Funding Options for Raising Startup Capital for Your Company

A recent survey found that almost 94% of new firms fail during their first year. One of the most prevalent causes is a lack of funds. Money is the lifeblood of every firm. The long and arduous but fascinating path from concept to revenue-generating firm requires a fuel known as cash. That’s why, at practically every stage of their company, entrepreneurs wonder, “How can I Raising Startup Capital?”

When you need money relies heavily on the kind and type of company. However, if you’ve determined that you need to raise funds, the following are some of the several forms of funding accessible.

Here is a detailed guide that includes 10 startup financing possibilities to help you get funds for your company. Some of these financing possibilities are for Indian businesses, although comparable alternatives exist in other nations.

Bootstrapping your new venture:

Self-funding, often known as bootstrapping, is a successful method of startup financing, particularly when you are just starting. First-time entrepreneurs often struggle to get investment without any traction and a strategy for possible success. You may invest from your resources or solicit contributions from family and friends. This will be simple to raise owing to fewer formalities/compliances and lower raising expenses. In most cases, relatives and friends are willing to negotiate an interest rate.

Because of the benefits, self-financing or bootstrapping should be regarded as a first funding choice. You are bound to do business when you have your own money. Investors eventually consider this to be a good point. However, this is only appropriate if the initial need is limited. Some firms need funds from the start, and bootstrapping may not be an option.

Crowdfunding As A Financing Option: 

It’s the same as accepting a loan, pre-order, donation, or investment from several people simultaneously.

This is how it works with crowdfunding – An entrepreneur will provide a thorough description of his firm on a crowdfunding site. He will discuss the aims of his firm, plans for profit, how much funds he needs and why, and so on, and then customers may read about the business and donate money if they like the concept. Those who contribute funds will make online pledges with the promise of pre-purchasing the goods or making a contribution. Anyone may offer money to aid a company in which they strongly believe.

Obtain Angel Investment in Your Startup: 

Angel investors are people who have extra funds and a strong desire to invest in new businesses. They also collaborate in network groups to assess ideas before investing. They may also provide mentorship or guidance in addition to funding.

Many well-known firms, like Google, Yahoo, and Alibaba, have benefited from the assistance of angel investors. This alternate financing is most common in a company’s early phases of development, with investors anticipating up to 30% ownership. They take greater risks in their investments in exchange for more significant rewards.

Angel investment has drawbacks as a fundraising source as well. Angel investors make smaller investments than venture capitalists.

Obtain Venture Capital for Your Business: 

This is where the big bets are made. Venture capital funds are professionally managed funds that invest in high-growth enterprises. They often invest in a company in exchange for shares and leave when it goes public or is acquired. VCs give knowledge and coaching and serve as a litmus test for where the organization is heading, assessing the firm regarding sustainability and scalability.

A venture capital investment may be ideal for small enterprises that have progressed beyond the startup stage and are already producing income. Fast-growing firms with an exit plan, such as Flipkart or Uber, may earn millions of dollars by investing, networking, and developing their business swiftly.

However, a few drawbacks exist to using Venture Capitalists as a financing source. Regarding corporate loyalty, VCs have a short leash and often want to repay their investment within three to five years. Venture capitalists may be less interested in you if your product takes longer than that to reach the market.

They often choose more significant, more stable prospects and firms with a solid team of individuals and high traction. You must also be flexible with your company and occasionally give up a little more power, so this may not be the essential choice if you are not interested in too much mentoring or compromise.

Seek Investment from Business Incubators and Accelerators: 

Early-stage enterprises may seek funding from Incubator and Accelerator programs. These initiatives, which can be found in nearly every large city, help hundreds of new firms each year.

Despite being used interchangeably, there are just a few key distinctions between the two. Incubators, like a parent to a kid, nurture the company by providing housing, resources, training, and a network. Accelerators do similar things; however, an incubator supports/assists/boosts a firm to walk, while an accelerator enables it to run/take a significant jump.

These programs typically last 4-8 months and need a time commitment from the company owners. Using this platform, you will also be able to connect with mentors, investors, and other companies.

Don’t Overlook Grants

There are many foundations out there such as The Dwoskin Family Foundation that provide grants for all kinds of projects. Such foundations do not offer grants to everyone and tend to focus on specific noble causes. Medical research companies, sustainable forests and businesses with charity angles are examples of businesses that are likely to get funding.

You can find foundations online to apply to. Pitch to them as you would an investor – but consider highlighting the social/environmental benefits rather than the profits, as most foundations are not looking for shares. 

Raise Funds by Winning Competitions: 

The increased number of contests has dramatically increased the prospects for fundraising. It promotes entrepreneurs who have business ideas to start their own companies. In such competitions, you must either produce a product or develop a business strategy.

Raise Capital Through Bank Loans: 

When it comes to fundraising, most entrepreneurs turn to banks first.

The bank offers two types of business financing. The first is a working capital loan, while the second is financing. The working capital loan is the loan necessary to complete one entire cycle of revenue-producing activities, and hypothecating stocks and debtors often determine the limit. Bank funding would include the regular procedure of providing the business plan and valuation data and the project report on which the loan is sanctioned.

Seek business loans from microfinance institutions or non-banking financial institutions.

Microfinance is essentially the provision of financial services to persons who would not otherwise have access to traditional banking services. It is becoming more popular among folks with modest standards and poor credit scores.

Similarly, Non-Banking Financial Businesses (NBFCs) are corporations that offer banking services without fitting the legal criteria of a bank.