Startup capital is the money which is needed to launch a new business. It can arise from various sources and can be also used for any purpose that helps the startups to have an actual business out of an idea. Startup capital is also known as Startup funding.

Startup funding is one of the most difficult tasks which the founders face. Without having any authentic source of finance in hand, ventures brawl to achieve significant resistance, grow the succeeding generation products and services, hire top level talent as well. And, if you’re also like most of the other startup founders, it is laborious to find out which type of funding capital you should certainly categorize.


Funding from angel investment in your startup-

Angel investors are individuals with excess cash and an eager interest to invest in the expected startups. Such investors also work in categories of networks to cumulatively safeguard the schemes before investing. They also provide counselling or advice alongside the capital. These angel investors have also helped various well known companies to get started like Google and Yahoo. This substitute of investing generally happens in a company’s primary stages of growth. They favour taking more risks in the investment with higher returns.

Angel Investment if used as a funding option has its own drawbacks. These investors invest less than the venture capitalists. They are basically the individuals with high net worth, who look forward to putting a comparatively small amount of money into the startups. Angel investors are one of the most easily attainable forms of primary stage capital for a businessman and therefore are an important part of the capital fundraising environment.

The biggest benefit of having an angel investor is that they generally make an investment decision by themselves. There’s no need to manage a partnership or a corporate ranking of making and taking decisions, which allows these investors to make wagers that they feel agreeable with. Frequently, this is all that an entrepreneur needs for the development of their startup.

Raising funds with the help of an angel investor always takes prolong than expected- what you need to do is find the right investor, prepare an investor presentation, negotiate the investment terms, etc.

Moreover, ownership requirements may also discourage you from an angel funding:

If you give away near about 10 to 50 percent (or higher than that) of your business, but there will always be the risk that the investors will figure that this is the business’s biggest hurdle towards success, and even can get fired from the company which you originated.

The Pros-

  1. Will invest based on your idea as a founder.
  2. Provide connections to the angel investment groups.
  3. Most probable to play a tractable role than VC firms.
  4. A way to engage advisors & future introductions to other investors.

The Cons-

  1. Requires time nurturing their contacts.
  2. Dealing with inexperienced investors with little formation.
  3. No experienced operators/ qualified advisors.
  4. Requires giving up notable value on your venture.


Funding from venture capital for your business-

This is the funding option where you make a considerable wager. Venture capitals are proficiently controlled funds, they invest in those companies which have vast capacity. They generally put funds in a corporation against equity and leave when there is an Initial Public Offering or an acquisition. Venture Capitals provides proficiency, counseling and also acts as an indicator of the organisation that where it is going, estimating the business from the viewpoint of competitiveness and extensibility.

An investment by a venture capital may be suitable for small enterprises which are far from the startup phase and are already initiating revenues. developed businesses like Flipkart, Amazon, etc with an exit strategy/conspiracy already existing, can acquire up to millions of dollars which can be further used to invest and grow their company rapidly.

Venture capital is subsidizing what’s funded in startups and small enterprises that are usually at a high risk, but also got the capability for exponential expansion. The basic goal of a venture capital financing is extremely high return for the VC firm, normally in the form of an acquisition of the startup or an Initial Public Offering.

Venture capital is an amazing option for the startups which are looking to scale bigger and quickly. As the investments are impartially large, your startup should be ready to take that money and expand.

However, there are some drawbacks to Venture Capitalists as a funding capital option. Venture Capitalists have a short restraint when it comes to a company’s devotion and often look forward to recovering their investment within a 3 to 5 years time span. If your product is taking longer than that to get to the market, then the venture capital investors may not have any interest in you and your product.

They basically look for bigger chances which are a little more steady, the companies which have a strong team of people and a good resistance. You need to be much more elastic with your business entity and occasionally give a bit of more authority, hence if you are least or not interested in overly counseling or settlement, this might not be your strongest option.

The Pros-

  1. Large funding amounts from every firm.
  2. Arranged due diligence & funding processes.
  3. Efficient board members.
  4. Adds credibility and media attention.

The Cons-

  1. Nobody wants to be the first main investor.
  2. Exhausting months of directing and investor meetings.
  3. Once you take money then you are working according to them.
  4. Pressure to make choices that may not be best for business.

Funding from business incubators & accelerators-

Primary stage businesses should consider Incubator and Accelerator programs as one of the most suitable funding options. These are found in almost every utmost city, these programs accommodate hundreds of startups every year.

Although used identically, there are some basic differences between these two terms. Incubators are like Parents to a child, who nourish the business, which provides shelter tools, training and network to an entity. Accelerators are the same thing, but an incubator helps and assists a business to be able to walk, while an accelerator helps to run and take a massive jump. Accelerator programmes are for fixed term programs which includes investment chances, connections with exclusive mentors, and various educational programs.

Such projects normally run for 4 to 8 months and require a time commitment from the owners of the business. This way you also get a chance to make good networks with investors and other startups via this platform.

The Pros-

  1. Focus on your startup and make progress.
  2. Surrounded by other renowned founders.
  3. Chance to present yourself to a room full of qualified investors.
  4. Credibility if you have joined a well-known accelerator like Y Combinator.

The Cons-

  1. May not get into your chosen accelerator on the first application.
  2. Have to travel and stay there for various months.
  3. Fast-paced with big expectations.
  4. Funding amounts are small & equity taken can be significant in comparison.


Funding from Crowdfunding-

One of the recent ways towards funding in a startup is Crowdfunding. It is becoming more and more popular, day by day. It is similar to taking a loan, contribution or investments made from more than one person at the same time.

Let us have a short description on how crowdfunding works. In this, an entrepreneur will place a detailed description of his/her business on any crowdfunding platform. Then the goals of the entrepreneur’s business, plans for making the profit, details on how much funding is needed and what are the reasons behind, etc. should be mentioned and then consumers can read about their business as well as giving money if they are influenced with their idea. Those money donations will act as an online pledge along with a promise of pre-buying that product. Anyone can contribute money, if they aim to help a business that they really believe in.

Why Crowdfunding is considered as a funding option for your business:

One of the great things about crowdfunding is that it has the ability to generate interest and hence can help in marketing the product along with financing. It is also considered as an advantage if you are not sure if the product will be in demand or not. This process of crowdfunding can cut off professional investors and brokers by placing funding on the hands of common people. It can even attract venture capital investments down the line for a company having successful campaigns.

It should also be kept in mind that crowdfunding is quite a competitive place to gain funding, so until and unless your business is extremely strong and it can gain the attention of all average consumers just through a little description and some images, then you may not find crowdfunding a difficult job task.

It is a method for raising the capital through a number of communities including customers and investors. Crowdfunding campaigns are started through some renowned crowdfunding sites including Kickstarter, GoFundMe, Indiegogo, and others. According to experts, the crowdfunding industry will grow to over $300 billion by the year 2025.


There are a total of three types of crowdfunding including:

  1.  Donation-Based Crowdfunding: In this type of crowdfunding, there is no financial return to investors. It is basically, disaster relief efforts and other nonprofits draw donation-based crowdfunding activities.
  2. Rewards-Based Crowdfunding: In this type of crowdfunding, there is a “reward” which is given in exchange of financial contribution. This approach is very popular among startups that are at an early-stage and are eager to develop.
  3. Equity-Based Crowdfunding: In this type of crowdfunding, there is a company ownership which is given in exchange for financial contribution. As equity owners, those who contribute receive a financial return on their investment as well as share of the company’s profits.

It is simply a method of raising capitals through collective effort of customers, friends, and investors. This way brings in the collective efforts of a large number of individuals — basically online via social media and other crowdfunding platforms.

Traditionally, all entrepreneurs spend months roaming through their personal networks, trying to get potential investors, and spend time and money to get their product in front of them. With the process of crowdfunding, it is much easier for entrepreneurs to gain opportunity in front of a number of interested parties and provide them a number of ways to help grow the business.


The Pros-

  1. No need to add the pressure of monthly repayments.
  2. Recruitment of more stakeholders who are invested in your success.
  3. Raising in public can help create urgency among possible investors.

The Cons-

  1. Strong marketing strategy and a sizable marketing budget is required.
  2. Legal fees and filing with the SEC is necessary.
  3. Costly and takes a big bite from your raise.
  4. Success can rely on your round, subscribed in advance.

Funding from winning contests-

A surge in the number of contests had helped to maximize a plethora of opportunities available for fundraising. It helps entrepreneurs with some business ideas to start their own businesses. In this sea of competitions, you either have to make a product or to prepare a business plan.

After winning these contests you get some media coverage. You really need to build your project to stand out of the line to improve their success in these competitions. You can get an opportunity to either present your idea in person or present it through a business plan. It must be brief enough to influence anyone that a great investment can be made in your idea.

Here are some names of popular startup contests one can consider to take a part of; NASSCOM’s 10000 startups, NextBigIdea Contest, Microsoft BizSparks,  Virtual VC FinTech & Payments, Hustle Raise,  CatchFood CF, Startup London Club Pitch Night, IMPACT Methodology Cohort 2020, DM Event, Festival of Ideas and Lets Ignite.

The Pros-

  1. Opportunities for connecting that may be valuable in future.
  2. Get social followers.
  3. Opportunity to interact with your customers.

The Cons-

  1. Diversion from focusing on product & customer development.
  2. Opportunity cost.
  3. Focus on investors and not on customers.


Challenges faced by the startups in choosing a funding option and how to overcome them-


1. Scalable model for your business- 

In case you are willing to expand your small business using a loan or by going for a round of venture capital, you will be needing a scalable business model. Investors, particularly, wishes to fund or invest only on scalable or businesses that are ready to scale. Your model of business must display the potential to increase the revenue even with some minimal expenditure in the upcoming months or years.

Your business idea needs to be scalable:

This clearly depicts that it should be able to increase the profits without increasing the costs at the same or higher rate. It needs to unique for sure. But without this quality of scalability, it is less likely to be investable.

2. It needs to be determined that how much money is needed-

Whether you ask any angel investors to invest in your expansion or seek a bank loan, you should know that how much money is needed. Many people will suggest you should raise the money as much as you can. However, in numerous cases, more is not always better.

A business plan needs to be prepared:

It’s possible to plan anything about how you are going to spend your money without even having a plan for business. Factually, mostly all investors will invest in your venture without even knowing a complete business plan. But your business plan needs to have a practical financial forecast. You must forecast the actual expected cost of the investment or loan that it will cover as well as the returns it will give in future. The expected statistics as well as facts and figures must have a justification.

You need to demonstrate that your company has a positive cash flow:

Showcasing that you have a positive cash flow is a key, especially for any budding startups and small businesses finding an opportunity for expansion. There is not a one approach here. Practically, a better and positive cash flow increases the probability of receiving any desired funding.

3. Finding a suitable funding option-

A number of funding options are available today for new startups. These options increase the chances of getting most of the funds, you just need to choose a most suitable alternative for funding. Many a times, you also needs to use more than a option for investment in your startup.

4. Spending money wisely after you receive the funds-

If you are taking any investment, you are liable to your investors to do whatever you promised to be done with their funds, so that it is transparent while thinking of changing course. You must not go on pending spree. You should not spend money on extremely expensive furniture, workspace, infrastructure, equipment, business trips, and lunches.

5. Keep the investors in loop-

There is a probability that you decided to get outside investment, but your contacts requires you to give investors or customers their proper return in due time. Furthermore, displaying them that their money is placed to be used for good and it will help forge a bond of trust.


Countries which provides extraordinary benefits to startups-


There’s a big seize to Start-Ups Chile. But you must create a startup that has the potential to become a phenomenon worldwide. The benefit of the startup here is that it’s conducted entirely in English, even though the country is Spanish-speaking.

2. Denmark-

Denmark is the most entrepreneur-friendly country. It gives you entry to the single market. Prime part of the European Union’s program will provide you with a 2 year working visa and also a chance to settle in that country.

3. Ireland-

Enterprise Ireland is that scheme, aiming to attract entrepreneurs from worldwide. If you have a startup with high-growth possibilities, you can apply for funding from this program. If you get acceptance, you will get thousands in the funding and a chance to live and work there.

4. Germany-

You will get a highly educated as well as multinational workforce whose second language is English, and also find a first-class infrastructure, combined with the local government incentives for creating startups in the city. The corporation tax in Germany is 15% only.

5. Sweden-

Sweden has generated some very successful startups in the recent years and is the home to some of the great inventions and technologies.The corporate tax is 20.6% in Sweden.



If you really wish to grow more faster, you will be needing outside sources of capital. If you remain excluded without any external funding for too long, then you will not be able to take full advantage of the market opportunities.

Lending options equal to the size of a size are available and can make it easier than ever to get started. All the responsible business owners or entrepreneurs should ask themselves one question that how much financial assistance they exactly need.

You all can see that there are many potential sources for startup capital- and there is a huge amount of money on the table out there. It is important for each business founder to analyze which type of funding is best for their objectives and the targets for their company. Everyone should have a deeper insight of each type of startup capital before you start with the process of trying to secure it.


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