How to finance your startup.

All the financial instruments to boost your business from the early stage to growth.

If you have a new business, a startup or you want to start a new business unit, there are many instruments to finance your idea from the beginning to the growth and expansion.

Usually to finance an idea in the early stages, all the companies (either they’re already founded or not) start from their own resources (Bootstrap) or the well-known 3Fs (Family, Friends & Fools). Self-financing has the advantage of allowing you to maintain autonomy on your business project, while for the second option you should be careful to avoid ruining relationships with the participants.

If you need consistent funds and/or your want to give credibility to your company, in the EU community a new business can count on many public funds: financial instruments that come from the European Commission, State Ministers, Universities, regional departments.

We can divide them into two categories: Direct European Funds and Indirect European Funds.

In the first category, all those financial instruments are directly disbursed by Europe to the final beneficiaries. Companies can apply to “call for proposal” and receive funds under the form of grants or public contract.

In the second category, there are those financial tools that are designed into a wide project to carry on economical progress and reduce inequity among the regions. Under guidelines of the EU, funds are split into incentives, concessions, credit guarantees, as well as non-repayable startup loans, female startup loans and to increase youth entrepreneurship.

Moving from public to private, we find the Incubators, Accelerators, and Crowdfunding platform.

The Incubators are corporations that give to the startupper a lot of different instruments to grow up his/her own idea into a business as working places, management and financial consultancy, training, mentorship and networking.

The Accelerator is a company (or a group of companies and associations) that supports the development of startups through pre-set duration programs that include a wide range of services and funding opportunities. Accelerators invest in startups in exchange for equities.

Then, we find the Crowdfunding platforms: these are companies that, through their platforms or online portals, raise capital in the forms provided for by crowdfunding. They perform a credit brokerage role. There are 4 methods to raise funds on the crowdfunding platform through donation, reword, equity e lending. We will deepen into the arguments in a second article, but the internet is full of dedicated information on the matter.

You can go traditional, and ask for funds to banks. They concede loans through the classical method, just asking for guarantees and assuming the risks or they have dedicated funds for new business. Last, they organize with other banks and associations of corporations and accelerators and other players, competitions to find the best startups to promote.

Moving far from the launch, in the scale-up phase, a business can rely on Business Angels (or Angel Investors or informal investors): they are (or have been) entrepreneurs, managers, consultants or professionals who invest in exchange for equity (usually up to 10% of risk capital). Their contribution, given that their earnings are linked to the growth of the company. Sometimes business angels and super angels invest in an informal or organized group.

In the same category, there is the Venture capital, a component of private equity and usually, its funds are dedicated to supporting the entrepreneur of high-risk innovative startups. They invest in exchange for shares, too.

In the mature stage of new business (not so new at this point), we find investment banks and private equity funds. Private equity funds differ from venture capital for the fact that the former invest in innovative, high-risk companies to guarantee their investors a return and on average leave them after 3–5 years.

In conclusion, we’re happy to have shared our knowledge about this matter but we always suggest to rely on experienced professional to ask for financial consultancy.