Startup funding refers to any capital invested in a new or growing business. This can include everything from personal savings and credit cards to equity rounds with angel investors or venture capital firms. Depending on what stage the company is at, each round of funding comes with different benefits and risks. Investors can accelerate growth and open doors, but they also require that you give up a portion of your business to them in return and that you work closely with outside stakeholders. For some companies, especially those just getting off the ground, bootstrapping — using their own money or reinvesting early profits into the business — is a more appropriate option. Nick Woodman, founder of GoPro, used his own personal savings and a loan from his mother to start the company before seeking external investment.
The first step in startup funding is pre-seed funding, which can be as low as $100k or up to $1 million. The goal is to validate the idea and cover initial expenses like hiring a team, building an early prototype and product development. The valuation at this stage can be difficult, which is why many startups use SAFE notes (a Simple Agreement for Future Equity) to postpone valuing the company until later stages of funding.
Other startup funding options include a business term loan, which is similar to a student or mortgage loan in that you make regular repayments and have a fixed interest rate. These loans can be obtained through traditional banks and online lenders, as well as through government programs such as the Small Business Administration microloans.