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Startup

Running musings: Startups: cheapest money available

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.

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