Was just running through the calculations of how much interest various kinds of funding available to entrepreneurs cost:
1. Venture funding: A 10X exit atleast. So basically you are paying a compound interest of 60% annually for that growth.
2. Angel Funding: More lenient, but still requires a reasonably profitable exit. So would cost you conservatively 30% annual compound interest.
3. Bank Funding: Typically 16 -18% compound interest.
4. Friends: They deserve a return slightly better than what a bank would give them. So 15% compound interest.
5. Family: Anything from 0 to 15% would be good.
6. Customers: They pay you to grow!
So, money from customers is undoubtedly the cheapest & best form of money available to an entrepreneur. Entrepreneurs should spend 90% of their time acquiring paying customers rather trying to raise money from other sources. This, of course, is meant for startups which are not capital intensive like biotech, infrastructure etc.
