Published on May 30th, 2017 | by Jose Vasquez0
The Pros and Cons of 3 Major Capital Investment Options for Startup Tech Companies
These three capital investment options are some of the most common, but they each have pros and cons.
When you start your business and you’re ready to grow, you’ll need an influx of capital to get things moving. That capital will fund your equipment, your office, your employees, and even your marketing and advertising strategies, so unless you’re running extremely lean, you’ll need some kind of capital injection to get moving. But what’s the best way to get it?
Below, I’ve listed three of the most popular methods, along with the pros and cons of each.
Venture Capitalists and Angel Investors
- You’ll be able to get most of the funding you need in one fell swoop.
- You’ll be able to rely on the advice of seasoned experts, who will now have a vested interest in making sure your startup succeeds.
- You’ll have access to an extensive network of other contacts to leverage for partners, employees, or clients.
- You’ll have an “in” to get capital in the future.
- You’ll forfeit part of your ownership, meaning you’ll be able to draw fewer profits.
- You’ll need to consult your investors after every decision you make.
- You won’t have to forfeit any control of your business.
- You don’t have to pay the money back (but you will need to give your investors any rewards you’ve promised).
- You can simultaneously market your products while you generate capital.
- You can guarantee an initial user base before your first run of products.
- There’s no guarantee you’ll hit your funding target (and most platforms are all-or-nothing).
- You’ll need some kick-ass offerings if you want to get noticed.
- If you misuse the funds or fail to honor your commitments, you could be held personally liable.
- You won’t have to worry about splitting decisions or using the money a specific way.
- You can choose from a variety of loan options.
- You may not be able to get a loan if your credit history is shaky.
- You’ll need to pay the money back eventually, with interest.
- If you take out a personal loan for your business, you’ll be personally liable for paying it back.
There’s no “right” or “wrong” way to fund your business, but you need to know what you’re getting into before you make your final decision.