Once you’ve come up with the best business idea and laid out all the strategies, it’s the issue of financial backing that will probably kill or grow your idea. Lots of entrepreneurs in the past and present have approached the issue of funding in diverse ways. Some have gone for crowdfunding, venture and angel capital in recent times, government grants, loans and contributions from family and friends or utilized their own savings. Some have even succeeded by using two of these methods to get their businesses running.
To find the best funding option for your startup the growth plans, track record and business type should play a key role. While some startups receive funding for the rest of their life, others always have to seek outsider capital injection as well as expertise. As you might already know, the right amount of finances and proper investment when required can break or make a startup.
From crowdfunding to government grants, options are available to seek today and get your startup idea going.
Crowdfunding
As the social media has risen and brought the world together so has crowdfunding. It involves raising a small or large amount of funds from all types of people globally to fuel your startup. While it might be enabled by advances in technology, crowdfunding is a concept that has been there for hundreds of years. With two kinds of crowdfunding, you can choose equity or the rewards type. However, the best one for any modern entrepreneur is the reward-based crowdfunding method where you don’t need to provide any shares or equity to investors. This is exactly what GoFundMe, Indiegogo, and Kickstarter, among others, offer.
Successful, famous crowdfunding campaigns include the smart biking startup Vanhawks Valour, Corner Gas: The Movie that raised $285,800 and The Veronica Mars Movie Project a 2013 U.S. project that raised over $5.7 million.
Remember lots of people with fabulous ideas are also seeking a source of funds just like you are. Your idea has to be exceptional. Ask yourself why anyone would invest in your idea or contribute their own money to it.
Equity Crowdfunding
As mentioned, Crowdfunding is a method of raising a specific sum of money from many people each contributing a small sum. Equity crowdfunding simply means the investor will have a stake in your business. The reward for the investor is the expected profit you’ve agreed to offer them for the money invested in your startup. Some of the top equity crowdfunding platforms today include EquityNet, AngelList, Localstake, and Wefunder. Real estate ones also exist that act as companies and investor intermediaries such as CircleUp and PeerRealty.
Angel investing
Angel Investing might have been around for decades, but it was in 1970 when the Center for Venture Research’s founder William Wetzel coined the term in a study to describe seed capital giving investors for startups. An angel investor is a great news for any modern startup. They are legally accredited and private investors who invest in a specific startup in exchange for convertible debt or equity. An angel investor can be a successful business person, family member or friend who wants to invest in the next big thing. Entrepreneurship.com indicates angel investments can hit anything from $25,000 to $1.5 million. While this idea gets you the money you need quickly, remember you’ll always hear from the angel investor again who want a return on their investment.
Venture Capital
Venture capitalists are investors with deep pockets and invest in startups they strongly believe have lots of potential to be something big. In contrast with other types of funding, venture capitalists make the largest investments. Entreprenuership.org claims startups take home anything from $500K to $5 million.
Bootstrapping
In startups, bootstrapping simply refers to a company that seeks to grow its business through its funds. The source can be savings, credit cards, a line of credit or a loan in contrast with having external investment. The term is a reflection of the self-determination, hard work and grit involved in starting and running a company this way. While some startups have succeeded by bootstrapping alone, others have sought cash injection in future after their investment has taken off. While it’s not easy and not without challenges, the beauty of bootstrapping is that if the company succeeds no one will come calling for a return on their investment. Successful companies that started this way include Facebook Inc., Oracle Corporation, and Apple Inc., eBay Inc., Microsoft Corporation, Coca Cola Company, Clorox Company and Hewlett-Packard, among others.
Government Funding
Governments are business creators, and purveyors and startups are a major means of creating jobs in any nation. It’s the reason governments always want to aid entrepreneurs one way or the other. Government funding includes tax incentives that seek to encourage investment and spending through a deduction, as well as a grant that once you receive you won’t have to repay. In the US, government funding can be applied for various programs, such as SBIR particularly for Technology and Research & Development startups, which awarded 300 grants each worth about $624,807 in 2014 alone. Startup America is funded by the White House and sees capital being expanded to startups with high growth. Find funding help depending on your type of business on Business.USA.gov through this Funding Wizard.
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