5 Ways to Fund Your Startup Business
A startup usually begins life as a passionate idea or a way to solve a common problem. The next step is the business model. After you have these things you should be ready to try for funding, but what are the best ways to fund your startup business and how can you access funding? In this article, we give you 5 of the best ways to identify and access the money you need at whatever stage your startup business is at. Read on to find out more.
Do you have a great idea for a small business or project but don’t have the money you need to get it off the ground? You’re not alone, that’s why so many opportunities exist for start-up funding. One of the most inviting is Crowdfunding. Crowdfunding allows you to raise capital based on your idea and projections. People with a shared interest or passion for the promotional products will contribute to the project to make it happen.
The top platforms for crowdfunding are Kickstarter, Indiegogo, and Patreon. Visit one of these websites and open an account, pitch your idea to an audience, and see if it gains traction. This is also a good means of market research. If enough people like your idea you will receive invitations to invest in the project. There is no long term investment. If the project fails the crowds receive their money back.
Sometimes a startup business needs a leg-up and that’s what Angel Investors are there to do. Angel Investors tend to be individuals or firms with an interest in investing in the right projects for them. They are called ‘angels’ because their investments are a high-risk strategy. They usually ‘seed fund’ a startup meaning there is a high-risk 0f failure. For the startup, it’s often an excellent deal.
Due to the advantages, angel investors can be hard to come by. You might need to use your contacts or do a bit of digging to find them. Use your network of contacts, use an incubator, or find them at startup events. When you find an angel investor put together a strong pitch for them. Make your business model airtight and convince them that the business has a profitable future.
If you’re a serious startup operation you will probably consider getting your funding from a venture capital firm. These are firms made up of pools of investors looking for profitable business ideas and people. They have large sums of money available but they will want to see evidence of the right attitudes, commercial sense, business models, and numbers. They will invest in you if they think you might cost them money down the line.
Although VC investment can be expensive – they may require a significant stake in your business to loan you the money – it is often the most realistic way of taking your business forward. Startups at certain stages of development can only benefit from certain sums of money and VCs are the ones to provide it. Along with funds, they can also offer advice and mentorship.
A startup incubator won’t always offer you funding for your business and they usually don’t ask for a share of the business either. Their role is to help your business get started with indirect funding and contacts. If you partner with an incubator you will receive Office space, mentorship, and access to angel investors. The contracts with incubators typically run for between 3 to 12 months.
Incubators are excellent for startup businesses without much experience or funding. The idea is to protect the integrity of your business while it gains traction, and open channels for further funding and investment opportunities to take it forward. While most incubator investments do not require a stake in your business, some do. Investigate your options fully and use your judgement.
Some startups have progressed to a certain stage of development, it might be they have manufactured a product but need to take it to market, or they have it in the market already but need investment to improve its performance or break into new markets. For this accelerator, funding could be the best option.
Accelerators are also mainly mentorship based and don’t always require a return on investment or stake in the business. Nevertheless, they do require certain criteria for startups to qualify. You must have a minimally viable product that is market-ready, for instance. This rules out many propositions, but if you qualify you could benefit from excellent input from leading industry professionals.