12 Funding Sources for Startups

Entrepreneurship is a very challenging and demanding endeavor. Financial planning and the determination to succeed are both necessary. However, both are not enough to grow the business to ensure financial feasibility. With that in mind, the founders or entrepreneurs need to raise funding for their respective startups to purchase new inventory, fund a marketing campaign, and hire key personnel, amongst others.

Raising funds for startups becomes a vital component to scale a business. In return, the funding source can get a percentage stake in the startup, which a startup finance model template can monitor. These funding sources differ in methods and preferences, so here is a summary of 12 funding sources of businesses and startups they can tap into for additional resources.

1. Bootstrapping — Founders use funds from their own pockets and reinvest said profits to grow the company.
2. Family, friends, and fools Funding — Founders get funding from family, friends, and fools who may not know a lot about the business but believe instead in the founders
3. Crowdfunding — Founders get funding from multiple individuals to fund pre-orders of their products.
4. Angel Investors — Founders get funding from high net worth individuals who will invest in their company to grow in exchange for equity.
5. Startup Grants — Founders get funding from an establishment that supports a cause aligned with your business. While funding is made for free, the criteria are particular and strict compliance requirements.
6. Family Offices — Founders get funding from the estate of a certain high net worth family. While relatively unknown, family offices are long-term holders hoping for exponential company growth.
7. Venture Capitalists — Founders get funding from professional investing firms, which will exit when the company reaches a certain level of growth.
8. Corporate Venture Funds — Founders get funding from a larger company, which may not necessarily be an investing firm, but with the same purpose of exiting once the business reaches a certain level of growth.
9. Private Equity — Founders get funding from a private equity firm, but this kind of company doesn’t usually invest in startups
10. Initial DEX offerings — Founders get funding from a DEX (Decentralized Exchange); this is where people see the introduction of new projects in the cryptocurrency space.
11. Equipment Leasing — Founders get funding from leasing equipment and use it for productive purposes; the problem is that leasing equipment takes a fixed amount of cash flow every month.
12. Bank Financing — Founders get funding from banks, but banks are unlikely to extend credit to startups with no proof of positive financial performance.

Learning about Different Funding Sources for Startups

For businesses, especially startups, knowing the funding sources can help grow and scale the business in the long term. More than one funding source that the entrepreneurs and founders can reach out to for inventory, hiring personnel, marketing campaigns, etc.

Some funding sources also have preferences in investing, such as strict compliance requirements specific to one industry or pace, etc. Founders should consider if the funding source is appropriate to the business or startup before reaching out to them.