This series of blog posts discusses 12 of the most common categories of funding for startup companies. The categories include:
- Bootstrapping: use of money provided by founders and revenues generated by the company.
- Customer Funding: similar to bootstrapping’s use of company generated revenue to fuel future expansion, but here, the company is paid before the service is provided or goods are delivered.
- Friends and Family: investments, in exchange for equity or debt, from friends or family members.
- Angel Investors: wealthy individuals who invest in startups in exchange for equity.
- Grants and Prizes: money raised by obtaining grants from private and government sources, or winning competitions such as business plan competitions.
- Accelerators: a structured, multi-month, program where an infusion of capital is only part of a package that also includes mentoring, office space and education.
- Incubators: like accelerators, but less structured and time sensitive.
- Crowdfunding 1.0: using a portal, like Kickstarter, to raise money from customers in exchange for a reward (usually an early release of a product, or a discount off the retail price).
- Crowdfunding 2.0: raising many small investments of capital from the general public in exchange for equity.
- Strategic Investors: raising money from companies or customers through an advance on an order for services or products, or in exchange for equity.
- Venture Capital: large investments by professional firms in exchange for equity.
- Debt Financing & Micro Loans: loans for businesses, usually conducted to finance asset acquisitions.
Each post will provide a brief introduction to the stage and type of companies suited to each category, an introduction to the form that the investment usually takes, and a discussion of some of the advantages and disadvantages of each type of funding. These posts are intended as a starting point to gain a basic understanding of financing startups. There are many other great resources out there – keep reading!