Informal and Early Formal Financial Support in the Business Creation Process: Exploration with PSED II Data Set

The sequence, amounts, and timing of informal and formal support for emerging firms, as well as the impact on start-up outcomes, continue to be a central issue. Tracking reports from a national representative sample of nascent enterprises indicates that average amount of informal support is $48,000: formal support, provided after the nascent enterprise has become a legal entity, averages about $200,000. There is little relationship between the informal support and outcomes (new firm, continuing start-up effort, or quit) and informal support, but virtually no cases reporting discontinuation report any formal financial support. Over 75 percent of the total funding is provided to initiatives that have not yet become new firms.