What do funding a company means ?
Hey there :
i’m in the internet marketing industry but i’m not that much into financles and stuff,
few months a after any startup company get started you see them anouncing that they got funded by big numbers by big companies and investors, what is that mean ? can somebody explain ?
a friend of mine started an online service back in aprile, i don’t really see the purpose behinde it and i don’t like it, but even thaugh he got funded with a million dollars ? what is that mean ?
Thanks
2 Responses
Shaneyflower
31 May 2010
nicky b
31 May 2010
It means someone liked their ideas and thought it made sense to take a gamble that they would win,
There might be a lot of things going on behind the scenes.
Basically a company has found a use for his service, and they therefore want to "fund" him, it’s basically an investment.
For example, if I started an online delivery service, I buy bulk deliveries from DHL for about £3 each, then sell them to ebay customers for £4 each, then they are getting a good service cheaper from me than if they bought 2 deliveries from DHL, and I am making money.
The funding comes in here; if an eBay shop starts using my business, they want 40-50 deliveries a day, but they buy through me because they can’t guarantee figures, then they might pay me up front for service, to ensure that the deliveries are available. That’s funding.