I think that people are too often tempted by having money for the sake of having money. I'm guilty of this myself. What I mean is that if you can bootstrap your startup yourself and you are able to use "sweat equity" to get yourself far in to the process, then DO.
Everybody talks about VC as if you are not a respectable startup unless you have it. We disagree at Hubski. mk is fond of saying, "like any self-respecting project, Hubski is self-funded." I tend to agree.
Once you get someone or some-entities money involved in your vision it becomes "our" vision. Motivations will change from creating the best product to creating the most profitable product. Also, Angel and VC aren't always interested in the long term returns but are often interested in inflating value so that your startup can be sold quickly for short-term returns. So just say "NO" to money for money's sake.
Also, depending on what it is you are working on, you may want to shift your thinking entirely. We decided a while back that we would never refer to Hubski as a "startup." We don't like the connotations. We didn't create it to see how much money we could make but rather to solve problems we think exist in the aggregation space. We want to sincerely create something useful and interesting. We now refer to Hubski as a "project." -Small things like that make a difference.
To boil it down: My take on how to finance a startup is to do so with sweat-equity for as long as you can. Then examine your revenue streams, are they in place? Are they working? Can it scale without outside funding? If so, then NEVER take any money. We live in a culture that suggests that if you've not taken any money then obviously nobody thought you worthy of it. -This is ridiculous.
Good luck Lu. You starting a business?