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The pros and cons of different funding methods for startups

Establishing a business is easier than before thanks to many funding methods, but not all funding methods are applicable for startups.



Launching a business is now easier than ever thanks to various platforms that cater to budding entrepreneurs. Proceeding past the startup phase is not as easy however, as competition is always stiff. For every entrepreneur, the best course of action includes finding the best funding option for their respective venture.

Vangelis Andrikopoulos, an investment associate, shared on Growth Business UK some of the best ways to fund startups. According to Andrikopoulos, the most common funding method is through one’s own pockets or savings. The benefit of doing this is that the entrepreneur will not have any loss in equity, or debts to pay in the long run. In retrospect, funding a business this way often leads to limited sources unless the entrepreneur is wealthy to begin with.

Alternatively, entrepreneurs can also borrow extra funding from family, friends or other acquaintances. This is a faster process as compared to borrowing from financial firms like banks, as there will be less paperwork to do since there is mutual trust involved. Similar to self-funding, this method is limited as well as it relies on the wealth of the loaner.

Moving on to bigger opportunities, entrepreneurs tend to gravitate towards grants. What’s good about grants is that the entrepreneur does not have to pay back the investment that was given. The con is that becoming approved takes a long time and is not always guaranteed. Entrepreneurs could delay their launch for months, or even longer, only to end up getting denied the grant.

Perhaps the most popular way to gain funding in today’s booming startup industry is through the use of crowdfunding platforms. Platforms such as Kickstarter and Indiegogo have been the breeding grounds for several successful ventures already. Since it is easy to launch campaigns on these platforms, competition is always tough, and the chances of success can be greatly decreased.

What’s common among these traditional funding methods is that they have major cons that entrepreneurs have to worry about. However, having little downside is what the Public-Accelerator Incubator (PAI) is best known for.

The PAI model promotes a healthy ecosystem for investors and entrepreneurs. (Source)

The revolutionary PAI model’s approach to funding

Created by Digital Asset Monetary Network, Inc. (DigitalAMN) (OTCMKTS:DATI), the PAI model is a revolutionary structure that promotes a healthy investing ecosystem that benefits both the startup and the investor.

The PAI model houses highly vetted tech startups and helps advance their innovations to the market, while finding quality investors along the way. Despite the tight competition among startups in getting funded, the PAI model is able to offer entrepreneurs higher chances at securing investors. This is because DigitalAMN taps angel investors and disenfranchised investors who are more than committed to the actual growth of a startup.

Those who choose to fund businesses under the program are given early access to liquidity, in as quick as 24 months, in exchange for 1 % – 5 % equity in the startup. On the contrary, traditional waiting periods for liquidity average about 10 years, which is one of the main reasons why the pool of viable investment resources has decreased in recent years. With DigitalAMN’s program, entrepreneurs are given access to a large pool of investors who are enticed by the prospect of getting returns quickly. For instance, since angel investors get shares of DigitalAMN, a publicly traded company, they can liquidate about 10 percent of their private investments once they sell the shares of DigitalAMN.

With such a solid structure, the PAI model serves as the best solution for potential unicorns that have trouble getting past the startup phase. Compared to traditional accelerator and incubator programs, the PAI model doesn’t necessarily offer industry-specific education for entrepreneurs. However, the program’s potential to further increase the growth ceiling for startups remains unrivaled.

Moving forward with the success of its PAI model, DigitalAMN continues to expand. According to a recent press release, the company has invested in WorkDone Inc.’s crowdfunding campaign, as part of its commitment to support client-companies in meeting their capital needs.

As part of the deal, DigitalAMN may receive future equity from WorkDone, along with the other benefits coming from the regulated crowdfunding offerings.

The early and funding stages are a crucial part of starting a business and finding a consistent pool of investors is also important for survival. With all the options available, entrepreneurs should weigh out what is best for them, carefully weighing the pros and cons to ensure success.

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Andrew Ross is a features writer whose stories are centered on emerging economies and fast-growing companies. His articles often look at trade policies and practices, geopolitics, mining and commodities, as well as the exciting world of technology. He also covers industries that have piqued the interest of the stock market, such as cryptocurrency and cannabis. He is a certified gadget enthusiast.