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

Ripple Might Lose Its Banking Partnerships Due to the JPM Coin Phenomena

JPM Coin caused an uproar in the cryptocurrency and financial market with its introduction of the JPM coin. However, the chaos was non-directed; the purpose of JPM Coin was unknown. Moreover, its contribution or competition to the cryptocurrencies was also unclear. Nevertheless, JPM coin received harsh criticism from the crypto community including Ripple’s CEO Brad Garlinghouse. The reason cited for the same was lack of interoperability. The general perception is that JPM coin is as an isolated centralized cryptocurrency. However, it seems that there is more to it that it meets the eyes. Beginning of a Banking/Blockchain Revolution? JPM Coin is built on a distributed ledger based on Blockchain. While the JPM coin does not add any economic value to the system, a variety of centralized blockchains can be made to interact with each other. Hence, JPM coin might not just be an isolated incident but the beginning of a Blockchain revolution in banking. According to Aaron Brown ” it (JPM) is designed to interact with any “standard” blockchain. It needs to be a blockchain to play with other blockchains and I think the distributed ledger means that JPM Coin will circulate outside the JPMorgan private blockchain. Those other ledgers might be private or public, centralized or distributed (probably mostly private and centralized), but the overall system is distributed. ” Tokenization of the Economy Furthermore, the increased interoperability between banks might also start to include other institutions in it. Hence, the centralized or decentralized entities will get an opportunity to transact in that ‘token’ as well. While this will help the cryptocurrency markets as a whole, it might hurt the price of Ripple’s XRP massively. Until now the XRP’s investments are majorly driven on its partnerships with banks and financial institutions. Therefore, if JPM cryptocurrency starts to provide utility and execute transactions as efficiently as XRP; XRP’s demand would decrease considerably as Ripple would start losing its partners.  “I think JPMorgan will earn seigniorage creating JPMCoin. I think the exciting potential is circulation outside the JPMorgan private blockchain.” The post Ripple Might Lose Its Banking Partnerships Due to the JPM Coin Phenomena appeared first on Coingape.
CoinGape

Anthony Pompliano’s Morgan Creek Digital Capital makes strategic investment propagating mass crypto adoption

The cryptocurrency market was helped along in its pursuit of mass adoption, with many proponents of the space lending a helping hand. The latest news about the bigger players in the cryptoverse included the tie-up between Morgan Creek Digital Capital and Ikigai Asset Management. The official release stated, “Morgan Creek Digital announced today that it will be the lead anchor investor in Ikigai Asset Management’s flagship fund focused on executing systematic and fundamental liquid hedge fund strategies as well as opportunistic venture-stage crypto asset investments. Ikigai is a crypto asset management firm launched in December 2018 by former Point72 Portfolio Manager Travis Kling and partners Timothy Lewis, and Anthony Emtman.” Morgan Creek Digital partner, Anthony Pompliano, is a voracious supporter of Bitcoin, and has held a bullish viewpoint about the world’s largest cryptocurrency. Post the partnership with Ikigai, Pompliano talked about the company’s  positive devleopments, and claimed that they were well-positioned to capture the outstanding returns brought by cryptocurrencies in the coming future. Ikigai Chief Investment Officer Travis Kling said, “DLT and crypto assets are fundamentally changing our world. We are honored to receive this investment from Morgan Creek Digital and look forward to working closely together with Mark, Jason, and Pomp in this exciting arena.” Pompliano recently sat down with Galaxy Digital’s Mike Novogratz to discuss elements like liquidity, trust and custody that need to be given a boost. Novogratz stated that the cryptocurrency market was presently a booming place of business, especially with the entry of companies like JP Morgan, Telegram and Facebook. He further claimed that it was a big opportunity to invest, with Wall Street sentiments changing. The Galaxy Digital CEO added, “Wall street earlier thought that you shouldn’t take risks on something small like cryptocurrencies. They are getting close though, not doing anything but are getting really ready. We are anyway working hard on the security token business and I promise you this, the upcoming tokens and ICOs will be a lot bigger but less sexy.”   The post Anthony Pompliano’s Morgan Creek Digital Capital makes strategic investment propagating mass crypto adoption appeared first on AMBCrypto.
AMBCrypto

Hedge fund Numerai raises $11 million in funding from Placeholder, Paradigm

Hedge fund Numerai has announced closing on an $11 million investment from Placeholder and Paradigm. Numerai will use the funds to develop its Erasure protocol which facilitates the transaction of high-quality data feeds. According to CoinDesk, Numerai is also planning to expand the engineering team in order to launch the Erasure protocol. The protocol is connected to Numerai's decentralised data marketplace for predictions that goes by the same name. Users can stake their Numeraire tokens against predictions. According to Numerai, the NMR has already become one of the most-used tokens on the Ethereum network—it has been staked more than 39,000 times. In order to assure the investment went directly to fund the protocol, both investors purchased NMR, CoinDesk writes.  “By decentralizing the revolutionary ideas behind Numerai, Erasure is fundamentally changing the structure of the investment business,” said Joel Monegro, partner at Placeholder. “We’re excited to be a part of the Numerai community and to be participating in this transformation.”
The Block Crypto

Hot news

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