Will you use your own money or capital to start-up your own company based on your brilliant idea? Should you use your own capital in starting-up or look for funding?

Most entrepreneurs do not start up with a large amount of capital, unless they have cashed out of a previous successful venture. However, unless the entrepreneur demonstrates that he or she really believes in the venture, it may be difficult to demonstrate to other investors – even friends and family – that the venture is worthwhile. The one thing that entrepreneurs have to offer is their own time, so if the money is required to pay for salaries, that’s a red flag for investors.

Some ventures require very little money while starting up. For example, if you write well you could start an online publication with yourself as the writer and editor in chief. In such cases, it would not make sense to seek external funding initially. However, if the start-up proves successful, you may decide to raise funds for marketing. If you have been able to achieve a certain amount of revenues or profitability, you may be able to negotiate with investors from a position of strength.

On the other hand, some start-ups require so much money that it’s impossible for the entrepreneur to start small. In such situations, the entrepreneur has no choice but to look for external funding. A venture capital or private equity firm might back you if they feel that you have the skills and experience to make the venture a success. However, you may end up with only a small stake in the company, unless you are able to negotiate additional sweat equity for achieving pre-agreed targets.

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