**1. Introduction**

A start-up business is unique as it has specific features that are not common in other types of businesses like high social impact, high reliance on technology, and out-of-the-ordinary solutions that bring significant contributions to society and the economy of the countries. In the digitalized era, the development of a country can be recognized by the technology sector, the number of unicorn companies, and the startup ecosystem advancement.

Startup businesses have specifics not common in any other businesses as it brings a strong impact on society through their unique solutions based upon high technology

that contributes significantly to the economic and social development of any country. It serves as a solid foundation for innovation since all activities of the business intensely deal with innovative solutions [1].

A startup is a temporary organization designed to look for a business model that is repeatable and scalable [2].

Startup businesses are most concerned with the creation of a business model that focuses on the development of innovative, unique products and services or processes, as well as businesses around the platform to bring them to the market making them desirable for the customers [3]. It has become notable in creating jobs, boosting innovation as well as competition and the financing of startup businesses grow persuasive in the economy. Financing decisions are crucial in recognizing the potentiality of the businesses to survive and prospect and risks [4].

Financial decisions generally depend on the choices available to businessmen. The potential funding is significant in the launch, survival, and expansion of any startup [5]. Raphael et al. noted that attracting investment is one of the key skills of the businessman [6].

Typically, startups require a heavy investment in the initial stage for developing new products and services and earn limited incomes as they lack expertise and additional investment to sustain the businesses. Fundraising remains the major challenge for most businesses and a key success factor. Furthermore, they make substantial efforts to differentiate their businesses from their rivals to take a better position in the market. The typical problems encounter among startups due to lack of capital and business experience. The most challenging issue among local startups is financing that has not been resolved yet and that prevents them to expand their operations.

#### **2. Literature review**

The meaning of startup is perceived as the initiation or start of any processes or activities. The terminology was used by Forbes magazine in 1976 to describe small companies with high growth potential, especially, an increase of information technology businesses in early 2000 like Dot com bubble in Silicon Valley served as the origin of the term. The technology-based competition allowed these businesses magnificently compete in the market yielding immense profits and attracting numerous angel investors. Startup businesses are developing progressively not only internetdominated businesses but also entering through technological solutions to the industries like banking, finance, insurance, commerce, logistics, and real estate.

Therefore, for any person who pursues transferring his/her idea into a real business activity attracting funding or raising the fund is a long way to learn and experience the real world. The knowledge and skills in funding technology are getting essential ever in a rapidly transforming business environment, particularly for the younger generations who often choose a free-lance professional career path that often ends in launching new startup businesses.

The funding of startups is tricky but provides diverse alternatives that make the businesses select the most appropriate ones. To better understand the alternatives of funding, the following part will guide you to the best options that exactly meet your needs. One of the key aspects of startup development is the funding opportunity that plays a crucial part in the initial stage. The appropriateness of financing startups depends on the development stage of the businesses and the other essential aspects

like return on investment, loan conditions, financial capital as well as any other types of support for the beneficiaries.

To mature, the startup businesses undergo the following stages:

#### **2.1 Development stages of startup business**


#### **2.2 Main investment sources of startup business**

One of the success factors of startup businesses is financing opportunity that is critical in any stage of development, especially acquiring adequate funding in the initial stage is indispensable. The biggest challenge for many startup businessmen remains to find the initial capital to launch the business or expand it [7].

Despite accumulating working capital, the new businesses need funding real estate, which is often solved through utilizing international funding, but in later stages, external funding is sought for the expansion [8].

Depending on the stages of the development of the startups, it is essential to consider certain conditions including return on investment, loan condition, and nonfinancial support in selecting an appropriate type of financing. Moreover, attracting the funding technology differed slightly relying on the stages of the development [9] as it is shown in the chart (**Figure 1**).

#### **2.3 First stage of the financing life cycle (seed funding/capital stage)**

Seed money is a form of financial means where an investor invests capital in a startup company in exchange for equity in the company. The term seed refers to the early investment to support the business until they stay confident or survive in the market until it is ready for further investments.

In the initial stage, seed financing is required for any business to transfer the idea into the business and it is often referred to as the initial investment. Technologyrelated businesses with a fast pace of development usually seek an opportunity to access the current financing to boost their growth and accelerate product development [11].

Seed financing options include [12]:

• Friends and family funding,

#### **Figure 1.**

*Stages of startup business development and financing cycle. Source: [10].*

	- *Self-financing*: It is frequently used as a convenient financial source in the initial phase of the business as it enables the creation and development of the establishment. However, further operations necessitate additional funding to expand the scope and scale of the business. The advantage of this type of financing is the owner's ability to monitor the company business, but the disadvantage is the lack of prospects extending their network within the professional sphere and learning the best practices and expertise.
	- *Friends and family funding*: Based upon the credibility of the business project family members and friends of the business person invest in the business as support. The advantages of this type of financing are skipping red tape and diverse risk assessment and criteria for funding, which are the compulsory procedure in accessing the investment, however, the amount of financing is usually sufficient for the initial stage of the newly launched business. Large involvement of personal relations likely damaging due to the business-related risks, there is no guarantee to save their investment as well as close tie.
	- *Business angels*: This approach has been used since the 1900s. Angel'<sup>s</sup> meaning of exemplary conduct is exactly suited for its deed for the startups that sharply need the support to survive "Valley of death" in the initial stage.

Angel investors or private persons are those who typically provide insignificant sums of investment for recently established companies to assist in implementing business ideas in exchange for share capital of the future business. The angels usually have business experience and expertise in corporate management and tend to invest in the familiar business [13].


Bootstrapping requires the business person to possess a certain income that is sufficient for funding startups unless third-party involvement is unnecessary [15]. The advantage of the approach is to enjoy full authorization to control the business, but if the owner lacks sufficient business experience, then it will be a disadvantage in the competition.

Freear et al. identified the prevalence of the following types of bootstrapping [16]:

1.Launch of product development,

2.business accelerator, and.

3.use of own resources to reduce the external funding needs

• *Crowd-funding*: The term is used since 1890 and initially, it is used for fundraising from the public. The concept remains the same except for the use of the internet platform, which widely entered daily life in the new millennium. In the present day, it is regarded as a way of raising money for financing business projects and the user himself turns into a financer. Starting from a few people or a large number of people are involved in collecting the fund via an online platform. In the case of using this approach, warranting an equal return on the invested money is more significant than the credibility of the business project [17]. Three parties are involved in this financing approach: business project initiator, the public who seek a return on their investment, and public financing organizations or businessmen, interested parties involved with the financing mechanism [18]. Crowd-funding is executed on a voluntary initiative and contributes significantly to boosting the development of innovative products. Types of
