Where do start-ups in New Jersey and other parts of the country get the funding they need to start and run a new business? Most presume that it comes from banks, venture capital or crowdfunding. Surprisingly, most funds come from credit cards or loans from friends and family.
Every year, nearly 6.8 million new start-ups are formed. With each of these companies raising more than $78,000, that's more than $530 billion in capital. Of that, $22 billion comes from venture capital, while $20 billion comes from angel investors.
Family and friends are also generous when it comes to helping out financially. Combined, they contribute $60 billion. Nearly 40 percent of start-ups receive money from family and friends. However, the most money, more than $185 billion, comes from the founders' own personal savings. This is also the most common form of investment, with 57 percent of start-ups using personal money. The average investment is $48,000.
For those looking for large sums of money, venture capitalism is the way to go. On average, a venture capitalist will invest nearly $6 million in a company. Banks offer the second-largest sums of money, with an average funding of nearly $144,000. Crowdfunding, on average, generates only $7,000 per company, but this form of funding is quickly growing.
The law makes it easier for start-ups to rise capital. With crowdfunding, which is when businesses raise money from the general public, the law makes this process legal. By making funding more accessible to companies, these entrepreneurs are better able to position themselves in the market. This leads to increased success and the opportunity to create more jobs.
Starting a business can be a very exciting but stressful event. It requires much planning and funding. When someone is struggling with a business start-up, they should understand that they have options. If financial planning assistance is needed, a qualified professional could help them through this process.
Source: Venture Beat, " Biggest source of funding for most startups is actually surprising," Meghan Kelly, Dec. 3, 2013