Value Creation Capital
While most business owners consider the availability and suitability of debt and equity capital, we believe another important element of business capitalization is what we call value creation capital. To understand what this is, let’s review several definitions.
Investors puts capital into a business to get future benefit or financial gain.
The key terms are capital, and future benefit or financial gain.
Capital is money, resources, and labor that help generate income.
This definition encompasses resource capital and human capital, which are attracted by the potential of future benefit and financial gain.
At the heart of value creation capital are customers. They buy from you if they believe there is real value and benefit in what you do. Customers are the best form of business idea validation, and are the only source of capital that provides long-term sustainability.
In addition to customers, resource partners and team members can invest a wide range of physical, intellectual, and labor resources in your business now in exchange for future benefit or financial gain.
Summary of Options
The complete landscape of capitalization alternatives includes a variety of sources of cash, including your own money, other people’s money, personal debt, business debt, and equity investors.
Then there are value creation investors who can provide capital now in exchange for future benefit or financial gain. The form of their investment can be financial, resource, or human capital.
Based on this perspective of real-world capitalization alternatives, most all businesses can get capital. The amount and form will vary, but all non-cash forms convert to dollars – the amount you would have paid to use the resources or hire the people.