The Seven Flavors of Capital (for Startups)

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Startups need capital to launch and grow. What many entrepreneurs don’t know is that startup capital comes in many different flavors. Each flavor has its own pros and cons and is appropriate for different situations. To be successful in fundraising an entrepreneur needs to understand what flavor(s) are a fit for them at each stage of their venture’s maturation.

For instance, I can’t tell you how many times I run into an entrepreneur who “knows” they need to raise equity capital from venture capital when royalty financing would work for them, cost less, and be non-dilutive*.

Or I meet a concept-level startup ready to invest 6 months in trying (and almost certainly failing) to raise equity capital when there are lots of grants and competitions that could help them get started.

Here is a 2-page table summarizing each of the major flavors of capital, their pros, cons, and who they are good for. I hope you find it helpful!

*Dilutive financing is any that distributes more equity (AKA shares), this has the effect of making each of the current owners of the company own less… effectively diluting their ownership.

One thought on “The Seven Flavors of Capital (for Startups)

  1. Pingback: What Should Founders Be Focusing On? SSRL Can Be Their Guide. – Paul G. Silva

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