Why do startups need funding?

Every great idea with a market and thus worthy of execution needs an injection of capital
Not every great idea can receive $ from the market right away without the idea proving itself, or even showing itself more tangibly (via a product, a more visual/tangible representation of the idea, etc)
Thus funding helps accelerate this process, or in some cases, make it feasible at all

In order to expand, hire new people, develop new products, advertise and so on. Any new business eventually needs capital, whether it is a classic bricks and mortar store or an internet company.

Tech companies also spend the majority of their capital on salaries, since most of the “work” is thoughtwork.

Or thoughtwerk if you’re German.

Thanks everyone. That helped a low.

Startups try to create a business with some initial idea. What drives startups is essentially motivation to build a business. Time is motivations best friend and also its worst enemy. Having money in the bank gives you time to try out your idea with whatever resources are required to build a business. Having more time means you can try different things and the chances of your startup buildign a business increases.

Startups dont really need that money upfront (most might not even need 10% of that to build a profitable business) but no one knows how much time it will take so its always good to have money in the bank.

Often, “bootstrap” startups (those that take no funding) are more successful because founders have more skin in the game. In contrast to venture-funded startups, profitability has to be the goal from the very start. While venture funding providers founders with more time to let their ideas grow, it also allows a certain amount of distance from the success of the business.

The problem with bootstrapping, of course, is finding enough people who will work in their spare time and/or for free until the business starts to bring in money.

Because not everyone’s a billionaire, and self-funding usually only works for smaller businesses. I’ve self-funded so far, but I’ve only run small businesses so far. I’m looking at starting a larger company, and as there are no small-scale versions of that, we will have to approach investors, whom we aren’t having any difficulty finding. It’s a bit daunting sometimes, but at least I don’t have to face things alone. Some things we need before anything happens is professional advice, which we are covering ourselves. But soon we’ll need land in large amounts, industrial plant, research staff, and so on, and my own pocket certainly isn’t elastic enough.