This time we decided to continue talking about money and touch the base with the financials. Yes, you can significantly reduce your software development costs — but you still require some funds for development and future customer acquisition. That is why we’ve listed all the most popular means to source your startup funding so you can take an informed decision which one to go for.
Knowing the right people could be a chance for startup funding. You never know who might get inspired by your innovative idea. Sourcing your seed capital might seem challenging but at the end, it’s not a problem you cannot tackle. Like-minded entrepreneurs might be just around the corner but you won’t bump into any of those when sitting on a couch and watching Netflix. With InterNations being one of them, there’re plenty of similar meet-ups that gather crowds of expats and curious minds.
In case you’re determined to play big and your gut tells you should, venture capitalists are the right audience to seek startup funding that begins from 1MUSD. The concept of VCs is to spread their funds among several promising trailblazers and enjoy the benefits once any of them succeeds. To get traction, you definitely need to work hard on your investor kit: these people see way too many entrepreneurs each day so you ought to stand out from the crowd with your value proposition.
San Francisco’s AngelList is probably the best-known pool of angel investors. The startup funding website bridges the gap between entrepreneurs and investors. Usually, these angels are HNWI that look for opportunities to pour their funds into innovative businesses that are like to rock the traditional boat. Often times, angel investments come handy when you look for ways to scale your business and grow the headcount. Angel funders’ most favorite deals are early-stage companies or pioneering startups. The latter need money giving a promise of more to come when the equity (the company’s shares) bears fruit after some time.
If you’re more into conventional startup funding methods, banks are always there to give you a helping hand with capital. From large to small, this type of financial institutions will check your credit score to determine if you can be trusted: they do need guarantees you will repay the loan. A spotless track record is what you’d require to get a loan from a bank. You might think it would be challenging to prove to a bank that you’re capable of paying off the debt, but there are many established financial institutions that are lenient to SMBs.
Friends and family
Some add fools as well making it an FFF abbreviation. However, indeed your close circle of friends, immediate and extended family as well as people with little knowledge of business but spare money can be a great source to turn to look for funds.
A lot of countries and non-profit organizations have government and industry or goal-specific funds allocated to support new technologies and important causes, such as education, medicine, ecology, and social needs. Although your options may be limited due to your location or your chosen industry, there are some great opportunities available to those who do meet the stringent requirements of modern business grants. Usually such grants, unlike a loan, shouldn’t be repaid and, as a one more profits, in this case, you can vastly widen your network and take great brand awareness.
In case you’re yet to hear about this alternative financing option, in a nutshell, crowdfunding is a mainstream way of startup funding these days. The term speaks for itself. There’re tons of websites where people list their campaigns trying to attract eyes and ears to their daring apps, home appliances, and revolutionary services etc. Often times, the crowdfunding fees are much lower than what you’d have to pay to e.g. a bank. However, in some cases, you’ll only to be able to get the funds if your campaign reaches its initial goal and there’ll be enough people to support your endeavor.
Setting up a strategic investment partnership is one of the best ways to fund your startups in terms of the value your company may receive in the future and the benefits you may gain. Usually, such a partnership implies the ownership of a significant share of your company by your strategic partner. In exchange, you get all money for growth and development, some insights and mentorship, the valuable expertise of your partner’s in-house employees and of course the most valuable — all your partner’s contacts for networking.
This might seem like a philosophical approach to startup funding, but if you want to live a debt-free life, you might want to rely on yourself only. See what things you can get rid off and sell them on eBay, check how much money you have purposelessly lying in your bank account. Bootstrapping is beneficial if you are not in a hurry to launch your product or service but prefer a gradual progression from a raw idea to its mindful realization without any external source of your startup funding.
Startup incubator or accelerator
You must have heard about this kind of business acceleration programs. Startup incubators usually offer a handful of resources for entrepreneurs with mentorship programs and office space to kick off the business. There is another type of incubators that are more into actual startup funding rather than just connecting the dots for you: they have money you can use as a seed capital.
Bringing you the industry best practices is the goal of this article. All of the listed funding methods need preliminary preparation and before you start the process, you need to think over the details of your business and create the ideal financial model for your start-up, to significantly increase your fundraising chances. Perhaps after all preparations will be done, you may see what method is your best shot.
However, it’s still totally up to you to choose among a myriad of startup funding opportunities that suit your business goals and pace you want to keep up with. Good luck!