7 Options to Raise Capital for Your Startup
Acquisition of funds that helps you to build your startup is an immense challenge, especially if you do not know from where you should start. Confiding to your startup platform, and trailing the incorrect path would keep you away from raising the necessary funds, and it will be a waste of time.
There are various options for securing capital for your business such as investors in marketplaces, crowdfunding, angel investors. Today in the marketplace, it is easier to raise funds than before. Here are seven ways you can raise funds for your startup:
1. Funding your own idea:
This way of raising funds is the most common among startup’s early stages. Founders or the team members put their money together for their startup. Professional investors in the market prefer this way of raising funds.
You must have some savings or assets that would be used for the business startup. Funding your own startup is one way of telling your potential investors, how serious you are about this venture. Putting your money in the project shows that you are willingly taking the risk of putting the money that you have worked hard for at stake, supporting your idea with the faith you have in your company.
Funding your own business has advantages that other ways of raising funds do not have, excluding crowdfunding. If you self-fund your business, you will have control of it in the premium stages besides crowd-funding. If not, then you will have to give out equity shares or take debt, which will have an impact on your baseline.
There are various types of crowdfunding. You have to select which one is the best for your business such as rewards or equity-based crowdfunding. It is an excellent way to gather funds for startups with artistic projects or even to raise capital to finance the manufacturing of new technology at a large scale.
Any option you choose this option is of low risk as if you want to put the product in the market and also get funds to finance your product and make it the reality. This is also advantageous to get feedback from the early adopters of your prototypes.
Future investors will be able to see marketplace adoption if you go with crowdfunding, this will help you in different ways. As investors notice other people are willingly investing in your idea, this will persuade them to also put money into it.
To uphold control over the business crowdfunding with rewards is another way. Many business startups select crowdfunding to maintain freedom and avoid censorship.
3. Angel Investors:
Angel investors are quite a bit popular because of ABC’s show, SharkTank. In the entrepreneurial world, it has been prominent to startups as they do not only provide finance to mount their business but also mentorship and experienced guidelines. Generally, Angel investors invest around 1 million, numerous investors come together and provide funding sometimes.
Reaching out to investors is as easy as reaching the right people in the right areas, but only if it is done in the correct way. Examples of networking to people are through engaging them on social media, Linkedin groups, and through blog posts on websites, and the list continues.
As you reach out to more people and they listen to your idea, they will give you feedback and more reviews that will help you out with your product. The more people get to know the more they will be interested in investing and it will be an advantage to you.
Seeking Angel investments may be a good option, but it is not for everyone as Angel’s like VC’s usually want an instant return on the investment and may also desire more control on the management of your business than you are okay with.
If you choose to seek angel investors try to look for someone who is in the same line as you are or has had success in that line. Focus on those investors who have the expertise in your target market or a point of view that your crew lacks. Investors want to see you succeed as they have invested their money in you, they are also a valuable source of mentorship and experienced guidelines.
4. Friends and Family:
One of the best places to raise funds is from your own house. As your family is well aware of your talents, they will be willing to support you regardless of what you want to do. Family and friends are the only ones who know your potential and will be willing to give you money to start your business.
This may seem like a great way of gaining investment partners, but everything has its drawbacks. Acquiring loans or investment form family or friends may be advantageous to some businesses as they have faith in your talents and your success. But for others that require expert assistance or guidelines, angel investors are the best way as your family might not have those experiences which are needed.
This may be a good way for you to raise money as they love and care for you but it is not fun when you lose it as it may affect your relationship with that person forever. A good way of raising funds from your family may be if you choose those who have the knowledge of business and its risks while investing.
Regardless of this fact, it is important to behave like a professional with them, and while they are considering to invest, you should lay out all the risks involved in the investment so they can decide at first.
5. Taking A Loan:
Another way to get your startup financed is a business loan from the bank. It is one way of keeping the initial control of the business in your own hand. Taking a loan for startups might be healthy but only to those who have full confidence that the business will prosper in the first run without difficulties. Again, it depends on you and the type of business you want to incorporate.
But while considering the loan check the interest rates and also if u have collateral to give. Crosscheck with all the facts, whether you are able to comply with all the terms of the loan.
6. Enter Competitions:
For gaining publicity, you can enter competitions if you believe that your idea is capable enough. Entering these contests will be very helpful to you as in one hand if you win the competition you will get a source of finance, and on the other hand, you gain publicity for your product and people will be waiting for it to hit the market (it acts as advertisements).
This is a low-risk option as you get your ideas out in front of investors and if it is good, you can win the competition and get money rewards to finance the startup of your business to succeed. If you are not able to make it and win the cash prize, being on that competition acts as an advert for you and angel investors may contact you to invest in your idea. Both ways it’s a win for you.
7. Venture Capital
One of the other ways to raise funds is venture capital. A venture capitalist invests in large growing markets and new technology. They usually Invest a minimum of $1 million. Not all the venture capital firms participate in investing in startups, they would often prefer to invest at a later funding stage.
There are several ways of raising funds for your new startup. All you need to do is choose one that is best for you and your type of business. Begin with going through all the options that are beneficial to you and your business, then slowly cut down to the best options that will reach your goals.
Also, consider that fact that gaining funding may be a long process and you may not be successful at first. Evaluate your progress at every level, keep an open mind and follow the tips. All these things will help you have a successful startup.