Sources Of Funds PDF
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Summary
This document outlines different funding sources for a business, from bootstrapping and bank loans to angel investors, venture capital, grants, and crowdfunding. It weighs the pros and cons of each method, providing a comprehensive overview of potential options.
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FUND RAISING • • • • • • • BOOTSTRAPPING BANK LOANS F&F ANGELS VC’S GRANTS CROWDFUNDING BOOTSTRAPPING • Own Resources • Without outside investment BOOTSTRAPPING PROS: § More Control § Fund Management § Forces you to be creative CONS: § Operate at a loss § Company growth § Valuable connections...
FUND RAISING • • • • • • • BOOTSTRAPPING BANK LOANS F&F ANGELS VC’S GRANTS CROWDFUNDING BOOTSTRAPPING • Own Resources • Without outside investment BOOTSTRAPPING PROS: § More Control § Fund Management § Forces you to be creative CONS: § Operate at a loss § Company growth § Valuable connections FRIENDS AND FAMILY • AKA “LOVE MONEY” • Funds from Friends and Family to put up a business FRIENDS AND FAMILY PROS: § Flexibility § Interest Free § Payment period CONS: § Relationship risk BANK LOANS • Funds from banks to put up a business BANK LOANS PROS: § Control § Temporary CONS: § Tough to qualify § High Interest Rates § Profitability ANGEL INVESTORS • Wealthy individuals • In exchange for equity • Private or seed investor • Infancy of a startup • Own money ANGEL INVESTORS PROS: § Less risky § Massive networks CONS: § Total Control § Profit sharing VENTURE CAPITAL • Venture Capital Firm • Funds of their firm • Seed Stage • Startup Stage • Expansion Stage What are VC’s looking for in a Business? 1. Identifiable Competitive Advantage 2. High Growth Potential 3. Well-defined exit strategies VENTURE CAPITAL PROS: § Guidance and Consultation § Business Connections CONS: § Loss of Control § Decision Making GRANTS • Issued by the government or private corporations • Given to businesses that benefit the community GRANTS PROS: § No need to repay § Easy to find § Gain credibility CONS: § Time Consuming § Too much competition § You must be very specific CROWDFUNDING • Funds from crowd to put up a business • Small contributions with the intention of achieving a stated objective CROWDFUNDING 1. Donation 2. Pre Order 3. Reward Based 4. Equity Based CROWDFUNDING PROS: § Test the market without spending § Maintain Control CONS: § Idea is not safe § Not for all businesses § Embarrassment
