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What are the different types of funding sources available?

June 20, 2024 2 minute read

What are the different types of funding sources available?

Funding can come from many different sources, knowing which one to aim for depends solely on the stage your startup is in. The below provides a quick overview of the types of funding that you may receive along your entrepreneurial journey.

‍Family and Friends: This is the road that many startups take initially on their journey. It’s always easier to start raising money from those who know you (and love you). However, as your startup begins to grow, the need for a more significant influx of money will make this option non-viable anymore.

‍Crowdfunding Platforms: There are many famous examples of “traditional” crowdfunding models, like Kickstarter. In this platform, people are allowed to pre-purchase goods and services in exchange for some rewards. However, this model is only functional for product-based startups. SaaS startups can use another model called Equity Crowdfunding.

Angel Investors: Angel investors are willing to invest in early-stage startups in exchange for an equity share. To free-up their investment, Angels need some sort of exit (when you sell your company or when you go public). Examples of Miami Angel investors are Rebecca Danta and Maya Baratz.

‍Venture Capital Firms: Unlike Angel Investors, VCs don’t use their own money to fund startups; they use a fund provided by the company’s own investors and the fund’s managers. VCs are on the lookout for promising startups, and they offer funds in exchange for equity. VCs also need an exit to generate a return for their initial investment.

Private Equity: Private equity is when a group of investors makes a direct investment in a company. They typically focus on mature companies that are past the growth stage and always have the intention to be involved to make the company worth more than it was so they can generate a return on their investment.

‍Accelerators: Accelerators offer crash-courses to fast-track your entrepreneurial journey. These courses typically run over a few months, and their goal is to help you save time, money, and much sweat. Accelerators may also offer capital in exchange for equity in your company (usually no more than 10%). An example of an Accelerator is Base Miami, however we take 0% equity.

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