Startup Capital: Fundamentals and Tailoring Your Funding to Your Strategy

Raising debt capital involves borrowing money to fund your new business venture. Typically, this borrowed capital originates from a bank, although alternative sources are also possible. It is common for a predetermined portion of the loan to be repaid in regular installments. The repayment amount, often scheduled monthly, is agreed upon and outlined in a contractual agreement. Additionally, interest must be paid for the utilization of the borrowed funds, constituting the interest component of the loan. This aligns with the familiar adage, 'borrowing money costs money.'

Equity is not the same as personal funds. Equity refers to the financial resources of a company (the private limited company), while personal funds refer to money that comes from one of the founders. When it comes to business financing for a startup, it is rarely possible with just personal funds. Although the starting entrepreneur often invests personal money into their startup, this is usually not enough. Additional financing must be found. It should be noted that this is not applicable to most advisors who start as sole proprietorships from their attics.

Business Angels (also known as angel investors or informal investors) are an important source for financing risky ideas and startups. Especially in the phase of idea development where banks and other parties are not willing to provide capital due to the high risk, this is a group of entrepreneurs who are willing to do so. The classic business angel is a successful entrepreneur who has earned (a lot of) money from selling their business.

A Term Sheet is a document that is commonly used in the world of investors, venture capital, business angels, and private equity firms. It can be considered as a "list of terms". A term sheet almost always precedes the negotiations that should result in the definitive agreement. This latter document is called a participation agreement. It includes the final and definitive terms for an investment.

An Elevator Pitch is a concise presentation of your technology and your future plans and provides you THE moment to capture the investor's interest and opening the door for further discussions. On this page, we delve deeper into how to craft an effective elevator pitch and the essential elements it should include.