DID YOU KNOW? FUNDING NEEDS

March 24, 2025 by Andrea Stramondo

🌎 “WHAT MAKES THE WORLD GO ‘ROUND”

Every startup, no matter how good of an idea or a team is at its core and independently from how specific the field is, needs one thing: MONEY.

🫴🏻 WHERE DO YOU GET IT?

There are different sources to get the funds your startup needs from, the main ones are:

• Own sources → The team’s personal savings, bootstrapping, friends and family
• Community sources → Reward-based or equity-based crowdfunding
• Investors → There are many kinds of investors. Let’s discover them in more detail

😇 ANGEL INVESTORS

They are wealthy individuals who invest in exchange for equity. Angel investors are the rarest kind of investor.

PROS: 

• They can be negotiated with quickly and easily in comparison with VCs or Banks
• They can provide advice and connections
• No repayment required, they invest risk capital unlike business loans

CONS:

• They generally can invest less than VCs
• You will give up part of your equity
• They might push for unfavourable exits to get returns

🏙️ VENTURE CAPITALS

VCs are investment firms who provide funding in exchange for equity, usually for high-growth startups.

PROS:

• They can usually invest large capitals, often millions
• No repayment required, it’s risk capital!
• It can offer strategic support and credibility

CONS:

• VCs often require 20-50% equity
• VCs will frequently pressure about growth
• The approval process is standardised and will often require months

💵 BUSINESS LOANS

Borrowing money from a bank or financial institution that must be repaid with interest: it is debt capital.

PROS:

• You retain full ownership
• The costs are predictable and planned
• Interest payments may be tax-deductible

CONS:

• It is debt financing, you will have to return the money eventually
• Like VCs, the approval process is stricter
• Some collateral is required, assets or credit history will be considered

🤷🏻‍♀️ SO, WHAT SHOULD I CHOOSE?

It really depends on the stage of your startup or the funds you have available, either yourself and with your team or your business.

Early-stage startups will usually benefit the most by bringing angel investors in, while scalable and rapidly expanding businesses might have best luck with VCs.

And whatever choice you make, always focus on getting the deals done right, don’t dilute too much unconsciously.

Remember: it’s investors who exist thanks to startups, not the other way around.