You’ve nailed that brilliant idea and are all set to go out and turn your dreams into reality! You’re ready to bring your A game up and make your idea the most innovative and groundbreaking startup.
You may have charted out a plan in hashing out your brainchild – maybe by outlining a goal pyramid, by selecting the right industry to venture into or by locking down a co-founder.
But, there’s one important aspect of starting a new business that you might have to figure out. Funding! A brilliant idea isn’t enough to scale any business. You need to have funding to get going.
Nowadays, lack of funding is a serious issue for most of the entrepreneurs and it is possibly one of the major reasons why most businesses couldn’t even get off the ground. Ample of would-be startup owners have all the right passion and drive, but not enough money and aptitude to bring it into a reality.
In fact, one of the most common challenges people run into – many people need funding for a startup. Hence, you’re not alone by a long shot. The requirement is gigantic, and resources are limited to support. And clearly, some of the startups do get funded. If you’re too propelled and wish to know where to begin and looking for a clear menu of funding options, then here’s the guide for it. These tips will help you hit the right spot.
How Startup Funding Works?
One can raise money for their business through two forms, debt and equity.
Debt is a loan that you borrow from a bank, or an individual at an agreed rate of interest. And, one has to pay back the amount with the additional rate of interest in the predetermined time period.
But there is a larger risk in this option as you take 100 percent of the risk yourself with an obligation of paying back the borrowed amount.
To diminish the chances of risk, most of the entrepreneurs raise funding by selling a partial ownership in the form of equity value in exchange of money. Wherein, an investor gets a share of the company under no obligation to pay back the money. Now, if you’re thinking how to get your entrepreneurial paws on this cash, here’s to your disposal.
Types of Funding for a Startup
A startup goes through multiple rounds of funding. Here we are exclusively charting out the average rounds that any startup goes through.
Seed funding is the most initial funding that any startup gets through an investor. The amount can vary entirely depending upon the pitch presentation. This is also one of the riskiest investments, an investor makes to take your business off the ground.
After the seed funding, when a venture is established and steps into the market, they require more cash to get things one level up. This is the phase where, Venture Capitalist companies and angel investors come into the picture to back the startup. The Series A investment is bigger than the seed funding.
After running the business successfully for four or five years, one can pitch for Series B funding to scale the growth of business, further. Most of the companies do not opt for series B because they tend to become profitable and self-sufficient to back the financial requirements. This startup funding is double-digit higher than the initial funding.
How to Land Funding for Your Startup?
1. Bootstrap Your Way.
Of course, we know you never wanted to hear this one. And, technically this isn’t really a source of funding, too. However, bootstrapping will help convince your VCs to take a chance with their money when you’ve done it yourself in the first place. In a nutshell, this means side-hustling in your business and self-fund it as much as possible and leaving no stone un-turned to cover the gap yourself. This will surely help you save a lot of bucks and gradually scale your business. Bootstrapping helps a business to build a runway for the investors. A lot of startups swear by the concept of bootstrapping to exhibit that they can hack it. Thus, makes it easier to land funds.
Tips on How to Bootstrap Right
(a). Start a side-business to support the operations of your business.
(b). Request all your co-founders to pool in some money.
(c). Only start your business, if you’re sure that you can fund it for the next three years.
2. Angel Investors
Angel investors are the private investors who invest in the business during the seed funding phase. This one of the reasons why they’re called “Angels” because risk of investing at the initial stage is comparatively higher than the usual. Seeking an angel investor for your startup is fairly easy, if you have the right network.
Tips on How to Raise an Angel Investment
(a). Try and build your business network early and don’t wait for the right time to pitch. You never know, when time falls right for you.
(b). Build a unique product and grow as much traction as you get. Let investors come to you.
3. VC Firms
A Venture Capital firm is a limited partnership company that funds startup businesses. They are big sharks in the ocean of investors and own a potential for a high return on the investment. VC firms actively looks for startups, who are looking for external funding in exchange of equity. You can directly find VC firms through their websites or by attending various startup events.
Tips on How to Attract VC Firms
(a). Make a unique product that VCs cannot deny, Trust us!
(b). The only thing that interests’ VCs is a good return on investment. Greater the ROI, more they are there to back you up.
Another way to conquer funding is through crowdfunding. It is one of the most reliable and fastest way to get funds. There are various crowdfunding sources that allow crowd to fund businesses in exchange of the product. Crowdfunding platforms offer infinite possibilities to kickstart any business. It’s a great way to land some cash for your startup.
Tips on How to Get Crowdfunding
(a). Run a successful campaign and market it smartly.
(b). Create a solid product that solves a problem.
5. Startup Incubators
Startup incubators usually do not require any equity share unless they are also funding the business entity. Mostly, they incubate and establish the startup to accelerate growth. Usually, they offer mentorship, office space and help in networking with angel investors.
Tips on How to Get a Startup Incubator
(a). Make a workable product and welcome feedback from mentors.
(b). Always ensure to network with right people and get traction for your business idea.
Certainly, there is a plethora of ways to get funding for a startup. Always remember it’s the idea that can make a difference. Learn from your experience at each stage and pitch your idea to the right people at the right place at the right time. We are sure that you will reach the pinnacle of your success.