A startup then goes out seeking venture capital. It is a form of financing that is typically provided in return for a share of the company, which is referred to as equity.
That works for entrepreneurs because they will not be in a position to repay a loan immediately along with interest.
So it makes more sense for them to give a share in their company instead. It is the most popular route startups aim for when they look for funding.
Venture equity funding is provided in multiple stages called rounds. Such rounds occur after the startup achieves critical milestones in its planned lifecycle.
These milestones could be in linked to the acquisition of a certain number of customers, completion of certain regulatory approvals, establishment of a presence in specific locations and more.
However, in recent years, another type of venture funding has been introduced to startups, and it is called venture debt.