Before a startup can grow and thrive, it needs to secure outside funds. The goal of startup funding is to convince investors that your business model has a large opportunity and your team is capable of realizing it. Investors make their decisions based on your potential to succeed and their own risk tolerance. Typically, they’ll demand equity or debt stake in your company in exchange for their investment.
During the early stages, a new startup might be able to find seed funding or Series A funding from angel investors or venture capital firms willing to take a risk on a potentially high-growth company. However, getting to this point requires a solid business plan and strong pitch deck. Founders at this stage should also ensure they have proper documentation and set clear expectations with friends and family, who may invest in their startups without a formal agreement.
As your startup grows, you’ll need to secure additional funding for things like equipment, infrastructure, and even employee salaries and benefits. Thankfully, there are many ways to fund a startup—the best method for your business depends on its current industry, growth stage, and goals.
In addition to traditional bank loans, many startups use lines of credit or venture debt. While loans must be repaid with interest, they don’t dilute ownership and can provide access to much-needed cash flow for your company.