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T H E STA R T U P F U N D I N G G U I D E :

How should you fundyour startup?

VOL 1 NO 4WORRELL INFOGRAPHIC

© 2014 WORRELL INC. @WORRELLDESIGN WORRELL.COM

As a startup, raising capital can seem like one ofthe biggest roadblocks to launching your product.

Here's a guide that can help you navigate the major funding sources and determine which options arebest for your new business.

BOOTSTRAPPING

The use of personal savings or early cashflow to fund a startup rather than seeking external capital in the form of

investments and loans.

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MORE CONTROL

Autonomy to grow your company at

your own pace and keep greater control

over its trajectory.

MORE EQUITY

Without investors, you’re ultimately able

to maintain greater ownership in your

company.

INCREASED FLEXIBILITY

The ability to change your direction on

a moment's notice, without waiting on

the approval of other investors.

PROS CONS

PERSONAL RISK

If you personally shoulder the finances

of your startup, all costs and losses

become your responsibility.

SLOWER GROWTH

Cashflowing your startup can result

in resource constraints that may

ultimately slow growth trajectory

of the company.

LACK OF SUPPORT

You may miss out on access to

knowledgeable investors and their

diverse networks and connections.

CROWDFUNDING

A new form of financing that enables startups to

raise funds through small contributions from a large number of individuals via

an online platform.

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PROOF OF CONCEPT

A successful campaign serves as

validation that there is demand in the

market for your product or service.

FREE PUBLICITY

Crowdfunding gives you free access to

media outlets that may be willing to

publicize your campaign.

MAINTAIN OWNERSHIP

This influx of early-stage funds may

delay or dissolve the need to raise cash

from other investors.

PROS CONS

LIMITED APPLICATIONS

This works best for raising small

amounts from many people, excluding

some service and large

equipment-based businesses.

EXTERNAL PRESSURES

Legal issues can arise if you are not able

to meet expectations on when your

product ships.

RISK OF EXPOSURE

You are required to disclose product

details, potentially giving competitors

information about your business.

ANGELINVESTMENTS

Individuals who contribute personal capital to an early-stage startup in

exchange for equity in the company.

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FLEXIBLE CAPITAL

Investments may range from a few

thousand dollars to millions, potentially

providing most of your startup capital.

ODDS OF SUCCESS

Angel-funded firms are more likely to stay

in business longer, experience significant

growth, and see higher rates of return.

CONNECTIONS

Angel investors are often experienced in

the field and can offer their expertise.

PROS CONS

LIMITED FUNDS

For additional funding, your angel may

be tapped, forcing you to raise money

through traditional VC firms.

LOSS OF CONTROL

Angel investors may expect to play an

active role in the decision-making

process in exchange for their

investment.

LOSS OF EQUITY

Angel investors take ownership stake in

your business, ultimately decreasing

your share in the event of an exit.

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http://hbswk.hbs.edu/item/6347.html?wknews=041910Harvard Business School Study:1

VENTURE CAPITAL

Venture capitalists (VCs) work for a corporate

entity, investing money on behalf of the

individuals or institutions they represent.

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MORE CAPITAL

VC firms provide large influxes

of capital, often with a minimum

investment in the millions.

MULTIPLE ROUNDS

Unlike angel investors, VCs often reserve

additional funds for follow-on

investment rounds.

CONNECTIONS

VC firms have vast experience, giving

them invaluable insights into what will

lead your organization to success.

PROS CONS

TIMEFRAME

VCs expect a return on their investment

during a specified timeframe, putting

pressure on your startup to turn a profit.

LOSS OF CONTROL

VC firms request a controlling stake in

your company along with board seats,

sacrificing equity and autonomy.

DELAYED SUPPORT

VCs often do not invest in early-stage

companies, but wait to invest once a

startup has a proven track record.

STRATEGICINVESTMENTS

Strategic investments, also known as corporate venture capital (CVC),

are investments made on behalf of a parent

company.

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MORE CAPITAL

CVC and other strategic investments

tend to be much larger than angel

and some VC deals.

RESOURCES

Startups may benefit from the

investing corporation’s resources in

commercialization, manufacturing

and marketing.

EXIT OPTIONS

Strategic investors provide an exit

strategy, such as licensing or acquisition,

early in the life of a new business.

PROS CONS

TIMEFRAME

Corporations are typically slower than

VCs in finalizing deals, so they may not be

ideal if you need quick access to capital.

LOSS OF CONTROL

An investing company will often lock

in a technology license or purchase

option at the onset of your relationship.

DISSUADES OTHER INVESTORS

Accepting CVC from one company may

close doors to resources that could be

secured from other interested investors.

INCUBATORS &ACCELERATORS

Accelerators and incubators aim to increase the success of startups by

offering capital, work space and mentorshipsin exchange for equity.

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VALIDATION

These programs can provide the first

signs of market validation, along with

the momentum and support needed to

attract additional funds.

OFFICE SPACE

These programs generally provide

shared office space and co-working

opportunities for your startup to use.

MENTORSHIP

These programs are often led by proven

entrepreneurs whose shared experiences

can increase the odds of your success.

PROS CONS

LESS FOCUS

At an incubator or accelerator, your

startup may be one of many, limiting the

attention and support that other forms

of investments may provide.

RELOCATION REQUIREMENTS

The caveat to office space is that you

may be required to relocate if accepted

to one of these programs.

LOSS OF EQUITY

In exchange for capital and mentorship,

you will be required to turn over a small

amount of equity.

GOVERNMENTGRANTS

A financial award that is given to a startup from federal, state, county or

local governments, private foundations, or corporations.

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MULTIPLE OPTIONS

In some cases, you can apply

for multiple grants within a year, giving

you multiple funding opportunities.

NO REPAYMENTS

A grant is a form of non-dilutive

financing and is generally given without

the obligation to repay.

CREDIBILITY

Winning a grant can serve as a stamp of

credibility that can be used as leverage

when approaching other investors.

PROS CONS

COMPETITION

There are often hundreds of startups

applying for a single grant, which can

make it difficult to obtain one.

APPLICATION PROCESS

Applying is a very time-consuming

process, requiring a significant amount

of planning, writing and research.

GOVERNMENT OVERSIGHT

A grant may require the recipient to

perform in accordance with strict

regulations.

© 2014 WORRELL INC. @WORRELLDESIGN WORRELL.COM

Ryan Broshar Confluence Capital Partners

Patrick Meenan Arthur Ventures

Toby Nord Carlson Ventures Enterprise at the University of Minnesota

Justin Porter Venture Center at the University of Minnesota

A special thanks our distinguished panel for

sharing their expertise on this subject matter:

© 2014 WORRELL INC. @WORRELLDESIGN WORRELL.COM