How Private Equity Works

Before you go out and solicit funding for your company, it is crucial to have a solid understanding of how various funding rounds work because as an entrepreneur, one of the biggest dangers to your wallet and idea is dilution of shares. Although in some cases venture capital is required to help an idea scale rapidly to beat the competition, giving up control of your company is a decision which shouldn’t be taken lightly.

When it comes to building a business, 99.99 percent of the time, bootstrapping (self funding) is ideal because you maintain the freedom to run your business as you please without the pressures of conforming to others. When you go the route of accepting outside funding, you run the risk of being kicked out by your own board – the story of Steve Jobs is one of the more notable examples of this.

Regardless, all entrepreneurs need a solid understanding of their funding options so they can make an informed decision. Fortunately the infographic below provides a easy to understand overview of what happens as a company begins to issue stock.

How Startup Funding Works