6 Startup Fundraising Options You Should Know About

The way in which you get money for your startup will not only affect your profitability but the infrastructure of your business for years to come. Think about it, by selling equity in your company, you’re giving up a part of the control over your business.
6 Startup Fundraising Options You Should Know About
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The way in which you get money for your startup will not only affect your profitability but the infrastructure of your business for years to come. Think about it, by selling equity in your company, you’re giving up a part of the control over your business. By going into this venture with your personal funds, you’re putting it all on the line, raising the risks through the roof. That being said, here are six startup fundraising tips and options you should know about.

Join a business incubator

There’s a statistic out there that one out of ten startups actually makes it. Well, there are some people who believe these odds to be quite profitable, which is why they offer people with a vision to make their dream come true in exchange for a fixed percentage of their startup. These are so-called business incubators. Namely, this trend is most commonly present in the tech-industry, where ROI is so great that it literally makes it worth for the owner of the incubator to finance a myriad of less successful projects and still make a profit. The best part of this lies in the fact that it’s a low-risk option for the startup owner, seeing as how they aren’t putting their own assets in danger.

CrowdfundingCrowdfunding

Another option that’s available mostly to tech startups is the idea of crowdfunding. What you do is turn your business idea into a presentation, often laying out your business plan and market research to your audience. If it appears appealing enough, there are people willing to pledge money to see you pull it through. In return, they often get a special status (preorder) or merely an opportunity to gain an access to the function/product/service they so desperately need. The greatest problem with this idea lies in the fact that it depends more on your ability to make a compelling presentation. In other words, your ability to present the idea may be more important than the idea itself.

Diversifying your streams of revenue

Raising money to start your business is one of the things you need to learn as soon as possible. However, what about maintaining the cash flow in those first few months before your business becomes self-sustainable? Here, you need to create a stream of revenue or, better yet, several of them. Some people decide to keep their day job. Others believe that it’s better to start day trading in the forex market. As for those who intend to get there by making smart investments, thus creating a profit, investing in gold by purchasing gold bullion seems like a sound plan.

Angel investors

You would be surprised to learn how many wealthy and wildly successful individuals are still interested in startups and projects ran by first-time entrepreneurs. These people are sometimes willing to cash out somewhere between $25,000 to $100,000 in exchange for a small level of executive control or merely a seat on the board. Most importantly, aside from money, these people also provide their advice and contacts, which can at times, be even more important than the resources themselves. The experience provided by these giants of the business world, even if they aren’t necessarily tied to your line of work, is simply invaluable.

Looking for government grantsLooking for government grants

In some regions, the government is trying to boost the entrepreneurial spirit by giving potential investors an incentive to put their ideas into action. We are, of course, talking about government grants. Sometimes, in order to qualify, you’ll have to belong to a certain demographic group (based on your gender, race or religion). At other times, the industry you’re in will be enough to make you eligible. For instance, if the product/service you’re offering is in any way benefiting the public sector, helping the environment or in other way benefits the society, you might be able to qualify, as well.

Personal assets

At the end of the day, it’s possible to finance your startup by selling an asset or getting a mortgage on your home, yet, this is not always the best course of action. Sure, it allows you to avoid interest rates, obligations towards investors or even selling equity within your company.

Remember what we talked about in the ‘business incubator’ section? Nine out of ten startups fail, which means that there’s a 90 percent of a chance that your business will result in a failure. That being said, you could end up losing your car, your home, your family heirlooms and your business, instead of just losing your business. This thought is more than a little unsettling, yet, it’s definitely a real threat to be considered. For this reason alone, it’s also for the best to structure your business as an LLC instead of being a sole proprietorship.

Personal assets

From the above-listed, it’s more than clear that each method has its downsides and advantages. However, the severity, availability and favorability of each of these methods depend on the context and the situation your business is currently in. In other words, the choice of the method depends on your assessment of the situation, which, due to your inexperience, may not be as reliable as you’ve hoped for. Still, it’s always for the best to have all the options in front of you.

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