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Different Types of Funding for Startup

  Do you would take your company to the next level. of course, the first thing you should think is funding! let us tell you the most convenient type of funding.

Types of Funding for Startup

1- Bootstrapping

This means Fund your startup yourself. it is the stage where the founder invests their own money to the startup (Self-funding). it is an effective way of startup financing, especially when you are just starting your business.

First-time entrepreneurs often have trouble getting funding without first showing some traction and a plan for potential success. Self-funding or bootstrapping should be considered as a first funding option because of its advantages. When you have your own money, you are tied to the business.

In fact, there are some companies that never received any external funding and are incredibly successful. You can invest from your own savings or can get your family and friends to contribute. This will be easy to raise due to fewer formalities/compliances, plus fewer costs of raising. In most situations, family and friends are flexible with the interest rate.

2-  Angel fund

Angel investors are individuals with surplus cash and a keen interest to invest in upcoming startups. They also work in groups of networks to collectively screen the proposals before investing. They can also offer mentoring or advice alongside capital.

Angel investors can either be an individual or group of individuals who use their own personal money to finance startups, rather than professionally managed funds. Most of the time, angel investors are friends and family of the founders. Other times, founders would reach out to their community to get investment. Angel investors are often ex-entrepreneurs, business leaders or wealthy individuals.

When you first start out, it is often difficult to get fund from venture capitalists because of multiple reasons. Venture capitalists are looking for startup ventures that will grow quickly, giving them tenfold returns for their investment. When you first launch a startup, getting this funding can be difficult as there are a lot of risks associated with an underdeveloped product or idea. That’s why it’s common for founders to turn to angel investors to get investment.

3- Venture Capital

Venture capitals are professionally managed funds who invest in companies that have huge potential. They usually invest in business against equity and exit when there is an IPO or an acquisition. VCs provide expertise, mentorship and acts as a litmus test of where the organization is going, evaluating the business from the sustainability and scalability point of view.

A venture capital investment may be appropriate for small businesses that are beyond the startup phase and already generating revenues.

4- Equity Funding

Equity funding is an umbrella term that refers to any means of financing your company in which you receive money in exchange for issuing shares of your stock. There are multiple methods for raising equity capital, but, depending on how you raise this money, you could be giving up anywhere from 1-100% of your business.

5- Debt Funding

it is a viable fund option. With it, you borrow cash that you will have to pay back, regardless of whether or not your company is making a profit. While you may choose to incur debt (i.e. borrow cash) from friends and family, there are other kinds of debt funding you could also pursue.

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