Startup funding is the money a business needs to get off the ground and accelerate growth. It comes in the form of equity, debt or grant funding. Investors put their own capital into startups in exchange for a stake in the company or convertible debt. As the company grows and becomes more profitable, it may receive Series A, Series B or Series C funding rounds. Each successive round requires more proof that the company is scalable and poised for success, and it also dilutes founders’ equity stakes.
Many startups rely on seed funding to help validate their idea and cover initial costs. Seed funding typically comes from angel investors or venture capital firms. At this stage, the startup must demonstrate that it has a proven team and a solid plan for developing its product. Founders should practice and perfect their pitch to potential seed investors, and be ready for tough questions about the team’s experience and ability, the market opportunity, the problem they are trying to solve and the development of their product.
Although investor funding can drive growth and open doors, it is not the right fit for every business. Bootstrapping — using personal savings or reinvesting early profits into the business — can provide more control and less stress, while still allowing for small-scale growth.