StartUp Funding

What are the Pros and Cons of these options below,

  1. Angel Investor
  2. Venture Capital
  3. Crowd Funding

Any other option aside from the above?

Thanks in advance for your input guys…

You might enjoy this recent podcast by the CodePen team on this subject:

Thanks ralph will read.

You’re always looking at pros and cons with funding sources.
For loans, you’re taking on lots of personal risk and maintaining control.
Crowdfunding, you’re becoming very slightly liable to tons of people (raising expectations) and have the danger of not getting enough at the end of a campaign, and spending time on it - but maintaining funds control and having essentially lots of “gifts”.
Investors and/or VC - just make sure you’re aware of their terms. Sometimes investors end up controlling your entity if you’re not careful. Short term that helps you a lot - long term you may regret it. Depends on your business model and your product/service/goals/etc.

Look over every option you can and be careful and patient in choosing what best fits your situation. Just my .02 worth, if it helps.

Thanks for the input.

I’m also thinking prosper dot com

Or maybe a Donation so I’m not liable lol :slight_smile:

Typically, you will want to approach this avenue in the below strategy:

Initial Demo & Presentation >>> Angel Investor (Make sure the Angel Investor is accredited and very reputable. Make sure you an him/her have similar goals… it is a marriage!)

As your start up gains traction and you (hopefully) are making money and you need to take it to market quickly, you then pursue Venture Capital funding. There are multiple series of VC Funding you can raise but the more rounds you do, the more challenging it becomes.

Crowd Funding: Before the government opened up crowdfunding to raise money for a startups, this was just an online platform like Kickstarter for start ups that had products and was more of a way to move product and use that to fund the business. Though, as regulations have opened up, you can now launch new start ups and raise funding from a group of investors (Angels and VCs). Though, typically these are just Angels who invest. There are also local crowdfunding groups which are typically all angel investors who will pull their resources and agree to invest in certain start ups after they have prepared a pitch.

Remember, Business Plans don’t mean jack---- anything so keep it simple (no more than 5 pages).

Good luck, it’s not easy!

Remember, Business Plans don’t mean jack---- anything so keep it simple (no more than 5 pages).

This is definitely situational, and not always true. If you want investment from a large organization, or you want a loan from a bank, you definitely need an extremely detailed, well thought out business plan - it’s one of the most pivotal parts of the process. Five page business plans would get laughed at in that scenario. If you’re talking to some Angel investor with a single decisionmaker or a small group, they may not give a crap. I’d recommend having an incredibly detailed one and an abbreviated version. Writing a detailed business plan is as much of a help to you as to your investors - it can let you realize problems, projections, etc that you otherwise might not have.

Crowd Funding: Before the government opened up crowdfunding to raise money for a startups, this was just an online platform like Kickstarter for start ups that had products and was more of a way to move product and use that to fund the business. Though, as regulations have opened up, you can now launch new start ups and raise funding from a group of investors (Angels and VCs). Though, typically these are just Angels who invest. There are also local crowdfunding groups which are typically all angel investors who will pull their resources and agree to invest in certain start ups after they have prepared a pitch.

The difference between public crowdfunding and investment or equity crowdfunding with angel investors is a big one. Public crowdfunding, like a local event or a Kickstarter, aren’t regulated in the way you’re discussing, and they also don’t have to be about a particular product as you say. They can be, but they don’t have to be. Some platforms lend more towards a single project (product, service, application, etc) - like Kickstarter. Some don’t. Many single service or project businesses have been launched via public crowdfunding. Don’t discount it as useless until you’ve thought about it in the context of your venture.
Crowdfunding groups of angels seems to me like the same process as approaching one, except more complicated :wink: but possibly with more potential.

(Make sure the Angel Investor is accredited and very reputable. Make sure you an him/her have similar goals… it is a marriage!)

Couldn’t agree more with that. The investors will often control large parts of your company, or help you run it. Make sure your ideas align!

This is true, however most start ups will NEVER get capital from a bank becuase there is too much risk and no real assets like Real Estate for example. As you’re in the start up phase, there WILL BE pivots before you reach success and investors who back you know this which is why they aren’t concerned about all the detail because they know it will change. However they want to know you have a good idea and you have plenty of possibilities to monetize and capitalize on that idea. Obviously, once you are rolling and you start approaching banks, you do need an in-depth business plan however at this point, id consider you a small to mid sized established business rather than a start up.

I think you’re assuming a lot about the start-up(s) in question; all start-ups aren’t the same. Some are extremely fluid, others are pretty set in a path from the start. I’d say “most will never” is also a bit too generalized, as there’s plenty of start-ups or even just starting businesses in general that can get funding from banks or other large entities.

On the flip side, I’d agree that your probability of funding from a bank is not great. It’s good to find people who, as you say, aren’t as concerned about those details since they know that things can be fluid.

I’m going to hold to the fact that you can need (internally or externally) a better developed business plan, even before you’re an established business - sometimes long before. But we all have our own opinions :wink:

Anyway, I think we’ve probably given the OP what they need. Any more questions, specifically, @solidcodes ?

How big is your company?

Who owns it? (You? Family? 5 Friends? 500 People?)

And why did you start your own company?

If I were starting up my dream company, I personally wouldn’t want to give away the control to investors for $$$.

Yes, that puts me in the minority, but if I started my own company it would be to be my own boss, and the more investors you have the more “bosses” you have, and before you know it, you’ll wish you were back at your 9-to-5 day job!

Is there a way you could get your idea off the ground with little or no investors to start off with?