Starting a business is an exciting venture. While the initial stages of starting out may seem difficult, the business endeavor can turn out to be quite rewarding as the profits begin to pour in.
Once you have an idea about the type of business you wish to establish, as the owner, you would need to seek out the financing. This not only involves the startup capital but is also crucial to keep your business afloat during the lean years and for expansion purposes as well.
With various platforms and innovative methods, acquiring funds for your business is no longer a difficult process. Following are some of the effective financing techniques that you can avail to fund your new venture.
Startup Incubator
Business incubators help establish a business from scratch by offering financial support as well as other services including legal, infrastructure requirements, accounting etc. Thousands of incubators all over the world assist numerous startup businesses every year. They nurture young companies and help them build connections with investors, mentors and other startups until they are big enough to make it on their own.
For example, in exchange for a 4 to 8 percent equity stake in the company, LaunchBox Digital provides teams with $ 15,000 to $ 30,000 in seed funding.
Crowdfunding
Crowdfunding enables you to directly appeal to thousands of potential investors with your startup idea and solicit funding for the same. Crowdfunding is primarily web-based. Therefore, you would require a good WiFi connection to pitch your idea seamlessly to the masses. There are hundreds of crowdfunding platforms that you can choose from.
According to Leo Shimada, co-founder and chief executive of one of the largest crownfunding firms in Southeast Asia, Crowdo, said, “Crowdfunding uses technology to efficiently connect these two parties – for businesses, it offers an efficient way to access capital, and for investors, it offers an additional way to diversify their investment portfolio to create more wealth.”
Crowdfunding is quite effective if the pitching is done right. This April, a $ 150,000 campaign for a lift installation and maintenance company was fully funded in only 2 minutes!
Crowdfunding has gained immense popularity over the years. By this year, crowdfunding is expected to account for more funding than venture capital.
Angel Investors
An angel investor provides financial backing for small businesses usually in exchange for ownership equity or convertible debt. To build relationships with the right investors, it is important to have your business idea tested for market viability. An investment will take place depending on how convincing your startup idea is.
You need to keep in mind that angel investors are going to test you and your resilience. When they start asking questions about your startup idea, you will see it from a different perspective as you begin to answer these questions. You should be able to convey the power of your idea to the angel investors. For this, an elevator pitch and an executive summary will come in handy.
Reputed angel investor, Ron Conway pointed out, “If you cannot communicate your idea through writing, then you cannot get through the system”.
Bootstrapping
A business that resorts to bootstrapping funds itself. In other words, the company utilizes the sales in its pipeline for the growth of the business. This is quite beneficial since the entrepreneur can maintain control over all business decisions.
While there is no doubt about the sustainability of bootstrapping, it is important to get your customers on board with the idea since they are your investors. According to Kevin Hale, co-founder of Wufoo, “Successful bootstrapping is all about discipline and stamina.”
After fifteen years of launching the ticketing service business, Vendini, has raised $ 20 million via bootstrapping. Chief executive of Vendini, Mark Tacchi said, “I started from scratch and basically grew it organically. When I started it I was adamant that I wouldn’t take any outside money.” While the big names in this industry were controlling large stadiums, Vendini targeted the middle market for ticketing by reaching out to small venues with compact solutions.
There are numerous funding platforms that you can choose from. Before selecting one, it is crucial to research thoroughly. Keep in mind that a funding decision is complex. Each of the options mentioned above requires commitment and persistence. Ensure that you have a good business plan in place to secure the funding that your business deserves.
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