Startup funding is the capital needed to launch a new business. It may come from a number of sources, including friends and family, angel investors, venture capitalists, or a credit card with a 0% introductory APR. In exchange for the money, startups usually give up some of their equity.
The amount of funding a startup needs depends on several factors, including its growth stage and type of business. A good rule of thumb is to raise enough capital for 12-18 months of runway, which is enough time to achieve significant milestones and position the company for the next round of financing or profitability.
At this early stage, most startup founders use their own funds to fund their businesses. This is called bootstrapping. Depending on the startup’s size and industry, this can be very difficult, but it’s also possible to do it successfully. Some examples of bootstrapping strategies include working nights and weekends while maintaining a full-time job, using free software tools for managing finances or marketing, and trading services with other entrepreneurs in return for cash.
At this stage, a startup is able to secure investment from private individuals or angel investors in exchange for equity. Incubators and accelerators are another source of early-stage funding, providing workspace and mentorship in exchange for a small percentage of the company.