Startup Funding Options: 5 Paths to Finance Your Business Dreams

Startup Funding Options: specifically 5 ways on how to finance your business dreams.

I believe every businessman has a hope and a desire to achieve and grow a business from his unique idea. Nonetheless, it is statistically shown that most of the new companies fail, not because of flaws in the business idea, but because of inadequate capital. Acquiring funding is essential early to realize aspirations as real goals. Here are five financing options to fund your entrepreneurial endeavors:  

1. Bootstrapping 

Bootstrapping entail using personal sources of cash, which means the owner uses his/her own money to finance the startup. While lacking financial backing Apple and Microsoft thrived through innovative use of resources. The major strength of bootstrapping is that there is no loss of control, you are your own boss. There is no have to sell ownership interest or pay high amounts of interest. However funding is only up to your pocket money for this simulation. Boot processing can be effective for companies that do not require much initial investment as in consulting, IT services that one needs is a laptop and some talent.

2. Crowdfunding

Equity crowdfunding for sale of company stakes is similar to rewards based crowdfunding like kick starter and Indiegogo. It assists in confirming the environmental receptiveness, specifically in garnering an initial customer audience. It’s fairly straightforward – the campaigning mandates developing a headquarter for the campaign – a page that advertises the product/service, one in which the creators set a monetary target for the campaign and a time line in which that target has to be met, and finally, the marketing to potential funders. People get to retain all the money except for a fee from whichever platform you achieve your preset target. If not, backers are refunded. This knowledge can be applied to consumer products which have a visual or video aspect to them since crowdfunding is best suited to this type of product. To gain interest and investors' attention you need to create an excellent marketing plan.

3. Angel Investors 

Qualified high networth individuals, willing and able to invest their own capital in seed stage ventures thus receiving share in the stock of the firm as the fee. As well as providing capital investment from angels there are business investors who can share insights due to their entrepreneurial experience and networks. To make it even more valuable, target those individuals with industry experience or previous exits. Some of the main angel networks that exist include; Tech Coast Angels and Angel List. The average check size of angel investment in the seed round falls between $25,000 and $100,000. Angel money brings your MVP to another level in terms of funding talents, product design/development and early stage marketing.

4. Venture Capitalists (VCs)

VC firms provide funds from institutions I.E pension fund, endowments etc and invest in high growth companies, tech , biotech, clean tech. The checks sizes average between three and ten million dollars and are typical in the Series A round. VCs offer advisory, access to contacts and branding and funding at the later stages for growth. However, they seek high returns on their investment and carry substantial risks and more often gain control or large voting rights. VC funding is for strategists who are interested in creating a market giant, not a mere business. Have vision, patents, and starting adoption when setting your sights to the best VC firms.  

5. Business Loans

The most traditional credit type is the bank loans as used by small businesses to finance their operations. However, such loans are not easily obtained in the initial initial stages of a start up because new companies usually do not have a trading record and supported security. SBA loans sponsored by the government explain the requirements of startups by reducing stringency but demand personal credit guarantees. Other choices are merchant cash advance where the funding is done based on credit card transactions and other online providers as Kabbage, Lendio, etc. using technology to fund new-start businesses. Credit products are characterized by fixed repayment periods but also by interest charges. Consult a business finance advisor on the right way to take in getting the right lending products.

The Bottom Line

There are always pros and cons to each funding source. Considering the business life cycle, and business industry forces, your financial status, and risk appetite will help you select the right funding model for your startup ambitions. Business startups are not a walk in the park but having the right path to access capital can work wonders for the fortunes of the firm. The most crucial initial step in funding is always to evaluate and model the funding needs. Lastly, go for the opportunities that suits best according to the business idea and business development strategies of an entrepreneur.