Even though it’s much cheaper to create companies nowadays —
especially those based on the Internet and mobile platforms such
as Apple’s (NASDAQ:AAPL) iOS and Google’s (NASDAQ:GOOG) Android
— those companies still a need to raise capital. And that
process has changed little over the years. There are essentially
four major steps. The first three happen when a company is
private: seed, angel and venture rounds. The final type of
financing is the IPO. How does each one work? Let’s use Facebook
as an example: This is the initial capital for a company, and it
is usually a small amount, say, $1,000 to $50,000. As the old
saying goes, this money comes from three sources: friends,
family and fools! When Mark Zuckerberg started Facebook in his
dorm, he needed capital to pay for the hosting costs. A month
after the site launched, he got $15,000 in seed funding from a
classmate, Eduardo Saverin. However, the relationship
deteriorated and Eduardo froze the bank account. To keep
Facebook afloat, Mark and his father had to