What’s Your Best Source of Capital?

What are your options when seeking to raise capital? What are the usual sources for early stage companies?

Below are the commonly recognized sources of capital for early stage companies and their pros and cons.

What’s your best choice?

Family & Friends

Pros
  • Low level of investigation into the merits of the project
  • Emotional investing
Cons
  • Repayment of capital
  • Strain on the relationship

Angel Investor

Pros
  • May be able to return for future rounds of funding
  • May gain valuable help and advice
Cons
  • Can become more of an “over-the-shoulder” type of partnership where the angel is second guessing the owner
  • Repayment of investment

VC Capital

Pros
  • Large amount of capital
  • May gain valuable help and advice
  • May gain the influence of the VC network
Cons
  • Loss of control of the company
  • Loss of more than 85% of ownership in the company
  • The company will generally be sold in 3-5 years whether the entrepreneur wants to or not

Partner

Pros
  • Share the stress
  • Advice and experience if partner is from the same field
Cons
  • Can mean the loss of control/autonomy in moving the company in the direction the owner wanted it to go
  • Can be good at the start but disagreements on how the company is run can create a very uncomfortable working environment
  • Loss of control of the company
  • Loss of more than 85% of ownership in the company
  • The company will generally be sold in 3-5 years whether the entrepreneur wants to or not