Thus, an entrepreneur can retain complete control over the company subject to paying his or her creditors. However, self-financing may not generate enough revenues to pay all the business expenses. Additionally, getting favorable credit terms and requiring customers to pay in advance might be difficult. A collaborative arrangement with an established company is another potential source of financing for a new business. Strategic alliances or joint ventures often occur where a company has technology that might benefit a more established company, but lacks the capital, personnel or additional technology to exploit it.
Strategic alliances can take many forms.
The established company can become a minority investor in the start-up company. It can fund the start-up company's research in return for the right to license any resulting technology. If both sides have to conduct research, then a strategic alliance might involve extensive cross-licensing of technology. Both sides may have to give up a substantial amount of autonomy for any joint project. A strategic alliance might be a less expensive source of financing than venture capital.