Got the greatest startup idea of all times, but wondering how to get it funded? Well, just because you’ve got an idea people won’t start throwing money at you! Therefore, it becomes even more important to get your startup idea funded.
According to a recent study, 94% of new businesses fail in the first year of operations itself simply due to the lack of funding. Money is the fuel of any business or startup. And, “How to get more money?” is the question of almost every entrepreneur trying to raise capital for their venture.
Well, you have landed at the right place because today we’re going to tell you some of the most reliable ways to get funding for your startup.
Ways To Get Funding For A Startup
Most of the newly launched startups are bootstrapped i.e. personally funded. This way of funding is not going to get you a lot of capital and will take more time and effort, but the good part is the funds are entirely yours. And also, it is considered an effective way of funding, when you’re just beginning. Why?
It is so because you are new in the market, and first-time entrepreneurs usually face trouble getting funded without showing a plan and some concrete success. So, if your personal savings are not enough you can ask your family and friends to be a part of it as well. This will be comparatively easy to raise money owing to flexible interest rates and documentation or compliances work.
Quick Tip: This type of funding is a good option for startups with lower initial requirements and also this works in their favour at a later stage when they approach investors for funding. But, in case your business demands huge money right from day 1, bootstrapping may not be an ideal option for you.
Crowdfunding is a new way of acquiring funds that has been gaining a lot of popularity lately. It is an excellent option if you are sure there is a huge target audience in need of your product because crowdfunding is like taking a loan along with pre-order and investments from more than one person at the same time.
The key to a successful crowdfunding campaign is to present a captivating story of the product and/or service or that of the company along with rewards offered in return for their contributions. Any person who really believes in the company can invest money to help your startup grow.
Quick Tip: Crowdfunding is a competitive way to get funding. So, if your business idea is a solid one and will get traction through a brief story and some images online, only then will this funding method work for you.
3. Venture Capital
Venture Capital (VC) Firms are another most-turned-to way of getting funding for a startup. They provide capital along with strategic assistance, mentorship, expertise, introductions to potential clients, employees, partners, and so much more. Venture Capital fundings are not easy to get along with being a very time-consuming process. Also, they are only interested in investing in startups pursuing big opportunities with high growth potential and already generating revenues while also having some traction.
So, before approaching any venture capitalist make sure whether and if their focus and goals align with your startup and its stage of development.
Quick Tip: They offer good money, but there are some drawbacks of choosing venture capital as a funding option. VCs have a tight rein when it comes to loyalty and recovering their investments within 3-5 years. In case you have a product that will take longer to get into the market, you might want to reconsider venture capital as a funding source for your startup.
4. Angel Investors
People often confuse angel investors with VCs, but they are different in their offerings. In simple language, angel investors are people with surplus money who invest in startups or early-stage businesses in return for equity ownership. Along with capital, they also offer mentorship.
Angel investing has been gaining momentum/popularity after a few high-profile success stories like Google, Uber, Facebook, and more. Although money is their motivating factor, they also take a keen interest in the genuine growth and development of the startup or business. Their expertise and management skills are something you must take seriously along with other things like:
- Contacts with potential clients, employees
- Knowledge and strategies
- Network of lawyers, banks, accountants, and more
5. Business Incubators
Business Incubators are simply specially designed programmes to help budding startups grow and expand. They assist startups in mentorship, workspaces, finances along with investors (if needed) , training and education, and more. The program consists of a team of including various industry experts to help you get a better understanding of the ongoing trends. They also offer other benefits like:
- Low Costs
Quick Tip: To get associated with Incubators, you need to fill a proper application form and follow a step by step process. Also, they usually ask for a commitment for a specific period of time.
Starting a new business is exciting but also comes with heaps of responsibilities and the most important one is figuring out the source of funding. Therefore, we hope we were able to help you figure out various ways to fund your startup and be the game changer.