Start-ups are commonly financed by convertible investments, shareholder loans and equity financing. Traditional bank financing is generally not available to start-up companies, as banks usually require a proven track-record and solid collaterals.
Start-ups may seek financing from alternative resources, such as:
• Angel investors, i.e. high-net-worth individuals who invest in new ventures, sometimes creating an investment portfolio with multiple companies in various sectors. They are particularly valuable to new businesses because they bring in “smart money”, comprising their experience, advice, network and ultimately funds.
• Venture capitalist funds that professionally invest large sums of money in new businesses, while helping to build the company so as to increase its valuation, anticipating acquisition or the company going public.
In such cases, investors typically require minority stakes in the start-ups, while some also take over positions on the board of directors or other advisory boards.
The law also recognises the concept of “preferential shares” in joint-stock companies (acțiuni preferențiale cu dividend prioritar fără drept de vot) allowing their holders preferential rights to dividends, but only a right to attend (and not vote) in general meetings. Such shares are used to a lesser extent in practice, given the absence of efficient controlling rights for their holders.