Silicon Valley knows that raising capital, in the beginning, is the most challenging stage of a startup for many tech company founders. They are aware of a pain point in the technology market or have an incredible new product to sell, yet initial funds inhibit them.
The world of technology is the fastest growing industry, and it shows no signs of slowing down. It is more important than ever to obtain cash at the beginning of your company’s journey so you can explode with the growth you project.
However, ample startup funds never have to deter you from launching your tech business. There are different tech startup funding options available, so you can generate the company growth you desire right from the start.
There are two basic categories of funding options: funding through debt financing and offering equity in exchange for funding. All of the various ways to raise capital fall under one of these two categories.
Securing capital through debt that you must repay with interest is a financial choice that most people are familiar with, whether from personal or business experience. Debt funding for your tech startup is the same. Securing a bank loan with collateral or using credit cards to fund your finances is a quick way to get your company up and running.
However, there are higher interest rates for new tech startups because banks know the risks involved. Debt funding can have negative consequences if your company cannot pay back the money in a short time. This is because you may quickly find yourself in more debt than intended and saddled with debt for years to come.
Seeking venture capital by exchanging equity for funds is a popular form of raising capital for tech startups. With this experience, investors produce funding in exchange for a percentage of ownership in the company. Equity funding is typically secured in early-stage Series A funding when there is still significant equity available.
Venture investors, including angel investors, are in the business of funding startups to earn a percentage of the profits. This option is excellent for entrepreneurs who do not wish to take on debt, but they run the risk of losing company control with every venture capitalist that comes on board. If your company gives away more than 50% in equity, you no longer own the most significant stake in your company, which can be detrimental when making decisions or selling the company.
Funding with RevTek Capital
Debt funding and equity funding have pros and cons that define them as different finance options for your tech startup company. If you have the next fantastic product for the technology industry, but cash is a problem, these solutions may be the catalyst you need for significant initial company growth.
Funding with RevTek Capital falls under the debt funding category but without the same amount of risk as with most debt options. We provide what we call Revenue Based Financing, which is an excellent finance option for tech startups already producing recurring monthly revenue but need a boost in capital to reach the next growth benchmark.
If you have any questions about the difference between debt funding and equity funding and would like to discuss the best path forward for your tech startup, we would be honored to help. Give us a call to our office at (480) 332-0399, and a finance specialist will get back to you on how to get you the cash your company needs for massive growth.