Principles of Entrepreneurship: Financing a Startup

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Financing a Startup
Coming up with a business idea might seem like a stepping stone to a brighter future, but then comes the real monster when venturing into entrepreneurship: finding resources for the business idea. Quite often, people that come up with brilliant ideas lack enough funds to take the idea to the next level, allowing financiers to come to the rescue. The financiers are not only providing funds but also help in asset management and capital efficiency (Nanu and Pankoo). Other than funding the idea from own money, that is bootstrapping, there is a list of options that can help finance a business idea: bank loans, angel investors, government grants and subsidies, venture capital, business incubators, love money, and crowdfunding (CrashCourse). Before considering any other source, bootstrapping should be the first option, although not the best because of its fewer formalities. If the business requires robust resources, then it is likely to stall if bootstrapping is considered the option. Bootstrapping is only suitable for small projects that require minimal funding.
Crowdfunding is an alternative strategy where a startup obtains funding from numerous individuals available on crowdfunding platforms or even social media after a detailed description of the business objectives and its potential (CrashCourse). Funding directly from common people through crowdsourcing cuts off the middlemen and professional investors. However, crowdfunding has some shortcomings too. The reliance on one's network inhibits the viability of business ventures with a small network. Crowdfunding shares common attributes with angel investors who also form a network of investors to scrutinize a project before investing. Venture capitalists take crowdfunding and angel investment to a professional level, capable of offering other services such as mentorship and evaluation alongside funding. Venture capitalists are often interested in short term goals, and will only invest if the comp...