Almost every startup starts the same way: an idea, a few people and no money. The good news is that there are more ways to fund that first stage than ever. The bad news is that each one comes with its own price, and it isn't always money.
Here are the eight most common routes, roughly in the order founders tend to use them.
1. Your own savings
Bootstrapping means paying for the first months yourself. You keep 100% of the company and you answer to nobody. The catch is obvious: you can only go as far as your savings reach, and if things go wrong, the loss is personal.
It works best for cheap products, like software you can build yourself, or for testing an idea before asking anyone else for money.
2. Friends and family
The first outside cheque often comes from people who trust you, not your business plan. It's fast and the terms are usually generous. Write it down anyway. A simple agreement that says whether it's a loan or a share of the company saves a lot of awkward dinners later.
3. Public grants and loans
Many governments fund innovation with grants or soft loans. In Spain, for example, ENISA offers participative loans for young companies, and the EU runs programs like the EIC Accelerator. They don't take equity, but they take time: applications, deadlines and reporting.
4. Accelerators
An accelerator gives you a small investment, a few months of mentoring and, above all, a network. In exchange it usually takes a slice of the company. The money is rarely the point. The point is the introductions to investors at the end.
5. Business angels
Angels are individuals who invest their own money, often former founders. They write smaller cheques than funds and decide faster. A good angel brings contacts and advice along with the money. A bad one brings opinions and nothing else, so it pays to ask other founders what they're like to work with.
6. Equity crowdfunding
Instead of a few big investors, you raise from many small ones: customers, users, fans. In the US, Regulation Crowdfunding lets a company raise up to $5 million a year from anyone. In the EU, licensed platforms can do the same up to €5 million.
The upside goes beyond the money. People who invest in you tend to buy from you and talk about you. The downside is that you'll have hundreds of shareholders to keep informed, and the platform takes a fee.
This is the gap we're building Krows for: one round where funds, angels and a startup's own community invest together, with the money released in stages as the startup hits its goals.
7. Venture capital
VC funds invest other people's money in a few startups that could grow very large. They write the biggest cheques and expect the biggest returns, which means they're looking for companies that could be worth hundreds of millions. If your startup is a good, profitable business that will never get that big, VC is probably the wrong fit, and that's fine.
8. Revenue-based financing and bank loans
Once you have steady revenue, you can borrow against it. Revenue-based financing is repaid as a percentage of your monthly sales. You keep all your equity, but you need income first, so it's rarely an option on day one.
How to choose
Ask yourself three questions:
- How much do you really need to reach the next milestone? Raise for that, plus a buffer.
- What are you willing to give up? Equity, control, time or personal risk. Every option costs one of these.
- Who can help beyond the money? The right investor at the right stage is worth more than a slightly better valuation.
Most startups end up mixing several of these. Savings get you to a prototype, angels or a crowd round get you to traction, and a fund gets you to scale. There's no single right path, only the one that fits where you are now.
This article is for information only and is not financial, legal or tax advice. Investing in startups carries risk, including the loss of all capital invested.
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