A startup is a company that is about to develop and offer services and products that are not available in the market. Startups are now becoming an important part of the economy of every country; They create jobs for people of this generation and carry a huge responsibility.
They contribute enormously to the development of the socio-economic conditions of the country. Not only do they also provide solutions to problems through the use of new technologies. Every industry sees new startups and some of them will be the future of that industry.
The survival of a startup is highly dependent on funding, if there is no funding a startup may never see the light of day, it will close even before the launch. Therefore, to avoid closure, one has to organize funds and invest in the business and this can be done in two ways.
One receives seed funding and the other through Bootstrapped. In this article, we will discuss the difference between funded startups and seeded startups and what they are. We'll also talk about which is a better option for your startup. So let's get down to business.
What is a Bootstrapped Startup?
Self-funded startups are businesses where you do not raise capital from an outside source or venture capitalist and are entirely dependent on your own funds for the business to survive and grow. There is no debt financing process here, you are the leader here and you have to make all kinds of decisions necessary for your business.
Advantages and disadvantages of a Bootstrap startup
Benefits:
The particularity of self-funded startups is that the founder does not depend on external investors to obtain the funds and the ownership belongs exclusively to the founder.
The founder of the company should only focus on the products and services of the company and there is no need to issue shares.
Control of the business belongs to the founder and he is not under any pressure from anyone and has the control to make all major decisions regarding the business.
Cons:
Lack of investor funding becomes a financial risk for the company.
No investor can suggest the founder and help him in his decisions. Additionally, the lack of relationships with various investors is slowing the pace of public trust.
What is a Funded Startup?
When starting a business, an amount is required as an investment. Some startups choose to raise funds from the public as corporate funds. Here you are looking for investors, also known as venture capitalists, who are genuinely interested in your business and will provide you with the required amount of capital in exchange for your business capital.
Pros and Cons of a Funded Startup
There are certain advantages and limitations one faces when deciding to raise funds from the public for one's business and they are:
Benefits : External financing provides companies with many opportunities related to financing, which in turn become an important factor in the rapid growth of their business. The investors who finance the company accompany the owner of the start-up with their expertise if necessary. The connections of these investors can be an asset to the startup and help it gain public trust.
Disadvantages: When external forces interfere in the business, payment, financial and capital decisions on the part of the startup founder are constrained. The founder loses a large part of the company to investors and therefore only owns a very small part of it.
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