Funding

Funding section on Startup Terminal brings the latest updates on funding in the startup ecosystem from all over the world. Funding is the act of providing resources to finance a need, program, or project. While this is usually in the form of money, it can also take the form of effort or time from an organization or company. Generally, this word is used when a firm uses its internal reserves to satisfy its necessity for cash, while the term financing is used when the firm acquires capital from external sources. Sources of funding include credit, venture capital, donations, grants, savings, subsidies, and taxes. Fundings such as donations, subsidies, and grants that have no direct requirement for return of investment are described as "soft funding" or "crowdfunding". Funding that facilitates the exchange of equity ownership in a company for capital investment via an online funding portal per the Jumpstart Our Business Startups Act (alternately, the "JOBS Act of 2012") (U.S.) is known as equity crowdfunding. Funds can be allocated for either short-term or long-term purposes. Venture capital (commonly abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which have demonstrated high growth (in terms of number of employees, annual revenue, scale of operations, etc). Venture capital firms or funds invest in these early-stage companies in exchange for equity, or an ownership stake. Venture capitalists take on the risk of financing risky start-ups in the hopes that some of the companies they support will become successful. Because startups face high uncertainty, VC investments have high rates of failure. The start-ups are usually based on an innovative technology or business model and they are usually from high technology industries, such as information technology (IT), clean technology or biotechnology. A financing diagram illustrating how start-up companies are typically financed. First, the new firm seeks out "seed capital" and funding from "angel investors" and accelerators. Then, if the firm can survive through the "valley of death"—the period where the firm is trying to develop on a "shoestring" budget—the firm can seek venture capital financing. Typical venture capital investments occur after an initial "seed funding" round. The first round of institutional venture capital to fund growth is called the Series A round. Venture capitalists provide this financing in the interest of generating a return through an eventual "exit" event, such as the company selling shares to the public for the first time in an initial public offering (IPO), or disposal of shares happening via a merger, via a sale to another entity such as a financial buyer in the private equity secondary market or via a sale to a trading company such as a competitor.