How To Finance Your Startup

How-to-finance-your-startup

It is one of the most important responsibilities of the CEO to keep the business funded at all times. No funding equals no business. Here's how to keep your business financed:


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As a startup founder it's important to understand a typical fundraising journey on the adventure that building a business represents.

Seed Stage

The start of the journey and the first funding milestone is the seed stage. This is the initial cash used to get the business off the ground - carry out research, invest in a product prototype, secure a strategic partner or win that vital first customer.

It can be described as the enterprise finding its way and figuring out if there's a business and a market with potential. The business is pre revenue. Usually the cash to fund this part of the journey is personal - very personal. It's the founder's money; it's his or her families helping or it's coming from friends.

Local, national and even EU government help can also be sought at this stage and help may be available by way of feasibility funding, marketing help, assistance with developing a business plan.

Recommended reading: How to Put in Place Financial Management for Your Startup

Operational Stage

You have now got your startup up and running and operational. Now you need to look at new sources of finance. 

At this stage, the firm will need to be valued, and too much funding can overly dilute the founders' stakes in the venture. The key is to know your growth track, determine your sales and profit benchmarks, and be shrewd when it comes to both the timing and valuing each stage.

Funding Types and Stages

Type of funding

Start-up

Operational

Growth

Personal savings and remortgage loans

X

   

Friends and family

X

   

Credit cards/personal loans

X

   

Current salary/income/earnings

 

X

X

Banks

X

X

X

Angel investors

X

X

X

Venture capitalists

   

X

IPO

   

X

M&A

 

X

X

Licensing or sale of distribution rights

 

X

X

Grants

X

X

X

One final thing to remember is that when you realise your company needs money it may be too late. It should therefore be planned well in advance at each stage.

Over to you now. How did you go about finding finance for your startup? Tell us in the comments below. 

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