7-EFFECTIVE WAYS TO FUND YOUR STARTUP

Startup

Starting our own startup is a dream of many people who have some idea that they think can become very successful in the future. 

But sadly, many of the startups couldn’t convert their great ideas into success just because of a lack of funds to get started. 

This is the problem faced by almost all the startups- to convince big investors, banks, and financial institutions to fund them. 

Some investors want startups to repay them at a certain interest rate whereas others want to own a part of the total profit of the company.

Each startup is different and there are different ways to get funded and thus it’s important that you consider some of the factors like the long term cost. 

The amount of equity that you will have to give to the investors, and also the personal guarantee that you will have to give for availing the required funds. 

Now let’s look at some general ways that help startups in getting the required funds:

1. Family & Friends

Approaching your family or friends is a great and simple way to raise funds for your startup. They will help you if they like your idea. 

Another advantage is that you can get a loan at reasonable rates and also flexibility in the repayment. 

This method is the best if you have a good network of wealthy individuals willing to help you to get funds for your startup. 

The only thing to remember is to keep your personal finances and business finances separate to avoid complications in the future.

2. Angel Investors

Angel Investors are very wealthy individuals who seek good investment opportunities for their money in exchange for equity in your business. 

Angel investors have derived their name because of their involvement in the very early stages of the startup where other investors are not ready to invest or show less trust in the idea. 

You will need to present your idea in front of angel investors so that they trust you and your idea. This way of raising funds is not as easy as a loan but a good way to reduce the debt burden.

3. Venture Capitalist

Venture Capitalists consist of a group of investors who provide funds to startups with good growth projections in exchange for equity. Unlike angel investors, VC generally invests after the business has been established. 

They generally want to have a seat on the board of directors of the company and like to play an active role in the business. 

You should take time to decide whether you need VC funding as it required you to give up a big part of your equity and also them being actively involved in your business.

4. Crowdfunding

Crowdfunding means raising a small amount of money from a large number of people and is mostly in the form of equity financing. 

There are basically two types of crowdfunding, one in which you give equity to the investors and the second in which you give your product to the early adopters.

There are many great crowdfunding platforms such as Kickstarter, GoFundMe, etc.

5. Personal Loan

You can apply for a personal loan for your business based on your income and credit score. It is a good way to raise funds if you have a good credit score with you. 

As the loan is in your name, you are personally responsible for repaying it. The only thing to keep in mind is that your credit score is on stake and thus failure to repay can affect your credit score and loss of your assets.

6. Incubators

There are many startup incubators launched with the aim to help startups in their early stages by providing workspace, seed funding, and mentoring. 

Many startup incubators are non-profit organizations mostly associated with universities and business schools. 

Some of the famous incubators include TechStars, Excelerate Labs, Atal Incubation Centre, etc. 

The main benefits include increased network, good mentorship, and support from other successful entrepreneurs.

7. Government Grants

The government of countries around the world provides various grants for new businesses and help with the funding without the need for you to repay it.

They are a kind of gift by the government and you don’t need to pay anything. 

But there are many conditions that you need to satisfy in order to be eligible for the grant and there is a huge amount of competition. 

You can check the government websites of the respective countries for more detail. 

Don’t believe anyone who asks you to pay in order to receive the government grant!

CONCLUSION

There are a variety of ways to raise money for your startup and there are lots of people out there who have money and want to invest it in a good idea. 

Thus it’s important that you are serious about your business and have proper planning beforehand so that investors are attracted to invest in your idea. 

You need to identify your business goals and decide accordingly how much money you should raise and by which way. 

All the best for the funding of your startup, believe in yourself no matter what, and don’t give up!

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