ITB sources funding

Crowdfunding

Where entrepreneurs raise capital for their ventures by soliciting small contributions from a large number of people, typically through online platforms, such as kickstarter.

Crowdfunding advantage + disadvantage

Advantages: Validates business ideas through public interest, builds an early, loyal customer base.  Provides consumer feedback.

Disadvantages: Requires relentless campaigning to attract backers, need to keep up all relationships, competition on platforms can drown out new pitches.  Doesn’t always provide enough funding.

Venture Capitalists (VCs)

Definition: An investor who provides capital to startups and small businesses with high growth potential, typically in exchange for an equity stake, aiming to profit from the company's future success.

Venture Capitalists (VCs) advantage + disadvantage

Advantages: Ability to infuse substantial capital, can open doors to partnerships and markets.  Lots of expertise provided

Disadvantages:Equity dilution, sometimes tipping the scales of ownership, demands rapid scaling, regardless of readiness.  Lots of control.  Selective in their decision-making process.

Angel Investors

Definition:  A wealthy individual who invests their own money, typically in exchange for equity, into early-stage, high-growth potential startups, providing crucial seed funding and often mentorship.

Angel Investors advantage + dis.

Advantages: Can bring mentorship along with money, more willing to invest in non-conventional ideas, even early in the process.

Disadvantages:Typically expect significant equity in return, startup founders might feel beholden to investor opinions.   Hard to find. 

Friends and Family

Definition: Entrepreneurs seek initial investment from their personal network of family and friends, often at an early stage of the business's development. 

Friends and Family advantage +dis.

Advantages: Informal, with customizable terms, often more understanding of delays.

Disadvantages: Potentially damages relationships if things turn sour, difficult to enforce formal repayment schedules.

Small Business Loans

A financial product designed to help small and medium-sized enterprises access capital for various business needs, such as starting, expanding, or operating a business. 

Small Business Loans advantage +dis.

Advantages: Small business owners retain complete control over the business, predictable payment schedules.

Disadvantages: High interest rates for risky profiles, stringent credit checks and collateral requirements.

Personal Savings

Definition: An entrepreneur's own money, typically from savings accounts or investments, used to fund a business venture, often as a form of self-financing.

Personal Savings advantage +dis

Advantages: Saves time versus raising capital externally, freedom from funding sources demand and questions, and full autonomy over cash flow.

Disadvantages: Limits scalability due to finite funds, emotional and financial burnout risk.

Dilution

Definition: The decrease in an existing shareholder's ownership percentage when a company issues new shares to raise capital or for other purposes, such as employee stock options.

In other words, the more investors that enter the pot, the original ones lose control/returns.