Funding Gap

AAA

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.


INVESTOPEDIA EXPLAINS 'Funding Gap'

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.

RELATED TERMS
  1. Allocated Funding Instrument

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

    An investor who provides financial backing for small startups ...
  3. Love Money

    Seed money or capital given by family or friends to an entrepreneur ...
  4. Bootstrapping

    1. A procedure used to calculate the zero-coupon yield curve ...
  5. Bridge Loan

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

    The initial capital used to start a business. Seed capital often ...
Related Articles
  1. Cashing In On The Venture Capital Cycle
    Fundamental Analysis

    Cashing In On The Venture Capital Cycle

  2. What are the sources of funding available ...
    Investing

    What are the sources of funding available ...

  3. Interpreting A Company's IPO Prospectus ...
    Fundamental Analysis

    Interpreting A Company's IPO Prospectus ...

  4. Entrepreneur Vs. Small Business Owner, ...
    Investing Basics

    Entrepreneur Vs. Small Business Owner, ...

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center