Starting a new business comes with a long list of challenges, both foreseen and unforeseen. One of these is the matter of startup capital.
For the confident entrepreneur, challenges are just a part of the path to success. Some may find injections of capital from investment firms. Others may rely on personal assets and available capital.
Can a new business survive without capital from angel investors? What does it mean to acquire Series A funding? What does it mean to resort to bootstrapping?
Continue reading below to find out more about how new businesses get their first influx of funding.
What is Bootstrapping?
Bootstrapping describes the process by which an entrepreneur starts a new business with little to no capital. The entrepreneur relies little on outside investments, finding sources of capital elsewhere.
This often involves dipping into one's savings or personal assets. Sometimes, the entrepreneur will rely solely on the operating revenue to drive growth.
Bootstrapping is a difficult way to start a business, as it demands hard work and a leap of faith.
Sometimes, a company may take orders for a product before the actual product is ready. The company then uses the money from the orders to finish and deliver the product.
What is Series A Funding?
Series A funding comes from outside investors, such as angel investors or investment firms. In this first round of financing where the company offers partial ownership to investors.
The new business must approach investors ready to sell the idea in mind.
The new business in question must present proof of the idea, current progress, market research, and risk involved. Investors may also consider the strength of the executive team.
Receiving Series A funding is often a reason for celebration. For many entrepreneurs, this is a mark of validation.
What Does the Round of Funding Cover?
At this point, the business may still be new and small. Though the business may generate some revenue at this point, the injection of capital aims to grow the business.
Investors take on a lot of risk when they invest in young companies at this point.
Series A funding often covers some of the basic aspects of business functions. Funding often goes toward salaries and market research.
In some cases, the product or service may not yet exist on the market. A new business may use the funding to complete the product or service to sell on the market.
Get Your Business off the Ground
A confident entrepreneur will let nothing stand in the way of their success. When you first start a new business, you may find yourself bootstrapping. However, you may eventually need to seek outside investments.
Your business may consider Series A funding to get the ball rolling with great momentum.
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