Upon establishing a startup one of the most integral components is not only social and human capital, but money (financial capital) as well. It is important for business owners to decide if they want to try to provide funding themselves or through resources such as investors. Self-funding can be challenging, as one must have a steady supply of revenue from their business and very early. Therefore, most will need an investor upon startup. There are three types of investors: friends and family, angel investor, and venture capitalists (Wasserman, 2012). As such, each presents their own benefits and potential risks.
Friends and family may be few in number, let alone have a deep enough connection to actually provide financial support therefore, not much financial assistance. This is why one should have a detailed plan and thoroughly evaluate the decision to use this group. Although there is a sens of comfort among family and friends, one must make sure they aren’t making a rushed decision or an uninformed decision.
Angel investor have the resources but can be harder to get a hold of by a startup founder. To get the necessary financial support sometimes requires having many investors. This can be challenging as a founder to manage. Furthermore, these investors are not always knowledgeable or even experienced in the arenas they invest in.
Venture capitalists can essential provide more than the others. They tend to be focused and dedicated to ventures they invest in, especially those that could provide high rewards. As such these investors may be on the ventures board, and for a lengthy amount of time. Over time involvement and amount of equity owned may increase. This can lead to a major shift in ownership favoring the venture capitalist for the venture. Not only can ownership be affected, but the decision making for the business can be as well.
For my venture, I plan to carefully consider each type of investment and which better benefits the company. One important factor that will be evaluated is if wealth or control is more important to me, at the given time.
Change is inevitable. Especially as a company matures from the startup stage. This will oftentimes begin at the head, or with the founder/ CEO. Upon the growth of a startup, there is “…this shift in expectations, you (CEO’s) need to invest in professionalizing the process of running your company (Solomon, 2013). For some companies this shift could be the CEO feeling their time is up and they no longer want the title/ position. Contrastingly, they may be forced to vacate their position because the board or investors feel it’s best. Company growth/ success, and the board members play a vital role in determining what happens to the CEO. These decisions can be tough, but ultimately everything should be done with the focus on what’s best for the business. As stated in Founders Dilemmas: “ …founder- CEO succession… is likely to be traumatic, but as a process, it has more opportunity to be productive and rewarding as well.” (Wasserman, 2012).
Works Cited:
Solomon, Glenn. “Transitioning from a Startup to Growth-Stage Company.” Fortune, Fortune, 11 Feb. 2013, https://fortune.com/2013/02/11/transitioning-from-a-startup-to-growth-stage-company/.
Wasserman, Noam. The Founders Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup. Princeton Univ Pr, 2012.
Art is Life's Paintbrush 
Hello Shayna,
Figuring out the best way to fund a venture is indeed difficult. I hate to be responsible for taking the last of a relative’s stashed cash; and, I’d hate even more if the venture was unsuccessful and I had no way to compensate them for their investment. At the same time, I’m sure there are many companies that can attest to the fact that had they not utilized funding from close relatives or friends that they would never have been able to get established. In any event, (as I’ve recognized this year) the theme seems to be that there is no right or wrong answer and that each entrepreneur has to do what’s suitable for them, their lifestyle and their organization.
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