Once the business has taken shape and shows good prospects for success, we proceed with a Phase 2 equity funding but also invite close institutional business associates or even friends and family* to participate in this round of financing. This happens once the business has met our strict criteria and has proved itself that it is lined up to become a successful business enterprise.
Again, financing is only in the form of equity. Although the business is operational, it is still far from achieving positive cash flows. At this stage it would not be appropriate to saddle the business with debt.
* This is done only to the extend allowed by applicable private placement rules.