How the Start Up Options Really Work Here

One of the startup’s main problems is to find sources of finance that allow it to be born, grow and become a successful business.Startups by their nature ‘burn cash’ and even when they start billing and have good earnings they may need capital injections to ‘scale up’.

Why? Let’s start with the definition of startup, which is the best at telling us what the distinctive elements of this type of business are.The startup is a temporary organization, which aims to find a scalable and repeatable business model. You can click here for getting all the information.

The startup features are therefore:

  • The temporary nature, the startup is a transitory phase, the ambition is to become a big company
  • Experimentation, the startup is looking for a business model, at the outset it does not know exactly if what it is doing will be successful, it must make many attempts to find out and find the right formula to be profitable by making innovation
  • The business model object of its search must be scalable (therefore operate in a very large market, with the possibility of growth) and repeatable in its processes (sales, distribution, etc.)

The startup therefore begins to spend a lot of money without earning it, for a period n work at a loss. Therefore it is a company that is obliged to find alternative sources of financing that will allow it to move forward in the search for the business model and to grow quickly once it has found it. Growth is another fundamental element that distinguishes the startup, for Paul Graham is the only, true characteristic that distinguishes this type of innovative enterprise from all the others.

What are the forms of financing for the startup?

  • When to start up to finance the startup
  • How to deal with fundraising

What are the forms of financing for the startup?

The first big distinction to be made is that between equity financing and debt financing: the first is the infamous venture capital, but also angel investing and equity crowdfunding, which allows one to obtain capital by selling shares in the company; the second basically consists of loans, so these are money that must be returned.

Among the ways in which a startup can be funded venture capital is the lion’s share, as it is a typical form of fundraising for innovative companies with high growth potential. But this does not exclude that the startup can access other forms of financing, for example public tenders, which sometimes also offer important non-repayable sums. Wanting to outline, the main sources of financing for the startup are:

  1. 1.       Self-funding (personal funds)
  2. Bootstrapping: the USA term refers to the startup’s ability to finance itself thanks to paying customers
  3. 3F (friend, family & fool): it is quite clear who they are and why they invest the first two categories in a startup, fools are people who ‘fall in love with the project’ and give credit to the startup for entirely personal reasons and that outside of object criteria