A Beginner’s Guide To Startup Funding
You have a great idea, you are more than ready to start your start-up, but you don’t know how to get funding to begin.
In the absence of liquidity, there might be difficulties in paying off your team members, running the daily activities of your business, or even creating your products or paying for things like a co-working space, electricity, rent, internet, etc.
Not having a concrete plan for funding is one of the primary reasons some ideas don’t get executed, or some start-ups even fail along the way.
With the right funding, you can start your business and pay for all the necessary things you need to run your business smoothly.
There are several ways to get funding for your startup, here are some of them below:
Bootstrapping: This is one of the most common ways startup founders fund their businesses. Investopedia describes Bootstrapping as “a situation in which an entrepreneur starts a company with little capital.” You fund the business from your own pockets, and you minimize your expenses as much as you can. You get to self-fund the company for as long as you can, and you even get to cover labor by yourself; this saves you costs. One of the advantages of bootstrapping is that you get to convince investors that you can build a profitable business on your own and you even believe in your dreams so well that you can fund it from your pockets. With bootstrapping, it is also possible to run your business as a side hustle while funding it from your pockets
Investors: Investors are people who provide funding for your business in exchange for shares in your company. There are different types of investors such as:
Personal investors: Could be people around you such as friends and families. First, you need to take stock of your current support system of friends and families and find out who among them would be able to loan you some money for your business. Some of them may even borrow you at little or a very low-interest rate. According to Wrike, 38% of startups get funds from friends and families.
Angel investors: They are people who give you a small amount of money to fund your business in exchange for equity. Most times they look towards funding start-ups in the early stages of their businesses. They sometimes may also not require taking part ownership of the business.
Venture capitalists: They demand value in the business before funding any venture. They may invest a significant amount of money in business ideas in exchange for a part-ownership of the company.
Crowdfunding: If you are a start-up founder, you must have heard of crowdfunding platforms like Kickstarter, Indiegogo, Gofundme, etc. Crowdfunding is simply a way of getting funds from a large group of people who love what you do and are willing to support you. A large group of people can support you with little money each. When thinking of crowdfunding, your campaign has to be very good and target the right kind of people. Traditional crowdfunding helps you raise money without giving up equity
Grants: This method of funding is mostly familiar to startups in the non-profit and charity areas. This doesn’t mean that other types of startups don’t get grants as well. The government also gives grants to entrepreneurs; go online and search for the one that suits your startup or idea.
Incubators & Accelerators: This is another way to supercharge your startup. Once you apply for an incubator or an accelerator program and you get picked, you get to participate in their programs meant for fast-tracking your company. In addition, you are given equity, mentorship, and most times an office space to work from.