Startup funding is one of the first—and most important—financial decisions many business owners make. It influences everything from how you structure your company to how you manage growth and profitability.
Founders often begin with personal savings and credit as startup capital. They may also seek seed funding from angel investors or venture capital firms. These options come with their own advantages, tailored to your company’s stage of development and growth.
A friends and family round is typically the first investment for most startups, where entrepreneurs ask their close network to invest in the company. This is a good way to test out your idea, develop a Minimum Viable Product (MVP) and gain early traction before seeking professional investors. However, it’s important to carefully consider how much equity you are willing to give away in this type of investment.
Pre-seed funding is the newest form of startup financing and has emerged in response to the growing need for businesses to validate their ideas at an earlier stage. It is often used to get a startup to their first paying customers, a prototype or sufficient validation to raise a seed round of funding.
Series funding is when a startup grows beyond its initial capital and attracts larger investments. The funds raised in these rounds are typically used to scale the business, drive revenue growth and expand into new markets. Eventually, most businesses will reach the point of an Initial Public Offering (IPO) and become publicly traded.