Because of the strict requirements venture capitalists have for potential investments, many entrepreneurs seek seed funding from angel investors, who may be more willing to invest in highly speculative opportunities, or may have a prior relationship with the entrepreneur. Additionally, entrepreneurs may seek alternative financing, such as revenue-based financing, to avoid giving up equity ownership in the business.

Furthermore, many venture capital firms will only seriously evaluate an investment in a startup company otherwise unknown to them if the company can prove at least some of its claims about the technology and/or market potential for its product or services. To achieve this, or even just to avoid the dilutive effects of receiving funding before such claims are proven, many startups seek to self-finance sweat equity until they reach a point where they can credibly approach outside capital providers such as venture capitalists or angel investors. This practice is called "bootstrapping".

Equity crowdfunding is emerging as an alternative to traditional venture capital. Traditional crowdfunding is an approach to raising the capital required for a new project or enterprise by appealing to large numbers of ordinary people for small donations. While such an approach has long precedents in the sphere of charity, it is receiving renewed attention from entrepreneurs, now that social media and online communities make it possible to reach out to a group of potentially interested supporters at very low cost. Some equity crowdfunding models are also being applied specifically for startup funding.