels are more tolerant to the 
business risk for two reasons. First, in many cases, business 
angels choose to support an investment initiative, driven 
mostly by intuition based on experience rather than relying 
on a comprehensive business plan with clearly formulated 
long-term business goals (Politis, 2008). Then, business 
angels are willing to get involved in the administration of 
enterprise offering, alongside capital, their experience in the 
organization and administration of the business, and risk 
management. Instead, the management of other financial 
institutions do not usually want to be involved in the daily 
management of the business and risk management and 
therefore prefer to invest where the risk is low and have 
guaranteed a return on capital (Coweney and Moore, 1998).