How Funding Works - Splitting The Equity

Written by Josh Hines on May 22, 2013 under Startup Funding Blogs
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There are a number of ways to seek funding for your startup from personal loans, banks, investors, angels and going public, each method has it's attached amount of risk and means of returning an investment to the lender.

How Funding Works - Splitting The Equity

How Funding Works - Splitting The Equity



First, let's figure out why we are talking about funding as something you need to do. This is not a given. The opposite of funding is "bootstrapping," the process of funding a startup through your own savings. There are a few companies that bootstrapped for a while until taking investment, like MailChimp and AirBnB.

If you know the basics of how funding works, skim to the end. In this article I am giving the easiest to understand explanation of the process. Let's start with the basics.

Every time you get funding, you give up a piece of your company. The more funding you get, the more company you give up. That 'piece of company' is 'equity.' Everyone you give it to becomes a co-owner of your company.

For more information view How Funding Works - Splitting The Equity Pie With Investors.

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