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Financing a Startup Company Series: Intro

A primary concern of many early-stages startups is how, and where, to raise capital.

A primary concern of many early-stages startups is how, and where, to raise capital.

This series of blog posts discusses 12 of the most common categories of funding for startup companies.  The categories include:

  1.  Bootstrapping: use of money provided by founders and revenues generated by the company.
  2. 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.
  3. Friends and Family: investments, in exchange for equity or debt, from friends or family members.
  4. Angel Investors: wealthy individuals who invest in startups in exchange for equity.
  5. Grants and Prizes: money raised by obtaining grants from private and government sources, or winning competitions such as business plan competitions.
  6. 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.
  7.  Incubators: like accelerators, but less structured and time sensitive.
  8. 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).
  9. Crowdfunding 2.0: raising many small investments of capital from the general public in exchange for equity.
  10. Strategic Investors: raising money from companies or customers through an advance on an order for services or products, or in exchange for equity.
  11. Venture Capital: large investments by professional firms in exchange for equity.
  12. 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!