Funding Gap


DEFINITION of 'Funding Gap'

The amount of money needed to fund the ongoing operations or future development of a business or project that is not currently provided by cash, equity or debt. Funding gaps can be covered by investment from venture capital or angel investors, equity sales, or through debt offerings and bank loans.

Most often used in context with early-stage companies during the initial stages of research, product development and marketing.


The ease with which a very young company receives funding depends on many factors including the viability of the business model, barriers to entry for that particular industry, and overall economic and market conditions. When the stock markets are strong, venture capital investors are much more likely to fund startup companies, and may even become less stringent in their eligibility criteria.

Funding gaps are also more likely at these early stages because a company won't know what its full operating expenses will be until it reaches a more mature stage and, at first, there aren't likely to be any meaningful revenues coming in.

  1. Allocated Funding Instrument

    A specific type of insurance or annuity contract that pension ...
  2. Bootstrapping

    1. A procedure used to calculate the zero-coupon yield curve ...
  3. Seed Capital

    The initial capital used to start a business. Seed capital often ...
  4. Love Money

    Seed money or capital given by family or friends to an entrepreneur ...
  5. Bridge Loan

    A short-term loan that is used until a person or company secures ...
  6. Angel Investor

    An investor who provides financial backing for small startups ...
Related Articles
  1. Fundamental Analysis

    Cashing In On The Venture Capital Cycle

    Find out how VC firms make the market go round, and round and round.
  2. Fundamental Analysis

    Interpreting A Company's IPO Prospectus Report

    Learn to decipher the secret language of the IPO prospectus report - it can tell you a lot about a company's future.
  3. Entrepreneurship

    4 Things to Know About Your Company To Make a Successful Pitch to Investors

    Learn how to make a successful pitch to investors. Regardless of your industry, size or market, there are some questions all investors need to have answered.
  4. Entrepreneurship

    Top 4 Billionaires Living in Los Angeles

    Learn how these multibillionaires built their fortunes to stand out from the crowd of the countless ultra-rich who call Los Angeles home.
  5. Investing Basics

    3 Business Tips from Restaurant Reality Shows

    The reality TV shows "Restaurant Impossible" and "Kitchen Disasters" offer lessons not just for restaurateurs, but for all business owners.
  6. Markets

    The Biggest Private Equity Firms In India

    Learn about the leading private equity firms operating in India and which companies and industries are attracting foreign investment dollars.
  7. Entrepreneurship

    4 Most Successful Indiegogo Campaigns

    Learn about some of the most successful crowdfunding campaigns on Indiegogo, which raised millions of dollars for everything from electric bikes to beehives.
  8. Entrepreneurship

    Top 10 Features Of a Profitable Rental Property

    Find out which factors you should weigh when searching for income-producing real estate.
  9. Wealth Management

    The Net Worth of the Shark Tank Cast

    Discover how the richest "Sharks" on the hit TV show amassed their vast fortunes, and learn how much they have to offer eager entrepreneurs.
  10. Financial Advisors

    Are Alternatives Right for Your Portfolio?

    Alternative investments are increasingly making their way into retail investors' portfolios. Are they a good fit?
  1. What are the sources of funding available for companies?

    Despite all the differences among companies, there are only a few sources of funds available to all firms. 1. They make ... Read Full Answer >>
  2. Do hedge funds invest in private companies?

    Hedge funds normally do not invest in private companies because of liquidity concerns. Capital funding for private companies ... Read Full Answer >>
  3. Who do hedge funds lend money to?

    Many traditional lenders and banks are failing to provide loans. In their absence, hedge funds have begun to fill the gap. ... Read Full Answer >>
  4. Can mutual funds invest in private equity?

    Mutual funds can invest in private equity indirectly by buying shares of publicly listed private equity companies, such as ... Read Full Answer >>
  5. How do you find the break-even point using a payback period?

    It does not make sense to find the breakeven point using a company's payback period. A company's payback period is concerned ... Read Full Answer >>
  6. What does residual value represent in a private equity investment?

    It is common to see a private equity investment's net asset value, or NAV, referred to as its residual value, since it represents ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center