capital in the 1970s. During the 1980s and 1990s, the venture capital industry grew in importance and experienced high volatility in returns. Despite this cyclicality and crisis such as Dot Com; venture capital has consistently performed better than most other financial investments and continues to attract new investors. Sources of entrepreneurial financing Financial bootstrapping Financial Bootstrapping is a term used to cover different methods for avoiding using the financial resources of external investors. It involves risks for the founders but allows for more freedom to develop the venture. Different types of financial bootstrapping include Owner financing, Sweat equity, Minimization of accounts payable, joint utilization, minimization of inventory, delaying payment, subsidy finance and personal debt. External financing Businesses often need more capital than owners are able to provide. Hence, they source financing from external investors: angel investment, venture capital, as well as with less prevalent crowdfunding, hedge funds, and alternative asset management. While owning equity in a private company may be generally grouped under the term private equity, this term is often used to describe growth, buyout or turnaround investments in traditional sectors and industries. Business angels A business angel is a private investor that invests part of his or her own wealth and time in early-stage innovative companies. It is estimated that angel investment amounts to three times venture capital. Its beginnings can be traced to Frederick Terman, widely credited to be the "Father of Silicon Valley" (together with William Shockley), who invested $500 to help starting up the venture of Bill Hewlett and Fred Packard. Venture capital Venture capital is a way of corporate financing by which a financial investor takes participation in the capital of a new or young private company in exchange for cash and strategic advice. Venture capital investors look for fast-growing companies with low leverage capacity and high-performing management teams. Their main objective is to make a profit by selling the stake in the company in the medium term. They expect profitability higher than the market to compensate for the increased risk of investing in young ventures. In addition to this, there are also corporate venture capitalists (Corporate venture capital) that strongly focus on strategic benefits. Key differences between business angels and venture capital: Own money (BA) vs. other people's money (VC) Fun + profit vs. profit Lower vs. higher expected IRR Very early stage vs. start-up or growth stage Longer investment period vs. shorter