Final answer:
Investing £10,000 into a business typically increases the owner's equity in the company and provides the necessary funds to cover startup costs. This initial investment can also attract additional funding from angel investors or venture capitalists.
Step-by-step explanation:
When an individual starts up a business by investing £10,000, there are typically two main effects on the business. First, the business owner's equity in the company increases, as they have personally provided financial capital to get the company started. This investment is often reflected on the company's balance sheet as an increase in owner's equity or capital. Second, the injection of this capital provides the necessary funds to cover startup costs, such as purchasing inventory, paying for rent, or acquiring other necessary assets to begin operations.
Business founders demonstrate a belief in the prospects of their venture by investing their own money, which can also attract angel investors or venture capitalists. These early-stage investors often contribute additional funding, in exchange for a portion of ownership, with the hope of high returns from successful ventures, despite the high risk associated with startups.