Final answer:
Entrepreneurs, especially inventors and startup founders, often face lower profits than expected due to imperfect information, misjudgment of the market, and external factors. They rely not only on their own investment to signal belief in the venture but also on the strategic advice and financial support from angel investors and venture capitalists to mitigate risks.
Step-by-step explanation:
Entrepreneurs, including inventors and founders of startup firms, sometimes find that their ventures bring in less profit than anticipated. This can be attributed to a range of challenges. One such challenge is the imperfect information regarding the potential success of the venture. While founders may have a belief in their ventures, as indicated by investing their own money, they may still misjudge the market, misallocate resources, or fail to execute their business plans effectively.
Furthermore, the enthusiasm and optimism of founders, beneficial in driving the venture forward, can also lead to overconfidence. External factors such as market volatility, competition, and regulatory changes can also significantly impact profitability. Recognizing these challenges, angel investors and venture capitalists often engage closely with the founders they support to mitigate risks, providing not just financial backing but also strategic advice.