VC Funding – General

For every start-up company, one of the important steps is how to raise funds for the company. The following are various avenues to raise funds:

1. Self-Funding – The founders put their own money into starting a company. However, in most cases, this will be limited but it is an important step in funding the company.
2. Friends and Family members Funding – The founders of a start-up can raise funds from friends and family members in exchange for some equity for the friends and family members. The founders will have to clearly make all members that they may lose all their funds in case the start-up company ceases to exist. This is another important step in the process of funding.
3. A loan from Banks and Financial Institutions – This will be the most difficult avenue in raising funds for a start-up. The only way this can be accomplished is to put enough assets as collateral to get funding from financial institutions.
4. Crowd Funding – The founders can raise funds using crowdfunding online platforms. There are many online platforms available, such as SeedInvest, Start Engine, etc. This method requires some work from the founders and investment in getting approvals from the SEC.
5. VC Funding – Most start-up companies strive to get funding from VC companies. The most attractive point is that the founders need to convince the investors that their start-up will end up making money with a good exit strategy. The exit strategy could be either taken over by another company or going for an IPO. Most VC firms are used to understanding the risk involved in funding the start-up. However, in exchange for funding the VCs may ask the founders for a good part of the company (10% – 50%). In most cases, this is the only way to have funding and move from the initial stage to the growth stage in the life cycle of a company.