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EARLY-STAGE FUNDING: OPTIONS, SOURCES, AND CONSEQUENCES

A community-based white paper for aspiring and first-time founders. Published: Q4 2020

By: Brian Ellerman; Danny Knee; Jonny Price; Liz Pocock

This white paper was a collaborative effort between University of Arizona’s Arizona FORGE, Community Investment Corporation, WeFunder, and Startup Tucson. The paper also features numerous founders’ case studies and interviews. Many thanks to all who participated!

Introduction

At the earliest stages of company formation, access to capital is repeatedly cited by aspiring entrepreneurs as the single greatest challenge.1 In the startup world, these funds help launch a project, moving from “someone with a good idea” to “something real” — a prototype or minimum viable product (MVP). Armed with an MVP, a startup leaves the idea stage ready to pitch to someone with the financial resources to help propel the startup to the market.

 

Aspiring entrepreneurs also list access to networks and connections as the second biggest challenge. For them, not only do they not know how to access seed funds, they do not know who to talk to to find out.As if this weren’t difficult enough, aspiring entrepreneurs also encounter a lack of inclusion based on race, ethnicity, gender, income, or other factors three times as much as established entrepreneurs. And existing laws and incentives are heavily tilted in favor of larger, established businesses with more resources to chase after those funds and programs.

 

While we can’t change policy or remove systemic biases with a white paper, we do hope that this can provide a bit of hope for aspiring entrepreneurs – especially those who have encountered discrimination. Along the way, we will tell the stories of a few founders and benefit from their hard-earned wisdom.

 

We will also bust a few myths and misconceptions, especially those that cause early-stage founders unwarranted downstream grief.You can read this in its entirety, but each section stands on its own. We know this document is incomplete. We invite you to contact us with additions and corrections. Most importantly, we invite you to share and join our efforts to build a nationwide entrepreneurial ecosystem builders guild.

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