Do you know what kind of funding you need for your start-up? No clue? You're not alone. GigaOm has a neat little primer on how to figure out what type of funding you should go after (written by sometimes angel, current VC, and former Director of Tech at Amazon, Anand Rajaraman). He proposes three options—venture capital funding, angel investment, or good old fashioned bootstrapping (bank lending was ignored, although we've included that as an option below). You can check out the full piece here, but we've got our quick and dirty take on it below:
VC Funding The creme de la creme of investment, VCs want to invest in businesses that are going to have serious returns, usually on the order of millions or hundreds of millions of dollars. You must demonstrate that there's substantial market opportunity. And you've got to have a management team they can get on board with, which means having a seasoned exec or a previously successful entrepreneur as one of your sidekicks. Scoring big money comes with its drawbacks though. Oftentimes that means giving up a large percentage of your company's ownership.
Angel Investment Yesterday we reported that angel investments are actually up this year. Since angels are often successful entrepreneurs who want to invest in other start-ups, GigaOm suggests that you find one who's specifically interested in the type of business you'd like to start (or are trying to expand). That's important because a single angel doesn't typically have the support team and resources a VC does to help determine whether or not your idea is a good one. If they have experience in your technology or field, they'll have a sense of the market and can more easily figure out whether they want to fund your start-up. However, like VCs, angels are obviously looking for a strong management team with experienced players.
Bank Funding If you're starting a more traditional business—say a restaurant, nail salon, or car wash—or if you want some supplemental cash to augment your own investment, bank funding is the way to go. Entrepreneurs are eligible to receive up to $2 million in funding from their bank through the Small Business Administration, who guarantees business loans. While naturally you have to repay a loan, the benefit of bank lending is that you don't have to give up any percentage of company ownership—meaning that you stay in full control of your start-up.
Bootstrapping Probably the most straightforward of all your funding options, if you're bootstrapping your business the capital comes straight from your own bank account (or from your friends and family). You keep full control, but if your business goes under, your savings and everything else usually goes along with it.

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