Boston is quickly becoming one of the hottest places to build a startup. With a large population of tech and creative talent, and an even bigger source of customers, it’s no wonder why some of the world’s most promising startups are coming from the city that was recently ranked the top ‘startup community’ in the U.S., according to the new “Innovation That Matters” Report, released by the 1776 and the U.S. Chamber of Commerce Foundation.
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One of the biggest reasons for Boston’s success as a startup community, however, is its vast number of funding options for every stage of your startup, many of which are listed out below for your convenience.
Early Stage Funding in Boston
Notable Seed Accelerators in Boston
A "seed accelerator" is a cohort-based program that typically accepts teams (not solo-founders) with a product (functional prototype or live product) and some form of traction (for example, user, revenue, or team growth). If accepted to a seed-accelerator, a company typically receives a small investment ($15,000-$150,000) in exchange for equity (6-10%). The goal of a seed-accelerator is to help companies accelerate their product or user growth during the program (typically 3-6 months) in order to raise a proper Angel or Seed Round of funding at the "Demo Day" that concludes the program.
Notable Angel Investors in Boston
Angel investors are affluent people that invest their personal capital in early-stage startups or entrepreneurs, and generally provide only a small one-time investment to help the business grow. They generally provide more favorable terms compared to other types of investors, since they usually invest in the entrepreneur starting the business, rather than the viability of the business, and are more focused on helping startups build a product instead of generating a profit. Angel investors sometimes go by other names, including “informal investors”, “angel funders”, “private investors”, “seed investors”, and “business angels”.
Notable Angel Investor Groups in Boston
Angel investor groups are networks, or syndicates, of angel investors who pool their resources together to invest more money than would typically be issued with a private angel investment. Most angel networks focus their efforts on sectors or verticals in which members have experience or knowledge, although they are usually open to investments in other areas. In general, investors in groups contribute funds to the group, and a professional syndicate management team chooses the investments.
Growth Stage Funding
Notable Venture Capital Firms in Boston
Venture Capital ("VC") firms provide startup or growth equity capital and/or loan capital to promising ventures for returns that are higher than market interest rates, and typically focus on later stage companies. VC firms only invest in companies that have long-term growth potential of at least 10X their investment, and that already have considerable traction (very fast revenue or user growth), a strong team, and a viable product or service. Because of these high standards, generally less than .1% of businesses are funded by venture capital.
There are also many different types of VC firms. The first (and lowest) funding level for VCs is typically called a "Seed Round", which is appropriate for smaller companies that have just recently generated traction and need capital to fuel the fire of growth. After that, rounds of subsequent funding are categorized by letter ("Series-A", "Series-B", "Series-C", and so on), with the investment amount (and maturity of the business receiving funding) getting larger as the letters progress down the alphabet. Some firms invest across many (or all) of these types of rounds, but most specifically focus on one or two of these stages.
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