Startup funding is the capital investment that a new company receives to help get their business off the ground. There are a wide range of business startup funding options, each with their own benefits and drawbacks. The best startup funding option for your company will depend on the type of funding you need, your stage in the life cycle, and your ability to secure it.
Most startups begin with angel or seed financing. Angel investors are wealthy individuals who invest their own money in a startup for a share of ownership. Often, they will also provide guidance and contacts to the startup founders. Angels are a good source of early-stage startup funding because they tend to have a deep understanding of technology and can provide valuable feedback.
Another common form of startup financing is borrowing from family or friends. While this is a viable option for many startups, it can be risky and may cause tension in relationships. It is a good idea to always put any agreements in writing.
After receiving seed or angel financing, a startup will begin to grow and expand. This requires additional funding, which is typically secured through Series financing. The first round of Series A financing is usually the most difficult because investors will expect to see more substance than a seed round. This will also require more dilution of the founders’ equity.
Investors will usually expect a growing startup to have a clear plan for increasing revenue and a scalable business model. This is why it is important to have a strong team, a robust prototype, and a solid pitch. Once a startup reaches the Series C or later stages of funding, it is likely ready for an IPO.