Startups need outside capital to get off the ground and fuel growth. The money you get can come in the form of equity (a piece of your company) or debt (money that you must pay back). No matter the type of funding, investors are making a big bet on your business. They want to see a solid plan, a scalable business model, and financials that show you aren’t just surviving but are set up for success.
Founders usually use personal savings and credit to get their startups off the ground, as this is the most accessible source of startup capital. This is called “bootstrapping.” Many people who start a business also seek out investments from family and friends to help finance their ideas. However, it’s important to remember that each round of funding involves transferring partial ownership of your company to investors.
Venture capital firms are a common source of startup funding for early-stage companies with high potential. These are typically large funds with a team of experienced investment professionals. They look for businesses that are poised to grow quickly and reach their target market, and are willing to take a higher risk in exchange for greater returns.
Startups that make it to Series C have already demonstrated significant growth and profitability. They may be ready to expand into new markets, acquire other companies, or develop and launch new products. These are the companies that attract the most attention from private equity and hedge fund investors. They will be looking for strong management teams and a clear path to liquidity, including an IPO or acquisition.