Seed capital funding sources: personal savings, friends & family
Last week Fundable came with a cool infographic about “Where startup funding really comes from” showing some interesting stats form the U.S.. Presumably the data is about seed capital and a “startup” is defined as a newly founded business (in any sector). The data is a helpful reminder that personal savings, loans, and friends & family are still the dominant sources of funding while VCs and angels still play relatively minor role. I did not fact-check this data, but the direction and conclusions are clear: it is consistent with the well-known best practice of how to fund your startup. From Altucher’s famous ultimate startup cheat sheet: “first build a product, then get a customer, then get friends and family money (or money from revenues which is cheapest of all) and then think about raising money.” The graph shows U.S. data only, but the direction and conclusions are clear.
This chart would look very different for later stage businesses obviously, and it is interesting to think about how crowd-funding, syndication platforms and other innovations venture capital may alter this landscape in the future. This is the topic for a next post.
The data shows U.S. only, not Europe. We already know that the European deal volume of VC and business angel deals is about 4x smaller than the U.S. deal volume. But I would imagine that the breakdown in the above chart to be proportionally somewhat similar in Europe (probably angel investing plays an even smaller relative role in Europe).
Yoram Wijngaarde, Founder
The dealroom.co team