STARTUP SECURITIES is an easy to read primer that aims to acquaint entrepreneurs and small business owners with the world of startup funding. In its four sections you will find information about the tools entrepreneurs have at their disposal to raise capital and to motivate and reward investors or employees.
In the first section, FINANCING AND INVESTING, we explore the fundamentals of the relationship between new businesses and investors. We go over the three basic types of securities startups use to raise funds – Bonds (or generally loans and debt), Shares and Options.
We cover these specificities and explain briefly what value they bring to the holder and the issuer of the security. This is followed by a comparison of finance in private versus public markets.
In the second section, STARTUP FUNDING, we go over the drawbacks and benefits of financing your company with debt or equity.
We also cover a middle ground option presented by financial instruments called convertible notes.
The third section is dedicated to the topic of using SECURITIES AS COMPENSATION. We discuss the motivations behind this practice as well as its appropriateness in different situations.
In the final section, ROADMAP, we touch upon the practical issues of determining your funding needs, creating a fundraising strategy, choosing between passive and active investors and possibly motivating them with securities based compensation.
After reading this eBook, you will have a solid grasp of the basics of funding your company.
Most importantly, you will have an understanding of the types of financial tools used for startup funding and the shortfalls and benefits of using each one in different situations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
