Securing financing is one of the first financial decisions most new business owners make. It is important to be strategic about this decision as it impacts the way a startup is structured and operated.
Startup funding can come from a variety of sources including personal savings, bank loans, investments from angel investors or venture capitalists, crowdfunding and peer-to-peer lending. Each source has its own set of pros and cons depending on the individual circumstance. When choosing a startup funding source, it is important to think carefully about the specific needs of your business at each stage in its development and to be transparent with potential investors to ensure expectations are clear.
It is also important to remember that not all startup funding options are mutually exclusive and many of them can be used in conjunction with each other. For example, venture capital funding may be available for startups that are ready to grow and enter the next phase of their development but it can also be used in conjunction with debt financing through a bank and with an employee equity plan.
Whether you are raising funds for the pre-seed, seed or growth stages of your startup, a well-structured business plan and month-by-month financial model is key to successfully securing the necessary funding. As you consider your options, it is helpful to seek advice from other entrepreneurs and business owners about the funding sources they have used and what worked (or didn’t work) for them.