Funding is vital for any entrepreneur looking to build a business.

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This can be a difficult and daunting task, especially when you don’t know where to look. Pursuing the correct avenue for funding, depending on the stage of your company, can be the difference between successfully gaining capital or simply wasting your time. Fortunately, there are investor marketplaces, such as AngelList and MicroVentures, to help you get on the right track.

Even with these helpful tools, it’s important for every entrepreneur to know and understand the five most common funding methods...

1. Crowdfunding – Crowdfunding is an effective funding method for an early stage startup. It’s important to carefully consider the type of crowdfunding that best suits your company, such as reward-based or equity-based funding. Crowdfunding can also help your startup look more appealing to other investors. Fundraising follows a snowball model; all it takes is one investor to take the leap for others to follow.

2. Angel Investing – Angel investing is another highly effective model to receive capital without worrying about oversight. Reaching angel investors is doable for any entrepreneur, but it takes creativity. This can be as simple as networking in the right places or reaching out to the right people (i.e. through social media, guest speakers, entrepreneurial blogs, LinkedIn groups, etc.). However, all money is not good money. Be sure to connect with investors whose expertise lies in your company’s industry. This will help relevant contacts look your direction and will allow your startup to gain some traction. The more traction you gain, the more angels will be interested in investing in you.

3. Self-Funding – Although self-funding is very common in a startup’s early stages, “having skin in the game” is not always the best idea. Self-funding is the only way to maintain complete control, but there can be long term consequences. Most financial professionals will warn against this type of investing due to its high-risk and personal liability. If you have the cash, get in touch with a financial advisor to ensure you spend smart.

4. Family & Friends – A safer way to fund your startup from an “inner-circle” approach would be to seek investments from friends and family. These types of individuals can be a solid bet in a dog-eat-dog environment full of investors looking to take advantage of young companies. With that in mind, don’t forget the psychology behind asking a friend for cash. Relationships change quickly, so be transparent and honest to give both your company and friendship a fighting chance.

5. Venture Capital – The final and most prominent way to generate funding for your startup is through venture capital (VC) firms. VCs tend to invest in fast growing markets, new technology, great teams, and often invest a minimum of $1 million. The stage of your startup is an important factor for VCs, as they tend to invest alongside other investors in larger rounds. Venture capital funding can be easier to find than an angel investor because of its prevalence, but there’s a risk factor; venture capitalists are masters at navigating negotiations and terms. Bottom line, if you’re dealing with a VC, get a lawyer.

Understanding what form of funding is best for your startup is important. Even when you have that figured out, the road to funding can be a long and difficult one.

Persistence is key.

Know that very few startups get it right on the first try, yet much can be learned from the mistakes of others.