Getting the right funding for your Start-Up is an essential factor to pursue your dreams.
Have a look at the below 7 ways to get your Start-Up funded right away.
1. Create a Detailed Business Plan
First of all, you need to have an extremely clear understanding of ‘How are you planning to operate your business?’ as securing funds will become a lot easier by preparing a business plan.
It has been also noted that the companies who have noticed high growth rates have always had a business plan.
The reason is cut simple and clear – It will be extremely difficult for you to raise money for your Start-Up from anyone without a clear business plan.
Do you know that several investors will require your financial projections before even investing a single penny in your Start-Up?
Creating a Detailed Business Plan will also set you up for success! It will remind you ‘How to proceed’ once you get into the daily routine of your business operations as you may forget some of the ideas in a year or two if you don’t have them written somewhere.
What does your Business Plan consist of?
Your Business Plan should have –
- Who are you?
- What do you do?
- A Market Analysis – A Market Research consists of your target market as well as research and information about your competitors
- A clear cut description of your Start-Up Idea
- Organizational Structure of the Company – An Organizational Structure of a Company defines clear roles for managers and other positions
- FINANCIALS – You should include Financial Projections for the next 4 to 5 Years and make sure that these financial projections are realistic. The project’s financial projections should project profitability from the initial 2 years maximum. So, just try to be as accurate as you can be in predicting your finances. Therefore, FINANCIAL PROJECTIONS will certainly help you to secure funding for your Start-Up.
2. Visit an Online Company or Your Local Bank
In this step, you need to visit an online company or bank that you use for your personal banking requirements.
Recommendation – Start with a bank in your locality as you already have an established relationship with them beforehand.
What do you need to do?
- Set up an appointment with an official of the bank who can grant loans.
- Be prepared and show up for the meeting.
- Dress professionally
- Do not forget to bring your Business Plan
- Now, here’s the main work that you need to do : Explain to the Loan Officer that how much money do you require and for what purpose it will be used
You may acquire loans for different aspects of your Start-Up depending upon your situation.
What if your bank denies your Start-Up Loan Application?
- Try getting a personal line of credit from the same bank and use it to fund your initial Start-Up Expenses.
- Or, you can even try other Institutions and banks.
Takeaway Motivational Advice – DO NOT QUIT AFTER YOUR VERY FIRST APPOINTMENT!!
3. Seek Help From Family and Friends
Family and Friends are the people that trust, care, and love you. Moreover, they believe in your potential and YOU! So, never be afraid to ask your loved ones for financial help.
Stats Time – Family and Friends are on the 2nd spot on the list for the sources of Start-Up Funding in the United States Of America.
Just like receiving funds from any other source, there are a few risks associated with this approach as well, and they are –
- You would never want that a loan given in good faith by your family and friends was put in a bad business idea. It can put both, you and your fund provider, in an extremely uncomfortable situation.
- You would never want to let your loved ones down.
Luck Factor – You might even receive funds for your Start-Up as a gift from your siblings, parents, grandparents, or even your super rich Uncle!
Now, let’s even look at the brighter side of this approach – You might success in your business idea funded by your loved ones as you have extra motivation to not lose the investment money.
Bonus Factor – You can get the same amount of money from your family and friends as the bank, and that too without paying any interest!
4. Venture Capitalists (VCs)
Definition – The firms that invest in the early stages of your Start-Up in exchange for an equity share is known as Venture Capitalists Firms or VCs Firms.
Harsh Truth – Opting for this route means giving away a portion of your Start-Up.
But, that’s not always a bad idea!
Think of it – If Venture Capitalists are playing the game with you now, they might be able to supplement you with other resources that can prove significant for the success of your Start-Up.
But, pay attention as smart Venture Capitalists will only structure such deals, if they support your business idea or plan. They will never want to invest in a business that would make them a return (say) 20 years later. They want to make money and that too, as soon as possible.
Deciding Factor – You mostly receive Venture Capitalists Funding depending on your Industry.
Hidden Truth – Venture Capitalists Firms generally put their money on Start-Ups within Technology and Software Sectors.
5. Angel Investors
In exchange for their investment, Angel Investors can either take an equity share of your business or their funding can also be returned for convertible debt.
Understand that there is a difference between Angel Investors and VCs –
- Angel Investors look to get involved in Start-Ups when they are still in the early stages while Venture Capitalists supply funding to Start-Ups after getting involved a little bit later
- An Angel Investor may take a decision by himself or herself but a Venture Capitalists Firm has advisors and committee working together
Common Fact – Angel Investors are themselves, entrepreneurs, or former entrepreneurs.
Angel Investors are genuinely interested in your Start-Up as well as the development and growth of particular businesses. Finding the right Angel Investor may give you an advantage in their expert management and advice skills.
You must articulate your business model well as Angel Investors may simply trust your goals, like your plan, and believe that your Start-Up will be super successful.
Shortcut Tip – A short meeting with an Angel Investor over lunch or coffee might be all it takes to get them to fund your business.
You should take benefit of the online available resources like Crowdfunding Websites to raise funds.
Here is a list of popular Crowdfunding Websites for Start-Up Companies –
All of these websites work in the same way or another. Some let you raise funds from anyone while the others put you in a pool of potential professional investors. You can raise a lot of funds if your Start-Up is promoted properly.
Here’s an illustration to depict you the same –
- A company named Oculus Rift which aimed to produce virtual reality headsets launched a Kickstarter Campaign with a fund investment goal of $250000.
- They ended up generating money nearly ten times their goal.
- The funding was super successful which led to the rapid growth and success of the company.
- After a short period of 2 years, Facebook bought Oculus Rift for 2 billion dollars!
This example depicts that crowdfunding is not just for small side projects or college students. There’s real money floating out there and You Just Need the right perspective to look at it!
Caution – Your Company will not be automatically successful just because you secured millions in the funding process.
In the year 2012, Pebble Watches raise over a whopping 10 million dollars. But a highly competitive market made it difficult for the company to stand with time. In 2016, Pebble Watches folded up their daily operations and stopped producing watches.
7. Look for a Strategic Partner
Getting a strategic Partner for your business can help boost the development of your Start-Up.
Stats Time – Over 80% of the companies have admitted that Partnerships are necessary for their growth.
You might have enough funds saved to get your business off the ground between you and your Strategic Partner. Also, the other person can even raise funds from the other methods that are outlined in this article.
Also, having a strategic partner reduces liability. If things go south, you won’t be on the hook as much as when you are alone in the sea with whales!
- You will acquire only half the profits.
- Even lesser, if you have other investors to whom you have to give away equity.
Caution/Disclaimer – Make sure that your Strategic Partner is someone who you can trust. Also be ready for creative differences, disagreements, and conflicts with your partner.
Other ways of acquiring funds for your Start-Up are:
- Dipping into your Personal Savings
- Minimizing Initial Start-Up Costs
Follow the tips above and you will be well covered in the right direction to raise funds for your Start-Up.
Any questions or concerns regarding ‘How to get funding for your Start-Up’ are welcome in the comments.