Friday, 29 January 2016

Funding your startup: Crowdfunding vs. angel investment vs. VC

Raising capital for a startup has traditionally been one of the most difficult parts of getting your idea off the ground, but new technologies and platforms have given entrepreneurs a plethora of new ways to make that happen. Nowadays, there are more options than ever to get a new company funded.

"One of the really cool things that's happening right now is this massive proliferation of ways to start a company and ways to get your company funded," said Aaron Harris, a partner at Y Combinator.

New enterprises were once only birthed by born-wealthy proprietors, or business leaders who could roll capital over from another successful venture. As the venture capital industry began to grow, capital became available to innovators who wouldn't have had access to it before. Then, as angel investors grew in popularity, founders had a new way to get capital at an early stage where some VCs wouldn't tread. Now, consumer crowdfunding has added another layer to the investment equation for entrepreneurs.

As funding becomes more and more democratized, we are seeing what Harris calls, "the progressive elimination of gatekeepers." But, the process can still be difficult to navigate, especially if you are a first-time founder.

"Entrepreneurs, whatever they're doing and whatever company they're trying to start, they're so different," said Bobby Franklin, NVCA President and CEO. "Clearly, some of the funding routes that one might go would be better suited for one type of entrepreneur, or one type of idea, than another."

As Franklin noted, certain funding options will work best for specific types of companies. Here are the three most popular forms of funding and how to better understand them.

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