Sources of Funding

Question 1

Bootstrapping

Answer 1

Basically you start a company from strach using your savings without attracting outside investment.

Question 2

Valuation

Answer 2

The process of determining the overall value of a business

Question 3

What are the big three in valuation?

Answer 3

Product - how are customers reacting to the product. Is the product attracting enough customers.
Market - what is the size of the market. How big will it get?
Team- is the team competenct and experienced enough to actually execute the business plan

Question 4

Debt financing

Answer 4

involves the borrowing of money (loan) and paying it back in interest

Question 5

Name two advantages of debt financing.

Answer 5

1) Your only obligation as far as business is concerned is paying back the lender on time
2) You don’t have to worry about giving up ownership over the company

Question 6

Equity financing

Answer 6

Investment money is issued once the investor claims partial ownership in the company

Question 7

Two advantages of equity financing

Answer 7

1) You don’t need to repay the investment money as you would a loan
2) With no need for monthly payments as loan buyers have to deal with, you have more time to raise capital, thereby growing the business