Raising capital for startups is initially less of a legal issue and more of a practical task involving identifying and charming relevant funding sources. While commentators and gurus publish plenty of general advice on the topic, finding answers to your specific questions can be a challenge.
The Harvard Innovation Lab, known as I-Lab, is the venture incubator of Harvard University. Harvard launched I-Lab in 2011. The incubator has published a seminar video on raising capital for startups. The video is particularly valuable in that it incorporates a question and answer process. If you are contemplating locating formal funding for a startup, this video is a must see. It likely incorporates answers to many of your about the funding process.
Capital and Risk
Of course, not every startup is going to face these types of challenges. Remember, the launch of any business is considered a startup. There is no difference between a company that hopes to be the next Google and a simple recipe website. Both need money. A business with more modest goals can look to less formal funding sources such as savings, credit cards, or the International Bank of Mom and Dad.
Whatever the source, you must evaluate the risk of a total loss versus the impact such a loss will have on you and your funding source. How much risk should you take on? Commentators have a wide variety of opinions, but most are just that – opinions. When raising capital for startups, the risk analysis essentially comes down to what are you comfortable with if it all goes poorly? Many a successful entrepreneur has “bet it all” on a business idea. Elon Musk is known to have bet the house on Tesla, and was almost wiped out when the company nearly failed. Of course, the company rebounded and he’s doing nicely these days, thank you.
How much risk are you comfortable with when evaluating capital sources for a business idea? Only you can say. Personally, I’m a you-only-live-once so swing for the fences type of people.
Richard A. Chapo, Esq.
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