Capital has often been cited as one of the problems many entrepreneurs face when getting started. Many great startups struggle to raise funds for their business despite their potential. There are however many options for raising funds for your startup. Here are the six most effective ways to get funding for startup businesses.
Exchange a Service for support
Various costs are associated with operating a company. If you do not have the money to pay for the services your business requirements, you can opt to offer your services for support. You can, for example, opt to provide computer support in exchange for accounting or legal support. This method might not give you direct funding but will reduce your capital requirements significantly.
When getting started, the only thing that you have is ownership of your company. You can offer equity of your business in exchange for support, capital, or a line of credit. One of the most important things when giving out ownership of your company is the valuation. Make sure that you accurately value your company to avoid any future regrets. When negotiating with a potential investor for capital, ask for a line of credit just in case your business requires more funding in the future.
Join a startup accelerator or incubator
Startup accelerators and incubators are mostly associated with large companies, major universities, or community development organizations. These organizations popular because they support startups with free resources which helps them be competitive. An incubator or accelerator like Y Combinator will assist you with seed funding, office facilities, consulting services, and other resources as well which reduces your operating expenses.
Look for venture-capital investors or local angel investor groups
Venture capitalists are professional investors looking for startups that are looking to scale. They target these startups and invest institutional money in them. If you have a proven business model but require a lot of capital to scale, solicit such investors. Accel Partners is an example of venture-capital investors. Angel investors, on the other hand, are high-net-worth individuals looking to support startups. Such persons can syndicate millions of dollars to support qualified startups. You can find them locally or on online platforms such as Gust.
Online crowdfunding campaign
You can also fund your startup simply by starting a crowdfunding campaign online. Online sites like Kickstarter allow you to do just that. These sites enable you to start a campaign where others can donate, make pledges to your startup, or even pre-buy o pre-order the startup’s product for later delivery.
Bootstrapping and pitching to family and friends
Since the cost of starting a business is lower today, you should seek to self-fund your startup instead of giving away ownership (equity) or leveraging your young business. It is said that over 90% of startups self-fund and you should try and do that too. If you cannot raise the necessary capital, look closer to yourself and ask for support from your friends and family.
Your ability to raise capital will determine whether your business will take off and scale or not. Raising funds for a startup used to be a daunting task but not today. There are many options, but these six are the most effective. Decide on your debt appetite and the equity you want to give away and then take a decision on the appropriate choice.