There are so many ways to fund your startup, and I've tried almost all of them. The major hindrance to starting up a small business is funding. Most entrepreneurs don't realize that there are more ways to get funding for your startup than going to an angel investor or venture capitalist.
Here are 7 different funding options that you can use to help accelerate your startup and grow your business.
Angel Investors & Venture Capital
An angel investor is a wealthy investor who ventures in a startup business with the aim of making money or holding an important position in the company. Since raising capital from angel investors can be tough, developing methods of attracting potential investors is, therefore, quite important. The advantage of raising capital from angel investors rather than venture capitalists,is that angel investors invest their money as well as their time and effort in your business. However, angel investors have their shortcomings too. Angel investors invest lesser amounts than venture capitalists. Venture capitalists invest an average of $7 million. They prefer to take more risks in investment for higher returns.
Crowdfunding is quite different from both angel investors and venture capitalists in that it involves many people or organizations. In crowdfunding, huge amounts of capital are raised from different individuals, organizations and so on. There are several sites devoted to crowdfunding: Kickstarter, RocketHub, Dreamfunded, Onevest and GoFundMe are just a few. With these platforms, entrepreneurs can ask for funding from practically anyone. An entrepreneur is capable of raising hundreds to millions through crowdfunding.
Enter a Contest
An increase in the number of contests has tremendously helped to maximize the opportunities for fund raising. It encourages entrepreneurs with business ideas to set up their own businesses. For instance, the Amazon Web Services Start-Up Challenge provides annual rewards of $50 thousand plus $50 thousand in AWS credits to businesses every year. MIT offers rewards of more than $350 thousand each year for its pitch, accelerate and launch contests.
You need to make your project stand out in order to improve your success in these contests. You can either present your idea in person or pitch it through an essay. The essay should be comprehensive enough to convince anyone that your idea is worth investing in.
Fee acceleration isn't meant for all businesses. It is mainly used by firms, especially law firms, that are experiencing irregular cash flow or want to expand their business. In such firms, fee acceleration, also known as post-settlement funding, can be the answer.
Plaintiff's attorneys face lots of financial challenges. The reason for this is that the payments for services such as depositions, research, hiring experts, day-to-day expenses and employee salaries are usually made after the services. More than $100 thousand may be used in pursuing a case, yet the attorney does not receive the money until the case has been concluded. In some cases, they may even have to wait for some months after successful resolution of a lawsuit. This poses a financial threat for the plaintiff's attorneys.
Fee acceleration is therefore needed to help solve this problem. Fee acceleration programs help to supply the law firm the money needed to pursue new cases or diversify their services.
Although incubator programs can be difficult to come by, they are worth seeking out. They are found in almost every major city and assist three to one hundred startup businesses every year. The assistance rendered by each startup incubator varies - some give office space, some give industry mentors and some give help with marketing, while others give straight funding to businesses.
Self-funding, also known as bootstrapping, is definitely an effective way of funding a startup in some situations. It enables you to manage your business yourself without relying on investors. It also saves you the time and energy involved in looking for venture capitalists or angel investors. However, the disadvantage of self-funding is that you cannot run your business if you do not have enough money to start it. More so, you might risk your money if your business plan is not good enough. This is a risky option for you as a startup, but having self-funded a few of my ventures has given me a whole new appreciation for money and cash-in-hand.
Trade equity or services for startup help
This is a way of exchanging your skills, or probably something you own for something you need. For instance, agreeing to support the computer systems for all other office tenants to get a free office in return. Another common example is exchanging equity for legal and accounting support.
I was a able to take my agency Adogy and grow my invoicing startup by doing SEO for many different startups that pushed our products. I was able to help them, work for them at my rate and charge them in services, then they charges me equally for their services in exchange. It worked out and has helped me grow the company to over 100,000 customers. It has been a driving force behind my business growth.
Learn More About Funding For Startup Growth
The seven fund raising techniques discussed above are just a few of the many ways that a new business can collect initial capital. You can learn more by consulting a professional to educate you more on how to raise funds for your startup today.