A small entrepreneur can choose from several options for funding. Banks on the one hand will look at a certain set of criteria in order to provide funding. This criterion is usually based on the financial ability of the entrepreneur to pay back. Venture capitalists on the other hand, finance promising projects with the objective of reselling their stocks at a higher price 5 or 7 years after the business opened.

Venture capitalists analyze projects meticulously before choosing those they are interested in. At the end, they choose to finance on average 5 to 10 out of a hundred projects.

A study done on 70 venture capitalists focused on analyzing the reasons behind the decision making process that these investors undergo in order to fund a project.

One of the factors is the related to the specific product that is being sold or the market. Including, how big the market is for the product, whether it has growth tendencies or if the activity is seasonal.

Strategic and competitive. Criterion relating to the concepts of strategy and competitive dynamics, including the nature and level of competition, power suppliers and distributors, the ability to block the penetration of new entrants

Venture capitalists take into consideration the managerial abilities and leadership skills of the business.

Other important factors are also competences in marketing, administration, organizational structure, sales, and production of the business.

The business also needs to be financially sound and have positive trends of development and return rates.

Funding is a factor that determines how the relationship between the investor and the company will be. This relationship is defined by the terms and conditions the both parties agree on. Venture capitalists manage their portfolio carefully in order to provide financing to the business according to the contracts they have with each.

These elements are fundamental during the qualifying process that venture capitalists and angel investors undergo in order to prioritize which projects they will provide funding to.

Although bankers may be more attracted by a business financial history, venture capitalists regard other factors highly. Managerial skills, the personality and the leadership of the entrepreneurs are for venture capitalists equally important.