Tips For Startups – Understanding Debt vs. Equity Investments

Bootstrapping your startup is a great way to preserve founder value by building your business through your own time and expertise. The theory is that in time, the value that you create using your own blood, sweat and tears will multiply. However, not all businesses have the same needs at the same time, and eventually most need cash. Even if you are able to bootstrap your way to profitability, there may still come a point at which you need an infusion of cash in order to expand your business.

Aside from crowdfunding campaigns or other sorts of pre-sales, this cash infusion will most commonly involve seeking investors. Whenever this happens, it is important to understand the different options available to you for investor financing, and the pros and cons associated with each. Investor financing may come as either debt (where the company has specific obligations to repay the funds to the investor) or equity (where the investor becomes a shareholder of the company). And