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Entrepreneurs are not always aware of the different financing tools available to them when raising funding, nor the implications of the different forms of funding for their company. The three most common ways to get funding are the following:<\/p>\n
Due to challenges with early-stage investing in shares, the convertible note<\/a> was invented. Convertible notes are a debt instrument with an interest rate, which postpones the whole valuation discussion.\u00a0That way, the startup is able to raise funding and use it to get the product\/service into the market.\u00a0The startup is able to get a track record \u2013 usually consisting of revenue\/ user growth \u2013 so that when a large investor wants to invest, the valuation will be based on more than pre-startup assumptions.<\/p>\n