Issues in Venture Capital

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This literature review highlights venture capital and how changes in global technology have resulted in an increase in investments and how venture funding leans toward more established businesses. This can leave early-stage businesses under-served. Alternatively, there are other ways to obtain financing such as crowdfunding, angel investment, and government grants. This paper synthesizes prior research on crowdfunding models, highlighting their capacity to democratize access to funds. Angel financing is analyzed as a critical pre-VC funding channel characterized by higher risk tolerance. This paper further evaluates the role of Small Business Administration programs and R&D tax incentives on how they can assist to mitigate financing gaps and stimulate innovation. Finally, the this review integrates a biblical worldview perspective, framing capital allocation and risk-taking within principles of stewardship and social impact.

Introduction

Out of the multiple sources of entrepreneurial finance, venture capital occupies a unique position in shaping the startup landscape (Sulillari, 2024). However, founders are able to apply for other funding options through crowdfunding, angel investors, and Small Business Administration (SBA) 7(a) loans. Since majority of startups do not have large amounts of resources they can gave a hard time qualifying for traditional collateral requirements, resulting in a denial from banks for business credit. This is where the other forms of business funding becoming valuable, such as crowdfunding, angel investors, and 7(a) Loans through the Small Business Administration. Since  startups with few assets are usually rejected by banks, they usually seek funding from  venture capital firms in exchange for equity (Sofia, et al., 2022). The global venture capital industry has been going through changes due to the increase of emerging technology markets and the growth of digital business models. These advancements have required firms to adapt or be left behind particularly in industries such as artificial intelligence and biotechnology, where investment sizes have grown exponentially. Evidence points out how venture capital firms are becoming more concentrated in more mature industries, while leaving plenty of startups without access to startup capital. Due to this gap, other financing routes have gained momentum in growing entrepreneurial activity.

Crowdfunding

Crowdfunding peer-to-peer (P2P) lending, use a technology-enabled funding model that leverages digital platforms to facilitate information, transactions, and connect investors directly with projects of interest for the potential to gain funding (Bollaert, et al., 2021). The multiple crowdfunding platforms currently available as of 2026 include Kickstarter, GoFundMe, and Indiegogo to name a few. There are multiple of crowdfunding options and some for very niche markets and founders should research which platform best aligns with their business. Equity crowdfunding can be a unique way for founders to gain funding by giving up small amounts of ownership to various investors. Investors gain ownership stakes in the venture with hopes that the business will become successful. This funding model falls under securities regulations and treats participants as shareholders under the U.S. JOBS Act.

Usually, crowdfunding campaigns need to have a predefined funding threshold before capital is released. One of the biggest advantages of crowdfunding platforms is the ability to receive capital without the need for large assets or established investor networks. However, for crowdfunding to be successful having a big community support is required. Additionally, crowdfunding campaigns can create public brand visibility and this can lead to brand recognition and market awareness for new businesses. Crowdfunding will remain a unique form of gaining startup funding since it can be done at a large scale from a large pool of investors, in which the investors are regular people and not limited to only accredited investors.

Although crowdfunding comes with plenty of benefits at scale, a reason it can lack popularity or not a successful route to take for a business to get funded would be the issue in that failure to meet funding targets can lead in no funds being sent out and the funds being returned to the investors. This leaves the question, how much should a business set out their target for funding? Too little and they will not be able to fund their project, too much and they may lose out on any funding at all. Finally, startup disclosure requirements can leave a startup idea exposes to the risk of intellectual property imitation. Although crowdfunding may seem like a great opportunity, both investors and entrepreneurs need to conduct their due diligence.

Angel Financing

To be an angel investors needs to have a high-net-worth to be able provide their personal funds to startups in exchange for equity. Angel investors usually have entrepreneurial or executive experience themselves, and they can use their business acumen to provide mentorship alongside financial support. Angel investment usually occurs before venture capital companies get involved. This can be due to the risk tolerance an individual investor is willing to take compared to a venture capital firm with multiple members. One strategy of an angel investor would be to be an early investor and get a return on their investment as the businesses valuation increases and sell their portion of shares to the next set of investors at a higher valuation (Virgen, 2026). Since angels invest their personal funds, they can accept less formalized agreements and provide capital faster than venture capital firms.

Angel investors willingness to take the risk to support startups in untested markets can be beneficial to support entrepreneurial culture and economic activity within a geographical area. Some common analysis that angel investors take on include founder credibility, team capability, commitment, and how realistic an exit strategy can be implemented.

Role of the Small Business Administration (SBA)

According to the Small Business Administration (SBA) website, beyond loans, funding programs, they also offer business guides and educational material to help entrepreneurs become successful business owners. This educational material can be especially essential for entrepreneurs that have not received formal business education from a university. It can also be a stepping stone for young entrepreneurs that are thinking about majoring in business. Created in 1953, the SBA is a federal agency dedicated to small business and provides counseling, capital, and contracting expertise as the nation’s only go-to resource for small businesses (SBA.gov, n.d.). In navigating through the SBA’s websites site map, one can concur that the resources provided are extensive and they cover guides such as steps required to setup a business, market research, break even point analysis, establishing business credit, applying for business licenses, mergers and acquisitions, and plenty of other business guides.

The SBA operates as a loan guarantor that usually is able to cover up to 85% of an approved loan. In 2019, the SBA facilitated about 47,000 loans totaling around $20 billion (Patel, 2022). The Small Business Investment Company (SBIC) Program and the 7(a) Loan Program are available for entrepreneurs that are seeking funding that is backed by the government, but receiving this kind of funding requires a large amount of paperwork and strict submissions. However, by putting in the work to submit all required documentation founders can gain access to government financing to scale their startup ventures. Although the paperwork required to obtain funding with the SBA is extensive, the requirements to qualify are straightforward. A business needs to be a for profit business, do business in the U.S., be creditworthy, and have exhausted financing options. These are some of the basics, but lenders will provide a more detailed list of requirements. Their website also highlights the unique benefits that come along with getting an SBA-guaranteed loan. For example, their loans usually have more favorable rates, some loans come with ongoing business support to help run ones business, and their loans also come with a lower down payment requirement and no collateral is needed for some loans. Hence, making SBA a great choice for first time entrepreneurs that do not have the needed network to help them launch, get funding, or whom do not have access to reliable mentorship.

The Small Business Investment Company (SBIC) program is a licenses privately managed investment fund to provide capital to small businesses. The program works under a “zero taxpayer subsidy” model in which they have been able to produce positive financial outcomes for the U.S. Treasury. In utilizing public and private partnerships, the SBICs program is able to provide funding to a large number of businesses to help drive the economy.

When visiting the SBA website one can search for the SBIC and use the filters to narrow ones search by investment strategy, fund style, and state. This will then provide a list full of investors that are partnered with the SBA and are looking for small business to fund. This program works in a way where venture capital funds put money into the SBIC program and the SBA provides 2x of what the investors provided. These funds are then used to provide both debt and equity. For example, in regards to debt, the SBIC will provide a loan between $250,000 to $10 million with an interest rate between 9% to 16%. In regards to equity, the SBIC will provide funding in exchange for a stake of ownership in ones company (SBA.gov, n.d.). The 7(a) Loan Program is used to assist businesses with obtaining funding with a borrowing cap at $5 million. This allows founders that have a hard time getting business funding to have an opportunity even without established collateral. This is a great program that founders can utilize from the Small Business Administration to receive the funds they need to obtain assets such as equipment, computers, and furniture.

Laws That Give Small Businesses a Competitive Advantage

Some laws that give small business a competitive advantage include general set-asides, small business jobs act, R&D tax credits, and the SBA’s 8(a) Business Development Program. General set-asides are government contracting policies that are put in place to maintain certain acquisition opportunities exclusively for disadvantaged, or specialized businesses, such as women-owned, service-disabled veteran-owned, or HUBZone companies (U.S. General Services Administration, n.d.). Typically, there are two ways in which these programs are used to implement these special programs (Shagbazian, et al., 2026). For example, set-aside (SA) auctions, where the public buyer restricts participation in auctions to targeted businesses, and bid subsidies in auctions where the public buyer adds a percentage discount to targeted business bids, making these bids awarding contracts based on the adjusted bid (Shagbazian, et al., 2026).

According to The US Small Business Administration (SBA) a minority business enterprise (MBE) as a business that is owned by someone who is socially and economically disadvantaged. While the total revenue for minority owned businesses in the US has been growing, their revenue metrics is still behind compared to their nonminority peers (Blount, et al., 2021). Jumpstart Our Business Startup Act (JOBS Act) has also given small businesses a competitive advantage, especially in regards to mergers and acquisitions. Additionally, Title I of the JOBS Act, makes the IPO process for emerging growth companies (EGCs) a lot more faster and easier to access (Chu, et al., 2022).  For example, the JOBS Act adds a layer of competitive advantage by reducing or even at times eliminating emerging companies from many accounting and disclosure requirements, particularly those required by the Sarbanes-Oxley Act (Chu, et al., 2022).  

Legislative and policy instruments have been created to help small business creation and growth and opportunities. Examples include the JOBS Act, research and development (R&D) tax credits, and programs targeting Veteran owned and women owned small business. R&D tax credits is a well known policy that has been established in order to encourage business innovation investment. However, startups that have obtained venture backing have still shown to have come across challenges in fully utilizing these incentives compared to larger established businesses (Chen, et al., 2024). However, these established policies are still essential for reducing the tax cost of business creation and innovative growth. Finally, Federal programs such as the SBA’s 8(a) Business Development Program, are put in place to further assist economically disadvantaged founders by providing specific government contracts and providing developmental support solely to this founders that meet certain characteristics that may put them at a disadvantage.

Biblical Worldview Application

 One of the most interesting sections of this weeks readings in Understanding Profits from the Christian Perspective is where Block, A. mentions principles to set our priorities, in which he lists; “You cannot serve God and money, It will be easier for a camel to pass through the eye of a needle than for a rich man to enter the Kingdom of God”. It is evident that Jesus has put the spiritual values that one has to be in a higher priority than material possession that one acquires. Additionally, Jesus has warned about the lingering dangers that come around having wealth and power. These are priorities which are at the core of a Christian perspective on economics.

I believe that with intentional effort at mass we are able to pursue business productivity and still have freedom for consumers, labor, and emerging business competitors. Pursuing business productivity aggressively, can become evil if it is done at the costs of others. An example of such evil aggressive tactics can include exploiting labor from poor countries, undercutting competitors, and using a monopoly to dominate consumer choices. Productivity can provide businesses with a competitive advantage. However, it is essential for business leaders to make ethical decisions where their increased productivity can provide an increase in consumer choices, improve quality of products, lower prices, and raise wages for workers. 

Entrepreneurship can often be seen as a vehicle for some to escape poverty, create community well-being by offering needed services and products, increasing the jobs available in a community, and encouraging societal progress (Polychronopoulos, et al., 2024). From a Christian viewpoint, the pursuit and obtaining of capital can be seen as a resource entrusted by God, in which there is a need for responsible stewardship. The Parable of the Talents (Matthew 25), shows us through scriptural studies how important it is for us to wisely manage and multiple our entrusted resources from God. Investing naturally brings uncertainty, with many investors thinking abut the possibility that many businesses they invest in will not succeed, and yet they continue to take the risk to receive a financial reward for their efforts. Integrity, justice, and community contribution are some of the fundamental values that entrepreneurs and investors should uphold throughout their professional journey. It is then important for those in business activities to use resources in a manner that can create value, generate employment, and expand opportunities (Ephesians 4:28; Micah 6:8).

The contributions made by entrepreneurial activity has attracted growing scholarly interest to further academic literature in economic activity. This can be because the creation of business can play as an essential role in sustainability challenges. The diversity in emerging entrepreneurs is also becoming more and more recognized as challenges that are being addressed to create more inclusive growth (Karlstrom, et al., 2024). Hence, entrepreneurs are now able to be in positions to make an impact in society to help address challenges in gender and racial balances in their  communities, because racial wealth inequality continues to be an issue in the USA (Robert, Et al. 2025). For example, entrepreneurs that are women can face challenges due to gender differences in obtaining funding for their business (Irwin, et al., 2023).

Although prices and profit are essentially economic elements for consumers, labor, and investors, prices and profits are also protectors against the evil of power (Block, 1982). Especially when it comes to working in a profession where one has the ability to set prices and make decision as to where to distribute their business profits, it becomes even more essential to not have a corrupt mindset and to make decisions under Christian values. It would be no good if a business person becomes extremely profitable, saves all their money or spends on self indulgences. Such profits would then be wasted on evil. However, if a successful business person shares their profits through social impact, providing assistance to those that need it, giving to charity, or investing on a project for the good of the community, then such earned profits can be seen as good. In regards to price setting, there is space for evil by those that set high prices, especially in monopolistic markets. Price setting should not be used as pure profit driven, but also set to meet the demand of consumers without overly exploiting a need for the product. God has given us creativeness and the drive to subdue the earth to our material benefit and enjoyment (Block, 1982). It is then our responsibility as Christians being in the profession of entrepreneurship to contribute to the redistribution of wealth, provide financial benefits to others, and provide a financial net to support the less fortunate. Then I would say that yes, we are capable of pursuing profits through a business we create and still be able to share our gains with our neighbors.

In Deuteronomy 8:18, God reminds Israel that it is He who gives the ability to produce wealth. Daniel 2:21 declares that God “removes kings and sets up kings.” Self-governance would then suggest full ownership, and control of how one goes about producing for society. If God is sovereign, then no economic system, corporation, investor, or entrepreneur is ultimate. Daniel 2:21 declares that God “removes kings and sets up kings”. Hence, economic power, will always be secondary and contingent. Gaining economic success can create the illusion of independence. In which James 4:13–15, mentions merchants are warned against bragging about future financial gains without acknowledging, “If the Lord wills.” The problem would then not be economic planning, but it would be self-sufficiency where one forgets dependence and acknowledgment of Gods will.

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Block, A. J. (1982). Direction: Understanding Profits from the Christian Perspective [Perspective I]. Vol. 11 No. 1. 19-25. https://directionjournal.org/11/1/understanding-profits-perspective-i.html

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Keywords:

venture capital issues, problems in venture capital, venture capital challenges, VC industry risks, venture capital market trends, startup funding challenges, venture capital risks and rewards, VC investment problems, early-stage funding issues, venture capital funding gaps, venture capital due diligence challenges, VC portfolio risk management, venture capital valuation issues, startup valuation problems, venture capital exits challenges

Citation: Virgen, M. (2026) Issues In Venture Capital. Doctors In Business Journal. DOI: https://doi.org/10.5281/zenodo.19771269