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Sources of Start-Up Capital

Don't forget about the not-so-obvious sources in your quest for cash.
June 4, 2001
URL: http://www.entrepreneur.com/article/41038

Q: I'm starting a music company that will be both online and offline. What's the best way to find and secure venture capital?

A: You'd never think it from the media hype, but most businesses aren't funded by venture capitalists. Most entrepreneurs find money through banks, private investors (friends, family and business associates), suppliers, customers or professional angel investors. The source you choose determines how you raise the money as well as how you pay it back. Here's a breakdown of your options:

Whichever sources you choose, decide in advance how much money you want from them and how you intend to repay it. And be realistic! I've seen entrepreneurs make up a story to get the money, only to be surprised four years later when the investors start demanding a return. Professional investors rarely walk away from an investment, so if you write the deal knowing how you'll provide the return, you're much more likely to reach a happy ending.

As an entrepreneur, technologist, advisor and coach, Stever Robbins seeks out and identifies high-potential start-ups to help them develop the skills, attitudes and capabilities they need to succeed. He has been involved with start-up companies since 1978 and is currently an investor or advisor to several technology and Internet companies including ZEFER Corp., University Access Inc., RenalTech, Crimson Soutions and PrimeSource. He has been using the Internet since 1977, was a co-founder of FTP Software in 1986, and worked on the design team of Harvard Business School's "Foundations" program. Stever holds an MBA from Harvard Business School and a computer science degree from MIT. His Web site is a http://www.venturecoach.com.


The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.