Funding Strategy

The NY Times sparked a great posting by ValleyWag which focused on the ways to raise funds for your startup.  While these strategies have a lot of subjectivity to them, they tend to hold true for the most part.  Take them with a grain of salt.

Venture capitalists

• A VC firm raises funds from investors, then invests it in startups, usually at upwards of $1 million per company (and sometimes as high as $12 million or more).
• A VC firm is buying a share of the company -- anywhere from a tenth to a third (or more!), depending on how much the firm decides the company is worth before the investment.
• If the company needs more money a few months later, the firm may invest again, or a different firm might invest. Companies often raise funds from multiple firms in one round.
• VCs want at least three times their money back, though they expect most deals to fall through
• Many companies only take VC funding after they've used up the funding from their...

Angel investors

• These are often the first investors in a company, most always used before venture capitalists.
• Angels invest a few thousand dollars. As with VCs, several angels may invest in a startup at once, for a total round of anywhere up to about $1 million.
• They have less of a business interest but more emotional involvement.
• Angels can be friends and family of the investee, but some startups raise a preliminary friends-and-family round.
• Or they may go even smaller and rely on...

Personal credit

• When is it healthy to run up a 20%-interest-rate debt on plastic? When it's cheaper than running up a 200%-interest-rate debt on VCs.
• Of course, you could also rely on your own cash reserves, as many startuppers do with their second companies -- Evan Williams, for example, who used his windfall from selling Blogger to Google to buy out the investors in his new company, Odeo.
• Ironically, credit card funding is a far cry from other way to borrow from banks...

Hedge funds

• The 90s bubble was partly blown up by VCs, but the big money came from hedge funds -- an adventurous form of private investment fund.
• They're not as involved this time -- the money's too small, at least for now -- but they powered many a startup in the 90s, when more tech-savvy VC firms hadn't dominated the Silicon Valley funding industry.