Monday, October 5th, 2015

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Startups Receive Funding from Angels, Family and Friends: Survey

Securing money from angel investors is the most popular way of getting startups off the ground.Startup companies overwhelmingly receive their first round of funding from angel investors, friends and family members, a survey of startup CEOs by law firm Dorsey & Whitney shows.

The firm polled 363 CEOs and found that angel investors were the most-commonly-relied-on funding source. Fifty-nine percent of the executives reported having received funding from an individual angel or a group of angels.

Family and friends were also common sources of capital: Thirty-two percent of the survey respondents said their friends or family had provided them with cash when they were getting their firms off the ground.

Venture capital firms were less popular, though. Nineteen percent of the startup CEOs had received funding from an early-stage VC firm, and just 17 percent had gotten capital from a conventional VC shop.

One reason many of the survey participants sought capital from angels, friends and family may have been that they simply didn't require a lot of money. Sixty-four percent of the survey respondents needed less than $1 million to bootstrap their companies.

For young people thinking about starting their own firms, the survey illustrates that informal connections are more important in securing capital for a startup than impressing VC investors.

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