Entrepreneur

Biggest source of funding for most startups is actually surprising

Image Credit: Vladitto/Shutterstock

You hear about startups getting venture capital or crowdfunding money all the time in Silicon Valley. But the two combined barely make up the money given by startups’ biggest funding source: friends and family.

There are 565,000 startups that launch each month (think twice next time you say your company doesn’t have any competitors). These startups will then raise around $78,406 each, according to Fundable’s infographic, which meand there’s $531 billion worth of startup capital flying around a year.

But only $22 billion of that comes from those rich dudes sitting on Sandhill Road. Angel investors, those well-off individuals who like to get in early on a company, only make up around $20 billion.

Overwhelmingly, people spend their own money or credit lines on their businesses. Founders shell out $185.5 billion of that annual amount from their own pockets to fund these budding companies. But if you’re looking for something external, it seems friends and family are the most generous.

Does grandma have deep pockets or does your buddy from college still super impressed by your ideas? Their cash makes up about $60 billion worth of yearly startup capital.

On average, they invest around $23,000 into a business and 38 percent of startups have taken on this kind of funding.

Other forms of investment will yield bigger sums, such as angel investors who will shove $74,955 into your hands, or banks, which will loan you an average of $143,899. But only 91 percent and 1.43 percent of startups respectively get this kind of cash.

By far, of course, venture capitalists will hand over the most money with an average of $5.94 million injected into a company. But only .05 percent of startups actually ever see the cash and that relationship.

Check out the infographic below for more information on where startups really get their money:

Startup Funding Infographic

More information:

Fundable is a crowdfunding site for startups. Fundable’s platform takes advantage of the new JOBS Act, also known as the “Crowdfunding Bill,” which now allows startup companies to publicly raise money from anyone willing to back... read more »

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