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Top 6 Sources of Startup Funding


As the economy regains strength and people regain confidence in their ability to successfully start and fund a business, there are more than 560,000 businesses started each month in the United States. On average, each one of them will raise startup capital at an average of more than $78,000, which comes to a total of more than $531 billion dollars a year in starting capital for these new entrepreneurial ventures in the United States.

Sources of Funding

The leading funding source is for the entrepreneurs to personally take out a loan or access their own personal credit. This accounts for more than $185 billion dollars of startup money. About $60 billion is borrowed from family or friends, which accounts for the second largest source of startup income for new businesses. Venture capital makes up more than $20 billion of invested money and private investors known as angel investors account for around $20 billion. Around $14 billion is borrowed from banks in business loans. The new form of online investing and borrowing known as crowd funding, makes up a small portion of the money invested in new business ventures, accounting for a little more than $5 billion.

Family and friends invest an average of $23,000, which funds about 38% of startup businesses. Venture capitalists fund .05% of startup businesses with an average of $5.94 million dollars per investment. There are currently 462 active venture capitalists investing in 3,700 businesses per year. Private angel investors invest in more than 61,000 businesses per year with the average investment amount being more than $74,000. This funds .91% of startup businesses.

The Small Business Administration helps with around 100,000 loans from banks each year, which fund 1.43% of startups. The average bank business loan backed by the Small Business Administration is more than $143,000. The majority of startups, at a percentage of 57%, are funded by the personal savings of the business owner or entrepreneur. Each of these personal investments averages at more than $40,000. Online crowd funding accounts for a very small percentage of business startup funding. The average crowd funding amount for a campaign is $7,000. The total amount which has been raised through crowd funding for startup businesses is $3.2 billion and there have been over a million successful campaigns funded in this way. Interestingly, crowd funding is also the funding source with the quickest growth rates out of all the other types.

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