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Digital skills in managing startup finances
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Module goals

IntroductionClick to read  

By the end of this module you will be able to:

•Identify and discuss traditional sources of business financing.
•Present and characterize innovative sources of startup financing.
•Perform an analysis of the advantages and disadvantages of using various forms of business financing.
•Adjust the form of financing to the proposed business venture.

Personal savings

•Especially at the initial stage of operations, when the risk of business failure is high,
•The most obvious source of business financing, especially for a startup.
•This type of capital is called equity, but it does not mean that it costs nothing to use it.
•Sometimes it is required when applying for external funding; as a security.
Private capitalClick to read  

Financial (or in item) contribution of owner(s) of the company, partners or shareholders.
The owners independently decide in what part and for what the funds will be allocated.
It is often a more expensive source of financing than foreign capital (e.g. a loan), but the only one that can be used.
Use of equity capital is treated as an investment and not as a liability as in the case of debt.
Cost of private capitalClick to read  

•Like all capital, it has a price.
•The cost is usually identified with the so-called alternative cost - opportunities or missed opportunities, i.e. the rate of return that would be expected if the same "zloty" was invested in other assets / investments.
•Due to the risk of not recovering the invested capital - the cost is relatively higher than for foreign capital (in the event of possible bankruptcy - the company's creditors have priority in recovering funds, and the owners are at the very end).
Advantages and disadvantages of private capitalClick to read  


- full independence of the owners in managing the capital

- no need to return the capital

- no periodic payments (installments, interest)

- making it easier to incur liabilities

- no additional costs

- availability - not limited in time



- risk of investment failure

- limited limit of funds (up to the amount of savings)

- relatively difficult access to finance

- relatively high cost of using capital

- in the case of external equity (VC investors / Business Angels), it involves limiting control over the company, losing some of the authority to make management decisions

Foreign capitalClick to read  

•Capital put into use for the period specified in the contract.
•It has additional interest costs.
•It is treated by the company as a liability that should be returned to the lending institution after the end of the contract, along with additional fees (according to the interest rate of the loan).
Advantages and disadvantages of foreign capitalClick to read  


•creditors do not take part in the company's life (we do not transfer shares in exchange for capital),
•relatively easier to obtain than capital from external investors (if the company is solvent),
•the inability to "produce" a tax cover,
•relatively simpler procedure for obtaining funds (no speech, complicated documentation, negotiations),
•wide offer on the market


•available for a limited time
•the need to present the company's financial situation
•reduces the company's liquidity (due to additional costs related to the incurred debt)
•increases the risk of insolvency (depending on the size of the liability)
•need to return funds
•the need to secure the loan value (e.g. with
a mortgage, institution guarantee, etc.)
•some banks introduce a requirement regarding the functioning of the company on the market for
a minimum period of one year (this may block the receipt of a loan for launching or in the initial stages of operation)
First-line financingClick to read  

•3F, which means - founders, family, friends and others naively believing in the success of the initiative.
•According to research conducted by the OECD, it is the most popular source of startup financing, after own savings, regardless of the group of respondents (gender, age, education, etc.)
•The main goal - to show that the entrepreneur believes in his idea, in addition, his family and friends are willing to take a risk and invest in the development of the idea.
•Such investments should be made with the same care and formality as for outside investors.
•lower costs of borrowing capital than in formal financing sources.

the risk of misunderstandings, the need to return shares in the company or distribute profit

External sources of financing – bank loansClick to read  

•Probably the oldest traditional source of financing business ventures.
•Credit ≠ loan

Bank loans are granted only by banks for the purpose specified in the contract and taking into account the provisions of the Banking Law.

Loans - other institutions (not only financial), if they have only such funds, taking into account the provisions (only) of the Civil Code.
What is loan policy?Click to read  

•As part of their policy, banks try to eliminate investment risks, which in practice means that the situation of the person / institution applying for a loan is assessed strictly.
•Each bank has its own credit policy adjusted to the current situation in the economy, top-down market regulations, as well as the activities of competitors.
•Each bank analyzes credit risk according to its own strategy and also independently determines creditworthiness requirements.
•Each bank analyzes credit risk according to its own strategy and also independently determines creditworthiness requirements.
•Like every enterprise, banks also often define the target group of customers and develop financial products for this group.
•Banks, however, cannot freely dictate prices, because all activities of these institutions are regulated by national and EU law.
What is creditworthiness?Click to read  

Creditworthiness is the ability to repay potential debt (credit / loan with interest and other fees).


When applying for a bank loan, you must show an appropriate credit history, often also collateral (e.g. real estate). That is why startups have difficulty obtaining a loan from a bank.

Creditworthiness and necessary documents?Click to read  

•The company applying for a loan must present the institution with registration and financial documents, such as the balance sheet, profit and loss account and cash flow statement, as well as the fulfillment of obligations towards public and legal institutions (tax office, social security contributions).
•Natural persons present the profile of a reliable borrower, including statements about having credit obligations as well as the amount of income obtained.
Advantages and disadvantages of bank loan financingClick to read  


•banking products adapted to the size and nature of the company [offers addressed to the company]
•the possibility of receiving the so-called investment loan for more complex investments
•receiving an opinion about our project from the bank
•previously known financing costs


•the need to secure the loan value
•the need to have an appropriate credit history
•the need to maintain financial liquidity at an appropriate level
External sources of financing– government grantsClick to read  

•Government grants are money given to a company by the government to help it expand its business over a period of time.
•Grants provide financial resources that can be used (depending on the program) to start a business, develop a new product or purchase necessary equipment.
•The biggest advantage of a subsidy is the fact that it is a non-returnable aid, i.e. you do not have to pay it back or pay interest on the amount received.•Often an extremely time-consuming and complicated process
•Many willing people mean that we have to take into account that our idea will not receive support.

•Grants may be directed to narrow specializations, market niches, which may make it very difficult to receive a grant, or even find a program in which, in formal terms, our project may be qualified for evaluation.

•Receiving a subsidy is associated with the need to settle the allocated money, there are spending criteria for the funds received, which must be strictly monitored.
•As a standard, the grant is allocated to a specific project, purpose, and less to the so-called "startup".
•Depending on the program, the company must prepare a set of various documents, including business plan (as a document showing the multidimensional assumptions of the venture), as well as the description of the idea itself.
•The detailed steps and requirements for applying for a grant may vary from program to program.
•Basic steps you must follow to apply for government grant funding:
1.Carefully read and understand the requirements of the granting authority.
2.Determine if this financing is appropriate for your idea.
3.Prepare a very detailed description of the project, purpose and how the subsidies will affect its achievement.
4.Write down information about the company, its representatives who apply for funding - experience, knowledge, skills - especially in the area of the future investment, as well as the company's history on the market.
5.Project valuation and implementation period - project implementation costs and the amount of support requested, implementation time.
Advantages and disadvantages of financing – government grantsClick to read  


•they are usually non-returnable
•have a positive impact on the development of enterprises
•improving the competitiveness of enterprises on the local and foreign market
•they can be allocated (depending on the program) for the purchase of equipment, innovative technologies, training for employees
•"forces" the company to think long-term, about the company's development (without support, many companies would not decide on investments that are crucial for their development)


•complicated application procedurę
•time-consuming process of applying for funds (preparation of the application, period of its evaluation)
•extensive project documentation and complicated vocabulary (both before, during the project implementation and after its completion)
•the need to follow guidelines and regulations on an ongoing basis
•the need to stick to the established plans and indicators to be implemented
•it is not available for all forms and types of activity, often targeted at specific specializations and industries
•it may be necessary to provide own contribution and security
External sources of financing - Startup loans)Click to read  

•There are national programs offering loans that provide financial assistance to people of all ages to start or develop
a business that is operating in the market for no more than
a year.
•In addition to financial support, such programs also provide content-related support.
•In the context of funds from the EU, programs are developed that are implemented by local governments or other institutions offering loans on preferential terms, but often targeted at specific groups of future entrepreneurs.
Advantages and disadvantages of financing – Startup loansClick to read  


•relatively high loan amount,
•favorable conditions,
•a wide range of beneficiaries,
•short time of obtaining financing,
•the possibility of receiving support from mentors,
•financing targeted at startups.


•received funds must be returned,
•required loan security,
•each program has different requirements, often also exact deadlines for submitting applications,
•often precisely defined target groups of beneficiaries (final year students, high school graduates, unemployed).
External sources of financing – Local institutions/Entrepreneurial agencies (Local authorities)Click to read  

•There are opportunities for financial support at the local level.
•Many local authorities create units whose task is to support local entrepreneurship - if they do not offer financing, they will certainly have office space for startup entrepreneurs or will indicate other local sources of financial support.

What is crowdfunding?Click to read  

Crowdfunding is a form of financing various types of projects by the community, which is or will be organized around these projects;
The project is financed through a large number of small, one-off payments made by persons interested in the project;
Donation crowdfunding (1)
•is donation-based crowdfunding. It happens when people donate money to a specific campaign, company or person and get nothing in return.
Debt crowdfunding (2)
•relies on loans which are a form of crowdfunding. Money pledged by sponsors is a loan and must be repaid with interest within a specified period.
Rewarding crowdfunding (3)
•occurs when the donors (people who financially support a given project) receive something in return for their donation (e.g. a product, a voucher for its purchase at a reduced price, etc.)


Equity crowdfunding (4)
•crowdfunding allows you to give away some of your shares in return for funding.
•These types of donations are an investment in which its participants receive shares in a company based on the value of the provided funding.
When to choose crowdfunding? (1 out of 2)
•When an entrepreneur aims to finance a single project (he does not treat crowdfunding as permanent funding for his business);
•When the entity has and develops a business model and knows how it will produce and distribute its products / services;
•When crowdfunding is treated as a kind of pre-sale, thanks to which you can raise money in advance for an offer that will be produced and will enter the market;
When to choose crowdfunding? (2 out of 2)
•When an entrepreneur plans to popularize a project through crowdfunding and believes in the marketing value of this type of campaign;
•When the entity is aware that it is not easy money and only professional undertakings can cope with the pressure of time and thousands of investors.
Chosen advantages and disadvantages of crowdfunding Click to read  



Possibility of obtaining financing without possessing financial assets;
Many investors hinder the company's communication and timely fulfillment of obligations;
The quality of products offered through crowdfunding is generally high;
Asymmetry in access to information between investors and the project owner;
Low risk of the project owner losing control of the project;
Relatively high costs of servicing dispersed investors;
Using the "wisdom of the crowd" (feedback from campaign participants);
The risk of not matching the product with the expectations of Internet users;
Creating a group of faithful recipients of future products and services;
The risk of plagiarism of the product on the basis of information made available about it online;
Success factors of crowdfunding projects Click to read  

Success factors of crowdfunding projects (1 out of 2)
1.Choosing the right (tailored to the project) crowdfunding platform.
2.Set a realistic goal (e.g. amount of expected funding) as well as the duration of the campaign.
3.Development of marketing materials (preferably tailored and substantively refined).
4.Preparation of a set of prizes differentiated by the level of funding granted.
Success factors of crowdfunding projects (2 out of 2)
5.Disseminating information about the campaign first among family and friends, and then in the external environment.
6.Maintaining contact with people who made payments during the crowdfunding campaign as well as after its completion.

Venture capital - definitionClick to read  

Venture capital is a form of medium-term investment in the shares of a venture at an early stage of its development. The high risk associated with the investment is compensated by the higher expected rate of return on investment. Venture capital is one of the specialized segments of the private equity market.

History of the beginnings of venture capitalClick to read  

1.Venture capital in Middle Ages
2.Venture capital during First Industrial Revolution
3.Venture capital after World War II
4.Venture capital in the 70s of the XX century
5.Venture capital in the 80s of the XX century and after
The essence of venture capitalClick to read  

Venture capital funds are looking for promising start-ups or people with an innovative idea. After finding a suitable entity, in return for shares in it, they provide capital allowing this entity to start and develop its business. Venture capital funds most often do not buy a majority stake in an entity. Their purpose is not to take over or manage such an entity.

The fund invests capital in the medium term.


The phases of enterprise development and capital commitment of venture capital fundsClick to read  

1.Seed stage
2.Startup stage
3.Development stage
4.Expansion stage
5.Phase of entry of a strategic investor or going public
Advantages and disadvantages of venture capitalClick to read  


1.Company raises capital for investments without the need to present collateral.
2.Fund is not interested in paying out current profit.
3.Non-financial support received from a venture capital fund.
4.Increase in the company's equity.
5.Improving the image of the company.
6.Improving the company's credibility.
7.Ability to raise capital without publishing sensitive information of an enterprise.
8.Owners of the enterprise raise capital without losing control over it.
9.Venture capital fund acquires shares in small and medium-sized enterprises.
10.The owners can benefit from the fund's experience and business contacts.


1.Partial loss of control over the enterprise. The need to share profits and power.
2.Long time to find an investor, counted in months.
3.A lot of formalities when investor enters the enterprise (bureaucracy).
4.There is no influence on who the shares or stocks will be sold to by the fund leaving the enterprise.
5.This funding is intended only for resilient, ambitious and promising small and medium-sized enterprises.
6.It is one of the most expensive forms of financing.
Venture capital in practiceClick to read  

Many companies, currently tycoons on the world market, used this type of support.

Venture capital was used by, among others:


Google, Facebook, Apple, Amazon, Twitter, Gupon, Intel, Microsoft, Hewlett, Packard, Compaq, Lotus, Xerox



Who are business angels? Click to read  

They are private investors (usually with extensive business experience) who invest in companies in their early stages of development in return for subscribing to some of their stocks or shares;
Process of project financing (1 out of 2)
Phase no. 1 – Entrepreneur's application to the network of business angels with the concept of a business project.
Phase no. 2 – Initial analysis of the submitted project (and in case of a positive assessment, presentation of the business plan of the project).
Phase no. 3 – Acceptance of the business plan results in the recommendation of the project for financing and includes the presentation of the overall project concept or pitching.
Process of project financing (2 out of 2)
Phase no. 4 – It includes negotiating the terms of cooperation, as well as in-depth business analyzes of the submitted concept, project.
Phase no. 5 – After the agreement of both parties, a contract is signed and the business angel pays a fixed amount in return for the transfer of part of the shares.
Advantages and disadvantages of business angels’ financingClick to read  



BAs bring added value to business not only in the form of capital, but also know how.

Difficulties with obtaining subsequent tranches of capital to finance project development.

Relatively low cost of raising capital.

Not every BA plays an active role in the project in which he has invested capital.

Support for entities in the initial stage of development with an emphasis on companies with high-tech potential.

AB's expectations of influencing the company's operations.

Added bonuses: leverage effect, loan guarantees, not too high investment fee.

Unregulated issue of the amount of shares in the supported enterprise.

Business Angels in practiceClick to read  

•When you want to get a business angel, you need to pay attention to several issues that determine your success:
1.You need to know what investor you are looking for.
2.Search close to home.
3.The web, the web and – again - the web.
4.Realize that angels rarely fly alone.
5.Take advantage of the services of connecting business angels with investors available on the Internet.
6.The efforts to "hunt" a business angel are worth it, and the scale of the benefits goes beyond the financial benefits.

What are startup accelerators?Click to read  

Accelerator programs, commonly known as accelerators, support enterprises in the earliest stages of development. Sometimes their area of interest are human teams that already have a developed product or service that they intend to commercialize. The assistance may include both financing, but also substantive support in the area of e.g. law, accounting, marketing or management. Incubators may also provide entities with the necessary space and infrastructure in the form of office space, equipment or office supplies.

Types of startup acceleratorsClick to read  

1.Accelerators run by investment funds
2.Corporate accelerators
3.Public (EU, government or local) accelerators and those created by non-governmental institutions
4.Academic accelerators
Choice factors of the proper acceleratorClick to read  

1.Value of the startup portfolio of a given accelerator
2.The size of the startup portfolio of a given accelerator
3.Survivability of startups
4.Satisfaction of entities that have terminated cooperation with the accelerator
Advantages and disadvantages of startup acceleratorsClick to read  

1.Increase in value of an enterprise, which is due to the entry of the investor and his financial support.
2.Increasing skills of the founders of the enterprise.
3.Access to mentors.
4.Possibility to use the contact network.
5.Assistance in verifying the effectiveness of the current business model, the ability to verify the previously adopted operating assumptions.
6.Possibility to use the accelerator infrastructure - rooms, equipment, etc.


1.Necessity to share shares or stocks, admitting a new owner to the enterprise.
2.Short-term and intensive cooperation lasting only a few months.
3.Possibility of disrupting the current product/service development.
Startup accelerators in practiceClick to read  

There is a huge number of startup accelerators in the world. Below are some of the largest companies in terms of financing and the number of serviced.


Y Combinator, Techstars, 500startups, AngelPad, Seedcamp, DreamIT Ventures


Business incubators - what are those?Click to read  

•Business incubators are institutions of various legal forms, the purpose of which is to support entrepreneurship.
•The main target groups benefiting from the support provided by incubators are budding entrepreneurs, young people and students as well as social economy actors.
•According to the assumptions, incubators are to contribute to the use of intellectual potential, skills and knowledge of the local community, bringing new solutions that can be adapted to the external environment and based on them to build a business*.
•It happens that the scope of activity of business incubators is associated only with work space, these are cases of incubators that do not operate actively.

* Some incubators focus on specific areas of the economy.


•In the incubator, we can work on the assumptions of the project even before we are sure of the proposed solution.

The concept of business incubator is used interchangeably with the concept of entrepreneurship accelerator, despite the undoubtedly similar assumptions of activity, both of these institutions differ in the target group due to the stage of advancement of the enterprise.


•It is not only a space for work, but also an environment - substantive, legal and accounting support.
•There are also incubators that lend legal personality to a budding entrepreneur while allowing freedom to make business decisions.
Advantages and disadvantages – Business incubatorsClick to read  


•organization of the workplace (equipped office space available)
•favorable lease conditions (relatively low costs)
•the possibility of starting a business without registering it (the incubator lends legal personality)
•substantive and organizational assistance (including accounting and legal assistance) from the Incubator
•no restrictions in relation to the target group (in terms of age, profession)
•freedom to terminate activities in the event of a wrong idea


•using a legal personality makes the company "nameless", there is a risk that the company may not be recognized on the market
•too much convenience (no need to take care of financial matters, legal assistance, lending legal personality) may prevent a novice entrepreneur from learning how to manage a company

What is boostrapping? Click to read  

Bootstrapping is a method that describes the financing of a startup's operations solely on the basis of the entrepreneur's own resources, based on a very rigorous approach to costs and liquidity management;

Bootstrapp and boostrapping

The term "bootstrap" means an entrepreneur who, in connection with the conducted activity, does not use any external financing or the share of this type of financing in the economic activity is very small;
Strategy of standing on your own feet Click to read  

Strategy of standing on your own feet (1 out of 2)
•Bootstrapping strategy is based on the following characteristics:
•The enterprise model must be adapted to the conceptual assumptions and the bootstrapping framework;
•Determination to collect own funds to finance business;
•Emphasis on the quick launch of sales that allows you to generate your own financial resources;
•Paying special attention to high-margin products and services;

Strategy of standing on your own feet (2 out of 2)

•Bootstrapping strategy is based on the following characteristics:

•Resignation from engaging labor resources in the activity;

•Paying attention to controlling the growth rate of the enterprise in the phase of its start-up;

•Focus on maximizing cash flow instead of the company's profits;

•Basing the business model on proven operating techniques.

Cash management Click to read  

Cash management (1 out of 2)

It is one of the most important elements of bootstrapping. Actions taken in this area include:
Concentration of activities on cash revenues or revenues with deferred payment terms;
Using factoring in relation to revenues with extended payment terms,
Negotiating the longest payment terms for purchased equipment, services, products, etc.,

Cash management (2 out of 2)

Negotiating payments with installments for larger-scale purchases;
Business use of leasing;
Avoidance of contractual penalties as well as high interest on capital;
The use of barter in business transactions.
Cost minimalization Click to read  

Cost minimalization (1 out of 2)

•Bootstrapping also means minimizing costs, e.g. through:
•Use of cheap office space, including shared space;
•Purchase of office equipment at sales, buying used or lower quality (grade) equipment;
•Emphasis on reducing the costs of marketing and PR activities;

Cost minimalization (2 out of 2)

Creating a company's website based on free templates;
Avoidance of costs related to conducting activities that can be performed on one's own (e.g. recruiting employees);
Minimizing the cost of legal services;
Limiting the costs of accounting services.
Characteristics of Community Development Finance Institutions Click to read  

Community Development Finance Institutions are private financial institutions that provide funding and financial education to individuals or local communities who have been excluded from the traditional commercial financial system due to low income.


Enterprises that can rely on funding from CDFI institutionsClick to read  

1.Entities with no access to traditional sources of financing
2.Entities operating in poverty-stricken areas
3.Entities belonging to people from a disadvantaged community
Community Development Finance Institutions’ sectorsClick to read  

1.Community development banks
2.Cooperative credit unions aimed at development
3.Loan funds for community development
4.Community Development Venture Capital Funds
Advantages and disadvantages of Community Development Finance InstitutionsClick to read  

CDFIs are typical financial institutions, banks, credit unions or venture capital funds, but they are focused on a specific client. Their main advantage is that you can get financing there even when traditional financial institutions have refused to do so. However, the condition for receiving assistance is that the person or entity is based in excluded areas or comes from excluded communities.

Community Development Finance Institutions in practiceClick to read  

In the case of CDFI, it is difficult to talk about spectacular successes because they are generally focused on local communities. However, CDFI institutions boast about the help they have provided.

For example, on the website of the Opportunity Finance Network (OFN), the National Association of Community Development Financial Institutions, you can find many of the examples described that make these institutions meaningful (see https://cdfistory.ofn.org/).




Finance management, digital skills, bootstrapping, crowdfunding, business angels, venture capital, startup accelerators, development financing institu


The main goal of the developed material is to educate course participants in digital skills necessary in managing startup finances. The implementation of goal indicated in such way will be possible due to the following activities that make up the course, and they include:
1. Presentation and discussion of traditional and innovative forms of startup financing;
2. The analysis of benefits and costs (advantages and disadvantages) of individual forms of financing of business activities;
3. Adjusting forms of financing to the planned economic activites.
After getting acquainted with the materials presented, course participants will be able to distinguish not only the methods of financing of business ventures and analyze their characteristics, but also indicate the legitimacy of using specific methods of financing business activities in connection with the designed business concept. Each of the met-hods will be presented in a separate thematic unit with comments, instructions and re-ferences to practical examples, which will make the acquired knowledge practical.


This course provides an answer to two basic problems related to initiating innovative business activity. Firstly, it is conceptualization. A key aspect in this regard are digital skills, which will be given particular emphasis in this material. The second aspect of initi-ating business ventures is their financing. Given the multitude of financing sources oper-ating in the economic environment of enterprises, knowledge about them is crucial for making well informed business decisions. The developed material is not only intended to indicate possible alternatives for financing economic projects. Its role is also to discuss their features, as well as to provide characteristics that enable the optimization of the se-lection of financing sources in relation to the planned economic undertakings.






































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