Ways of Raising Capital for Startup

Ways of Raising Capital for Startup

There are many ways of raising capital for your startup. You must consider all options and choose the one that best suits your particular venture. Here we provide an overview of seven common ways of funding to help you weigh the pros and cons of each source and make an informed decision.

#1 Bootstrapping

Bootstrapping refers to the practice of funding your project out of your own pocket. This is the ideal way of starting a new venture, as you will not owe anything to anyone in the process. You are in full control over your business, and you alone make decisions. Self-funding shows your dedication, therefore your project is more attractive to investors. However, if you fail, all the hard work you have put into your personal savings will go to waste.

Pros:

  • complete control over your business
  • draws further external investment

Cons:

  • risky; can cost life savings
  • no advice or guidance

#2 Family and friends

Borrowing money from family and friends is another way of raising capital for your business. Relatives and friends base their involvement more on their trust in the business owner rather than the business itself. It is an easy way of funding but it can have a negative impact on the relationships.

Pros:

  • easy funding process
  • flexible payment method

Cons:

  • no advice or guidance
  • can damage relationships

#3 Angel investors

Angel investors are wealthy individuals that are looking to invest their own money. Their role in your project may vary depending on the terms both you and your angel must agree on. Your angel investor may fully trust you with the way you handle the funds and have no involvement in your business. Others, however, may want to participate in decision-making and/or demand a certain share of your profits.

Pros:

  • advice and mentorship from investors
  • flexible business terms

Cons:

  • partial involvement in decision-making
  • shared revenue

#4 Venture capital

A venture capital firm is a group of investors that are looking to multiply their wealth. They are usually not interested in early-stage investment. VC investors do not like to take risks and fund those companies that are already making profit. If they do decide to fund your startup, be ready to give up control to some extent.

Pros:

  • large funding resources
  • guidance and mentorship
  • grant business credibility and open opportunities for further funding and partnerships

Cons:

  • not an early-investment method
  • demand involvement and shared revenue
  • demand a portion of profit when you sell your company

#5 Bank loans

Bank lending is an another investment option. Though banks will not be involved in the decision-making process, you will have to prove that you have a sound business plan, before they are ready to lend you money. This may imply an overwhelming amount of paperwork to be done.

Pros:

  • many options to choose from
  • fast funding process, if you qualify
  • no involvement in the process

Cons:

  • risky, implies debt
  • a lot of paperwork

#6 SBA

Small Business Administration are government bodies that are dedicated to assisting small businesses. SBA helps entrepreneurs raise capital and win government contracts for delivering goods or rendering services.

Pros:

  • Facilitate bank loans

Cons:

  • Strict requirements

#7 Peer-to-peer lending

Peer-to-peer lending is the practice of receiving capital from a large group of independent investors. Traditional peer-to-peer lending involves the use of a crowdfunding platform where entrepreneurs pitch their projects, and both institutional and retail investors can contribute money.

Token sales are a new type of crowdsourcing in the blockchain industry and involves issuing and selling digital tokens. Token sales differentiate based on the type of the token being distributed:

  • ICO (Initial Coin Offering) sells utility tokens that grant access to goods and services to their holders,
  • STO (Security Token Offering) sells security tokens that work like equities, i.e. holders are entitled to a share of revenue.

Pros:

  • network of investors draw additional funding
  • less paperwork
  • many options to choose from

Cons:

  • requires effort and time to collect funding

Bonus info

IPO (Initial Public Offering) is when a company makes its shares available for public purchase on stock markets. This means that retail investors can buy a stake in the company.

Related news

Top 5 Investment Strategies for 2019 plus Plus Enjin and Japanese Amazon - Crypto News

There are many different ways to invest in crypto. Mattie talks about the 5 best investment strategies for 2019. He also gives you the latest from Enjin and news regarding Amazon in Japan. This is a daily segment! ----------------------------------------------------------------------------------- CHECK OUT OUR PODCAST: https://bit.ly/2sZCAiF New episode every Monday and Friday! ----------------------------------------------------------------------------------- Check out Altcoin Buzz Ladies! https://www.youtube.com/channel/UCxulvI2C9wUvvDDNS7S35fA/videos ---------------------------------------------------------------------------------- Connect with us on Social Media: Twitter: https://bit.ly/2GDAoCp Facebook: https://bit.ly/2wYksLB Telegram: https://bit.ly/2IAqDuI ---------------------------------------------------------------------------------- Looking for the best cryptocurrency wallets? Check these out: BitLox: https://bit.ly/2rWQnHa CoolWallet S: https://bit.ly/2Liy5bv Trezor: https://bit.ly/2IXrZic Ledger Nano S: https://bit.ly/2IyE3al KeepKey: https://bit.ly/2x5TlhM Read about them here: https://bit.ly/2rTdthZ --------------------------------------------------------------------------------- References: Top 5 Strategies in Crypto Investing Right Now https://www.altcoinbuzz.io/crypto-news/spotlight/top-5-strategies-in-crypto-investing-right-now/ Top 5 Cryptocurrencies in 2019 from The Altcoin Buzz Team https://www.youtube.com/watch?v=ylKEIbggJqc Tips on Masternodes & Staking: https://www.youtube.com/channel/UCGyqEtcGQQtXyUwvcy7Gmyg/search?query=masternode First Crypto ETF Has Been Approved In Switzerland! https://www.altcoinbuzz.io/crypto-news/first-crypto-etf-has-been-approved-in-switzerland/ Amazon of Japan, Rakuten, likely to introduce Bitcoin payments https://blockmanity.com/news/bitcoin/amazon-of-japan-rakuten-likely-to-introduce-bitcoin-payments/ 楽天が4月に組織再編:決済事業の子会社を新設、みんなのビットコインの仮想通貨事業も統括 https://jp.cointelegraph.com/news/rakuten-revailed-to-establish-new-payment-company-which-covered-cryptocurrency-exchange-service Enjin Announces Token Swap Functionality for Its Mobile Wallet https://www.altcoinbuzz.io/crypto-news/product-release/enjin-announces-token-swap-functionality-for-its-mobile-wallet/ Enjin Update https://twitter.com/enjin/status/1087099273228025858?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1087099273228025858&ref_url=https%3A%2F%2Fwww.altcoinbuzz.io%2Fcrypto-news%2Fproduct-release%2Fenjin-announces-token-swap-functionality-for-its-mobile-wallet%2F How Can Blockchain be Applied to The Healthcare Industry? https://www.altcoinbuzz.io/crypto-news/blockchain-technology/how-can-blockchain-be-applied-to-the-healthcare-industry/ -------------------------------------------------------------------------------- DISCLAIMER The information discussed on the Altcoin Buzz YouTube, Altcoin Buzz Ladies YouTube, Altcoin Buzz Podcast or other social media channels including but not limited to Twitter, Telegram chats, Instagram, facebook, website etc is not financial advice. This information is for educational, informational and entertainment purposes only. Any information and advice or investment strategies are thoughts and opinions only, relevant to accepted levels of risk tolerance of the writer, reviewer or narrator and their risk tolerance maybe different than yours. We are not responsible for your losses. Bitcoin and other cryptocurrencies are high-risk investments so please do your due diligence and consult the financial advisor before acting on any information provided. Copyright Altcoin Buzz Pte Ltd. All rights reserved.
Altcoin Buzz

Overstock Blockchain Fund Shuffles Management Ahead of tZERO Launch

Overstock Blockchain Fund Shuffles Management Ahead of tZERO Launch Overstock has promoted Joel Wright to chief operating officer (COO) of Medici Ventures, the company’s blockchain venture fund. Wright was previously Medici’s chief technology officer (CTO). In his new role, he succeeds Steve Hopkins, who recently resigned as COO and general counsel to lead tZERO, Medici’s long-awaited… The post Overstock Blockchain Fund Shuffles Management Ahead of tZERO Launch appeared first on Altcoin Today.
Altcoin Today

Hot news

By continuing to browse, you agree to the use of cookies. Read Privacy Policy to know more or withdraw your consent.