What kind of capital do you need to start a business: financial or human?

Studies of self-employment disagree on the relative importance of human and financial capital in starting a business and keeping it open. This paper uses data from the Washington Self-Employment and Enterprise Development Demonstration (SEED) to model the decision to start a business jointly with the probability that the business will succeed. We find that when start-up and survival are modeled simultaneously, human capital appears to increase the probability of pursuing self-employment, but not the probability of succeeding at it. Financial capital, on the other hand, seems to makes it easier to both start a business and to keep it going. These results shed significant light on an important policy debate: do financial markets provide too little capital to small-business start-ups?