I recently read this article examining the differences between angel and venture capitalist pitches, and I started thinking about the differences between financing options.
Your company needs working capital, but where will it come from? How do you differentiate between angel investors and venture capital needs from other lending options such as banks and Far West Capital? You may remember an earlier blog post, explaining these options, but take another look at your options below.
1. Angel Investors
- Company is usually in the early stages of formation and need working capital to get the ideas off the ground
- Startups need a smaller amount of money
- There is less involvement from the ones funding, but the company still gives up some equity
2. Venture Capital Funding
- The business idea is more established and is ready for accelerated growth
- Funding usually involves corporate entities that manage the money invested
- Volume of money is larger
- Unlike angel investors and venture capitalists, banks do not require you to give up any equity
- Banks look at your current growth, not your future growth
- Banks take less risks on a company
4. Far West Capital
- Most of the time, it is cheaper than selling part of your company
- Solid way to finance growth when receivables grow faster than cash flow
- Less risk to you as the entrepreneur
- More flexibility – Use it if you grow. Don’t use it if you don’t need it
- More Control – We don’t tell you how to run your company
Generally speaking, there isn’t a “right” or “wrong” financing option, but businesses have different needs and where a company receives its funding may be crucial to the future of the company. There may be a particular option that fits a company better than another. How do you know which is the best for your company? Give us a call and we can give you our best recommendation, whether it is Far West Capital or not.