Entrepreneurial finance is the study of value and resource allocation, applied to new ventures. It addresses key questions which challenge all entrepreneurs: how much money can and should be raised; when should it be raised and from whom; what is a reasonable valuation of the startup; and how should funding contracts and exit decisions be structured. The problem Depending on the industry and aspirations of the entrepreneur(s) they may need to attract money to fully commercialize their concepts. Thus they must find investors – such as their friends and family, a bank, an angel investor, a venture capital fund, a public stock offering or some other source of financing. When dealing with most classic sources of funding, entrepreneurs face numerous challenges: skepticism towards the business and financial plans, requests for large equity stakes, tight control and managerial influence and limited understanding of the characteristic of growth process that start-ups experience. On the other hand, entrepreneurs must understand the four basic problems that can limit investors' willingness to invest capital: Uncertainty about the future: in terms of start-ups development possibilities, market and industry trends. The greater the uncertainty of a venture or project, the greater the distribution of possible outcomes. Information gaps: differences in what various players know about a company's investment decisions. "Soft Assets": these assets are unique and rarely have markets that allow for the measure of their value. Thus, lenders are less willing to provide credit against such an asset. Volatility of current market conditions: financial and product markets can change overnight, affecting a venture's current value and its potential profitability. History Venture capital as the business of investing in new or young companies with innovative ideas emerged as a prominent branch of Entrepreneurial finance in the beginning of the 20th century. Wealthy families such as the Vanderbilt family, the Rockefeller family and the Bessemer family began private investing in private companies. One of the first venture capital firms, J.H. Whitney & Company, was founded in 1946 and is still in business today. The formation of the American Research and Development Foundation (ARDC) by General Georges F. Doriot institutionalized venture capital after the Second World War. In 1958, the Small Business Investment Companies (SBIC) license enabled finance companies to leverage federal US funds to lend to growing companies. Further regulatory changes in the USA –namely the reduction of capital gains tax and the ERISA pension reforms- boosted venture