How to Find Startup Capital
About to start a business and not sure which is the right funding option for you? Well, as per a recent study 94% of the startups had failed during their first year of entering into the business world and operating. The reason? Well, they didn’t feel that the funding for startups was something important.
Money acts as the bloodline of a business. The journey from you having a great idea to you making a revenue out of the concept needs fuel for the process to run. And the name of the fuel here is capital. And this is one of the reasons why you see many entrepreneurs asking how to get funding for startups.
Now, moving to the central part regarding the funding for startups, which is the exact time when you would need the funding. Well, this entirely depends on the type and nature of the business. But the moment you realize that you need the funding, below shared is some of the different ways through which you can obtain the funding for startups.
Get Funding for Startups From Business Accelerators or Incubators
The early stage businesses could consider going to the Accelerator programs or the Incubators for getting the funding for startups. These programs are available in each and every city in the world and work towards supporting those new startups that want to make a place in the market with their great idea.
Even though both accelerators and incubators are used interchangeably, they are not the same entirely and have some main differences between them. The accelerators act as a parent to a child by helping them to nurture the business, though they normally teach the startups to take a giant leap in the business or run faster to achieve what they want.
On the other hand, the Incubators are the same as accelerators where they treat the startups like their children and prived training, tools, shelter, and the network to a business. The thing that makes the incubator different is that the incubator nurtures and assists startups gradually to make them grow into something better, rather than to rush them to succeed such as in the case of an accelerator.
These programs do a lot of good if taken seriously and if the owners give time and dedication towards what they have in mind. The time frame for the program usually lasts from 4 to 8 months, depending on the type of business or the incubator/accelerator.
The best part about these programs is that you don’t just get the funding for startups, you also make new connections, meet investors and many mentors during the process which can help you a lot in the business life cycle, or even for the next step as soon as you finish the program.
Bootstrapping your startup business
Bootstrapping is also called self-funding. It is an effective method for obtaining funding for startups since your startup is in the initial stages and hasn’t become worthy to pay back to any loans. If any first-time entrepreneurs tend to go to the bank or an investor to get some funding, they usually get rejected since they do not have any traction or a plan that they would be successful someday soon.
In this type of funding for startups, you add in the money that you have saved or ask your family and friends to help you out with the initial amount to kickstart the business. It is normally straightforward to obtain this type of funding for startups since due to the less cost of raising and the fewer formalities that follow it. In many cases, you might not have to encounter any formalities as well since family or friends just want to see you succeed, after which you can pay them back.
The best part about this process is that you just have to add in your money to the startup and you are tied to it forever. After you have moved slightly ahead of the initial stages of the startup, you can consider the choice of getting the next funding for startups from an investor. But if you do not have enough money, and you are not able to get the desired amount from your family or friends, it is better to choose another option.
Get Venture Capital (VC) For Your Business
This is the option where you can make the big bets for the funding for startups. Venture Capitalists are super investors who invest in companies that according to them have a huge potential. Moreover, they offer the investment only in exchange for equity and exit the company if there is an acquisition or an IPO (Initial public offering).
Even though the VC take equity from your company, they also offer mentorship, expertise, and acts as the litmus test to depict where the organization would one day reach, and also for evaluating the company from the scalability and sustainability point of view.
This type of funding for startups is needed especially when the company has moved past the initial incorporation and the setup stage. The reason is that VCs do not really invest in an idea but a business that has already tried out the market and has a plan to succeed. Moreover, the VCs normally invest amounts that range from $5 million to $20 million in a company, unlike the other funding options. This amount is then used to grow the company and expand its horizons.
Nevertheless, a few downsides are there for this funding for startups. The VCs normally have a short leash for the company loyalty, and they usually expect to gain back their investment within a range of 3 to 5 years time. So, if your product is going to take longer for it to become a popular one in the market, then the VC would not be interested in your business or in you.
The VCs seek for the opportunities that are larger than what they have in hand and that is much more stable. Moreover, the companies that have an excellent traction and have a strong team in their hand is the thing that the VC also look for before they can provide the funding for startups.
Other than this, you need to be flexible with the business and also be ready to give a little control of your business in the investor’s hand. So, if you are not comfortable with this, it is better to look for the other options that offer the funding for startups.
Get Angel Investment for your Company
Angel investors are somewhat like the VCs but just that they invest in the initial stages of a startup, and their amount of investment is much less as compared to the VCs. They are people who earn a lot of money and are looking for a way to invest their money so that they can make a profit out of it.
The fun fact about angels is that you mostly find them in groups of networks where they screen all the proposals coming to them collectively before they invest in the company. Other than the funding for startups, they also provide advice and mentoring to the owner they are funding.
If an angel investor loves your idea, they would happily invest in your company and even get many others to invest in (if the amount is less from one investor). Many of the famous companies like Alibaba, Yahoo, and Google started with angel investments as the funding for their startups.
Again, this form of funding comes with a price which is capital in exchange for equity where the investors expect at least 30% of equity for the investment they make. Moreover, the angel investors claim that they deserve the equity since they are taking a risk in investing in a new idea that has no backbone in the beginning.
As a matter of fact, angel investors have the same mind as the VC where they expect the return to be within a short period of time. Also, the amount that they normally invest in a company is way less as compared to what VC invest in a company.
Crowdfunding As A Funding Option
Crowdfunding is the latest method that many entrepreneurs utilize to gain funding for startups, and it is gaining a lot of popularity currently. The funding is in the form of an investment, contribution, pre-order, or loan from more than one person at a time. Let us understand this type of funding for startups in a better way.
On a crowdfunding platform, an entrepreneur can put the description of the business for the public to learn all about the company easily. For people to give money, the entrepreneur would have to add all the details like the business plan, the idea of how he/she would make profits with it, how much capital is needed and why is it needed, etc. The customers would read the details and if they like the proposal and idea, they might fund the entrepreneur.
Moreover, the people who help with money would also make pledges that they would buy the product or give a donation for the business to run. Any person has the chance to contribute towards assisting the business that they feel has the potential to grow and do good.
What is so good about crowdfunding is that you would be able to create interest in the people and it also helps a lot in marketing along with the funding for the startups. Moreover, if you are not if there would be any damage to the product you might be working, this is the funding that would not make you lose anything. Also, the funding is provided by the common people and not the brokers or the investors. Plus, it would also attract the venture capital investment later on in the life of the company.
But you need to keep it in your mind that the crowdfunding option is a competitive one where your business idea has to rock the crowd and impress them to grab the attention of the public. If your idea is not that great, then crowdfunding might not be the right idea for you.
Startup Capital by Govt Programs
Each country’s government has many startup programs that help in assistance in the funding for startups. In the USA, there is a lending fund and dedicated portal for small businesses by the Government grants that are there for the startups. And if you are suitable and meet all the criteria, the Government grants would be the best funding for your startups. You can check out with a lawyer or a government agency to learn all about the various Government initiatives to get the funding for startups.
Obtain Business Loans From NBFCs or Microfinance Providers
The method of microfinance is a service for those who are not able to get access to any conventional banking services. It has been becoming something popular for a long time for those who have, and the bank does not favor the credit rating. Similarly, there is another option called the NBFCs, which are the Non-Banking Financial Corporations and offer Banking services without meeting the legal requirement or definition of a bank.
Raise Money Through Bank Loans
Usually, a bank is the place where every entrepreneur thinks about going to when they want to raise the funding for their startups. And in a bank, there are two types of business funding options. One is the funding, and the other is the working capital loan. Funding is the option where you would have to provide the business plan, and the project report details to the bank before the loan is sanctioned.
On the other hand, the working capital loan is the basic amount required to run one complete cycle of the company revenue-generating operations. The limit, in this case, is normally decided by the hypothecating debtors and stocks.
Many banks offer collateral-free business loans. All you need to do is search for the banks offering it and then go there. Although, it is not advised to initial go for a bank loan without trying out the other options since it is not easy to obtain a bank loan for business.
Raise Funds By Winning Contests
With the increase in the number of contests in the world not, a lot of people have been helped a lot to get easy opportunities for raising the funding for their startups. Moreover, such contests help the entrepreneurs that have a great idea work towards setting up their own companies easily.
To win or even just take part in such competitions, you need to have your product ready or prepare a business plan to show what you have in mind. If you win any of the competition, you would also get the media coverage easily. But the catchy part here is that your project has to stand out as compared to the rest and this would help you improve the success in these contests.
Your idea can be presented as a business plan, or you can give a presentation in person. Just keep in mind that the idea has to be comprehensive to have everyone convinced that your idea is worth it.
Fast Ways To Raise Money For Your Business
Other than those methods shared above, there are other ways that can help you in raising the funding for your startups. They fall under the list of quick funding options, but they do not pay a high amount for the funding. Here are the options:
A business credit card is the easiest way of raising funding for startups and is also a quick way to get instant money. In case you are a business already and you do not have a lot of expenses to cover, a credit card can be used to pay the little payments while you can pay off the credit card dues slowly as you earn.
Nonetheless, it is important to keep in mind that the costs of using the card and the interest rates are high and build fast. Hence, if you are not able to pay on time, you might fall under debts easily.
Even though this is a tough step, it would be able to meet your short-term fund requirements. As soon as the crisis is over, you can opt for a much better option and even purchase your assets back.
Yes, this type of funding for startups is something that many big brands like Apple and Samsung (Remember the pre-sale that starts many times?) also tend to opt at many phases of the business life and is a great way to gain funding. Sell your products before it gets launched as it would help you with the cash flow and would prepare you for all the customer demands. It would also give you a good market coverage.
In case you want your business to grow fast, you would need to put your hand on every type of outside funding sources that you can reach to. Bootstrapping is alright, but you too know that ti would not work for a long time and you would need reach funding for your startups later on.
Even though you can find every possible reason to make excuses of reducing the cost from here and there, the real business people would ask them the actual amount needed for the startup to get off the ground. And after you have decided the amount, the next step is to choose the type of funding needed. Depending on your needs and the options available choose the one that is the best and would get the best out of your business idea.
Just ensure that you have registered your business and incorporated it after doing a proper market research regarding your idea. If you haven’t yet registered your business, contact Inc Paradise to register your company in Delaware or Nevada today!