This thesis presents the challenges faced by small and medium-sized enterprises in Croatia regarding limited access to funding sources. Definitions vary depending on the context, but startups can be described by terms such as lack of resources, innovation, uncertainty, rapid growth, time pressure, limited experience, new enterprises, high risk, and self-sustainability. The theoretical part of the thesis analyzes the challenges and constraints in accessing external funding sources through the lens of the startup lifecycle model. Financing startups in Croatia is hindered by a lack of alternative funding sources. Compared to the USA, startup entrepreneurship in the EU is less developed due to cultural differences, regional disparities, a fragmented market, and insufficient infrastructure. Various scientific methods were used in writing the thesis, including analysis and synthesis of relevant literature, comparative analysis of financial models and funding sources, and empirical analysis through statistical data. Based on the research, it was concluded that Croatia stands out with high entrepreneurial activity compared to other countries in the same developmental group, but the biggest obstacle is the insufficient support from government policies and public institutions.