Creating a new company; becoming an entrepreneur. It’s an exciting and challenging process that usually starts out with someone having a great idea for a new product or service that they are certain has a bright future in the market. But how do you position yourself for success? We hope to help guide you through those questions and answers starting with this series, "Funding Your Startup." We'll cover other core business topics in later series but bear in mind that since we focus on consulting for startups interested in building web, mobile, and social networking applications so most of our examples and business cases discussed on our blog will cater to those style of startups.
Funding a new company
There are several options available for seed funding and growth capital when it comes to getting a new business off the ground or up to full speed.
- The lean startup: Do-it-yourself approach to funding startups
- Angel investors and angel networks: Successful entrepreneurs turned investors who offer experience and hands-on guidance.
- Venture capital investment: High-risk, high-reward investment funds that demand results.
- “Crowdsourced funding” or “crowd funding”: Organized micro investments.
- Small business bank loans: A more traditional method for small business funding.
- Government small business loans and assistance: A quick look at Uncle Sam’s helping hand.
Each of these funding types has advantages and disadvantages and we will do our best to cover both in their respective articles. They can also be combined to best suit your startup’s needs and to help attract additional investors. For example, the financial capacity to self-fund much of your starting capital requirements may help to bring a bank on board. That bank loan could potentially help aid in securing interest of a venture capital fund an angel investor.
What to do before you make a decision about funding
If this is your first time seeking outside investment or setting up a startup you should definitely consult a local attorney or a Small Business Administration expert. This will help to ensure that you’re both legally squared away and not accidentally giving away rights that can allow an outside investor to seize control of your company or your intellectual property sometime down the line.
One piece of advice that you are likely to hear from either an attorney or an SBA advisor is to set up a company before seeking funding, regardless if it’s a multi-partner LLC, sole-proprietorship, corporation, or other business type. While you can solicit funding without the limited liability or shield of an LLC or corporation, you do run the risk of creating a very personal financial liability when offering potential investors equity in exchange for their investment capital.
We will cover various business types and forming corporations in subsequent articles and series. For now, we are just going to focus on the money itself.
Part One: Do-it-Yourself Startup Fundingblog comments powered by Disqus