1.
7
WWAAYYSS WAYS TTOO TO
SSTTAARRTTUUPP FFUUNNDD WAYS YYOOUURR
TO
Bootstrapping
Tap into personal savings, borrow
from your 401(K), or keep your
day job and use part of your
paycheck to bankroll your startup
until you can secure outside
funding.
WARNING
Don't take it all. Keep an
emergency fund in case a client
doesn't pay on time, a pipe bursts
and destroys equipment, etc.
Raise money without giving
up equity.
Crowdfunding
WARNING
Don't get swept up in success
stories. Unlike the Pebble Watch,
most campaigns do not make
500x their fundraising goal. And
because preparing & executing a
campaign takes months, it can
slow your timeline.
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SEED FUNDING
figure out your product and target market.
This early investment help fledgling companies
develop products, research target markets, &
start building a user base. Funding options
include bootstrapping, friends and family, angel
investors, and crowdfunding.
WITHOUT IT, MOST
VCs ARE WARY:
If friends & family aren't
confident enough in your
idea to pony up cash, why
should they?
Credit cards
Use credit cards to buy initial
equipment and cover setup costs.
You can buy some time & avoid
interest charges by transferring the
balance to other cards while you
either wait for your first customers to
pay, or secure additional funding.
WARNING
If you fail to get funding and can't
pay off the debt in full, you're
personally responsible for the
balance — and the interest
payments.
WARNING
You'll need a lawyer. There are a
lot of regulation & legalities, and
you'll need a private placement
memorandum (PPM) for any
offering you make.
WARNING
Bridge loan
Crowdfunding is a great way
to practice your pitch, get to
know your audience, & tweak
your product.
Traditional Lenders
You're ready to scale up but
haven't been able to secure
additional capital.
Come to the bank
prepared with a thorough
understanding of your
company's risks, a working
business model, & a high
credit score.
Pitch to a large pool of potential
investors, actively looking for new
companies to back. Plus, platform
posting requirements force you to
have a viable business plan in
place.
Friends and Family
It'll help cover the gap between
when you'll run out of cash and
your new funding kicks in.
SERIES A FUNDING
Scale your product & define your
ideal business model.
Your company has momentum & may be
generating revenue, but isn't yet profitable.
Series A funds growth, helping businesses extend
their user base, scale geographically, or hire
more staff.
Angel Investors
Incubators
38%
of startups get funds
from friends & family,
0.05%
of startups get money from
venture capitalists.
WARNING
Banks are lenders, not investors.
Your business needs to be
established enough to show a
track record of steady revenue, so
they can be confident in your
ability to make payments.
These accredited investors back
companies in exchange for
convertible bonds or ownership
equity.
They often band together in angel
networks, pooling resources and
providing advice to the companies
they invest in.
SERIES B FUNDING
Scale Your Business.
You have a good product/market fit & solid
business model. Series B funds business growth
to hire marketing & sales people, further scale
your customer base (e.g. move internationally),
or buy out a competitor.
VCs invest initial or growth
capital for equity.
Many VC firms also have
specialists on staff to provide
expert guidance & ensure
their investment pays off,
which can be helpful if you
don't have much experience
running a business and want
help.
This short-term loan can
give your bank account a
boost while you secure
more funding, or if there's
a set period of time — say
90 days — until your
funding deal closes.
WARNING
Be prepared for hefty fees &
interest rates to compensate for
the high-risk nature of the loan.
WARNING
Many also offer investment capital &
support staff to help with finance,
marketing, sales, & strategy, plus
established networks of experts
to help guide major decisions.
Incubators provide
DON'T ask anyone to lend you money they can't
afford to lose. And make it legal, so everyone
knows exactly what they're in for. (Will you owe
interest? Do they want equity? When do they
expect to be repaid?)
Since they stand to lose
their entire investment,
Angels like a “sure thing,"
often opting for
opportunities that will net
a major return very
quickly. Possible IPO or
acquisition within 5 years
is most attractive to
Angels.
WARNING
Because they have a vested interest
in your success, Incubator staff want
to be involved in decisions. And
there's always the possibility they'll be
at odds with your vision.
Personal Savings
Traditional crowdfunding Equity crowdfunding
Venture Capitalists
Bank loans
WARNING
If they have a stake, they'll want a
say. VCs may want to add a
member of their own team to your
upper management, or approve
any major business decisions you
make.
phones
mailboxes
conference
rooms, etc.
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Instead of contributing for
products or T-shirts, backers
donate in exchange for a
stake in your company.
And when it comes to
convincing potential future
investors, you'll already have
proof yours is a viable
market solution.
office space
WANT TO LEARN MORE?
Find out how some of the most successful
startups in history got funded:
bit.ly/StartupFundingSuccess
Brought to you by SOURCES:
Award-winning collaboration and project
management software Wrike.com
Businessweek.com, Blog.eladgil.com, Dashes.com,
Entrepreneur.com, Entrerev.com, Forbes.com, Fundable.com,
Mergersandinquisitions.com, Mytopbusinessideas.com, Inc.com,
Investopedia.com, Startupdonut.co.uk, Wikipedia.org.