How Start Up Business Funding Works

Start up business

Everyday there’s a new idea spinning around in one’s mind and everyday a new start up business project gets funded… so to speak. If a start up business has to grow from a seedling to a big company, funding is required at different stages of growth.

Entrepreneurs work hard on their idea and giving away a certain portion of their company can prove to be very painful and distressing in many case. However, receiving the right funding from the right people can be extremely favourable even if it results in having much less equity in the company than when they were a start up business.

The importance of start up business funding can’t be stressed enough. However, there must be a qualified reason for raising the funds which require many questions being answered. One of the main question is, how are you going to raise this start up business funding?

Self funding is obviously the most popular as many people have to set up by self investing in your own business. Your start up business funding may go through a friends and family round followed by a government grant or bank loans, or you may want to venture down the angel investor and venture capital path.

Anything is possible when it comes to start up business funding. However, the ultimate question that requires an honest answer is, does your business actually need to go down the venture capitalist path? Does it need investors at all?

The illustration below explains start up business funding and maps out the investment vs growth pattern in an easy to digest way from a start up business to a big company. Click on the image to enlarge.

How start up funding works

San Francisco-based start up business community organisation Funders and Founders has created the infographic above that shows the entrepreneurs journey through various stages of investment and growth.

Do you have any funding and start up business growth stories you can share?

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  • James White

    Amazing how unequally the pie chart is split up in terms of percentages 🙁 But I get the point of how 17% of a very successful company is more than 100% of nothing. Would you agree with it?

    • Thanks James, I complete agree with the % split. Yes, it can be hard to part with and yes, it can be seen as unfair, but by this point you’d be walking away with major dividends anyway. Just as long as one is still passionate about their project/business when circumstances change!

  • Doug

    Awesome stats here and a great visualisation for understanding funding!

    • Absolutely and hence thought to share with everyone 🙂