Raising money for a startup is a huge hurdle to cross for most startup founders. A lot of startups sets off with bootstrap financing to prove concept and acquire the first customers. That way it is easier to approach angel investors to fund the business. Others begin to make presentations to venture capitalists right from the beginning, but that is even a harder task to cross. Some way somehow your business needs money to survive, but always consider your options and what it in the best interest of your business and your vision for the company.
Rahoul Seth, the CFO of Adteractive has put together an illustration of the various stages of financing to help you figure out the type of customers, the plan and the team required at each stage of your funding process. Rahoul believes that professional funding brings you more than just funding, you also get to work with expert business partners and professional advice.
If you choose to bootstrap, be prepared to risk a part of your own savings to kickstart the business. This is very common with most founders. Others rely on additional money from friends and family. But tread carefully, you could rack up a huge debt and damage your credit rating, and it’ll be hard to get further funding.
There are a few requirements for getting funds from angel investors. You should be further along in your development of the product, you should have a management team and, preferably, a product or service on the market. A few customers is a plus.
VCs rarely invest in startups or even early-stage companies. Angels are your best shot. “You have a much better chance of winning $1 million in the lottery than raising venture capital for a startup,” says Bygrave.