Evaluation of Early-Stage Financing Methods and the Challenges of Capital Acquisition for Startups

Pouya Ojaghzadeh¹

1) Department of Technology Management and Entrepreneurship, Allameh Tabataba i University, Tehran, Iran

Publication : 1St International conference on new horizons in management,business, economics and humanities(icmbe.com)
Abstract :
Early-stage financing represents one of the most critical determinants of startup formation, survival, and growth. This study evaluates the effectiveness of various financing methods available to startups and examines the major challenges founders encounter when attempting to raise capital in the early stages. Using a descriptive–survey methodology, data were collected from startup founders, investors, and entrepreneurial finance experts. The findings indicate that private investment sources—particularly angel investors and venture capital funds—play the most influential role in early-stage financing due to their risk tolerance and ability to provide both capital and mentorship. Institutional sources such as incubators and accelerators also demonstrate strong effectiveness by supporting startups through training, networking, and market entry facilitation. Internal financing sources, although widely used, remain limited in capacity, while government financing shows the lowest effectiveness due to bureaucratic procedures, restrictive eligibility criteria, and slow fund disbursement. The results further highlight significant challenges such as information asymmetry, lack of collateral, investor risk aversion, and limited access to formal financial networks. Overall, the study underscores the importance of adopting diversified financing strategies and strengthening policy frameworks to improve startup access to early-stage capital.
Keywords : startup financing early stage investment venture capital angel investors