Most business startups need funding. Studies show that more than 90% of business startups capitulate during their first year. The lack of investor confidence results in less funding, and business startups fall down in their initial stages. With many people planning to startup their own business, capital fundraising is one of the most crucial parts to start and run a business.
An established business can easily raise money from a trading platform. But, if you are new to the business world, you need some concrete idea to raise startup capital. Without a proper fundraising, you cannot imagine a successful business future.
Here, I have gathered 5 valuable funding ways to raise startup capital for your business.
1. Bootstrap Your Business before Planning a Startup
Bootstrapping is the most usual way to fundraise capital for your business. If you are planning to start a small business, you must ensure some early funds that you can access easily. It has many benefits.
- You are the owner of the fund, and you can use it as per your need and will.
- You can easily access the funds whenever in need.
- No bureaucratic pressure or obstacles
- You do not need to think about the interest rate.
The idea is unsuitable for a large business startup.Statistics say that 82% startup funds for SME (small and medium-sized enterprises) businesses come from the entrepreneur himself or from family and friends.
Another study says that 40% of small business startups are profitable and 77% of SME startups rely on bootstrapping the capital fund. Funding your business also send a strong message to the outside world about your faith and confidence in your business.
Let us say, you have some personal fund to invest in your startup but that is not adequate. What will you do? Since we are living in a digital world, crowdfunding is the next best option. Crowdfunding means getting investors who are willing to invest in your business idea.
There are various social media platforms and crowdfunding websites where you can share your business idea online and can make a business pitch. You have to sell your business idea model and potential growth statistics on the crowdfunding platforms. Then wait for the investors to pledge their support and donate money for your business.
The benefits of crowdfunding are immense.
- You get free marketing and public interest for your venture.
- You get funds for your startup business.
- You are free of intricacies that come with the one investor or a broker.
- You get the brand value for your business. This increases the potential to attract more capital investment in the future.
In 2012, the global crowdfunding was $2.67 billion. America alone witnessed $2.4 million crowdfunding in 2012.
There are some negative points to crowdfunding as well that you must know.
- If you do not have a progressive startup idea, you may find it difficult to get investors due to high competition in the crowdfunding platform.
- If you are a novice or dull in business pitching, there is a high probability that your business idea gets no investors.
3. Find Angel Investors for Your Startup Business
There are people under the sun with huge money and willing to invest. They help startup entrepreneurs with seed money and demand equity stake in return. In the United States, angel investing is about $25 billion every year in almost 70,000 companies.
The benefits of angel investors are:
- They do not only help with the capital, but they also act as a mentor.
- They may provide lower capital but they help often.
- They can take a risk on your business idea since they need heavy returns.
4. Find Venture Capital for Your Startup Business
Venture capital involves large firms, a group of professional investors that are ready to help new business ideas. While Angel investors are just the people with lots of money, Venture capitalists are professionals that have venture firms including investors, board members, and people who invest money in business with high potential growth.
Venture capitals have their own baggage of benefits and problems. Some of them are:
- As the owner, you have less control over your business. However, venture capitalists will help you with a large sum of capitals.
- They will help your business to grow until they get their capitals and profits.
Statista chart suggests that in 2017, the total venture capital investment in the United States were $84.2 billion.
5. Source Capital Funds by Winning Contests
Every year, investors organize multiple contests for startups to pitch for their business idea. These contests work as a platform for both startup entrepreneurs and investors. If you are confident about your business ideas, you must take part in these contests.
You need to make a solid and comprehensive business plan strategy to lure investors and get the capital funds for your business. You get the media coverage, branding, and publicity as added advantages.
Raising a capital fund for your business startup is not an easy task. 82% of business fails because of cash flow hindrance. NSBA claimed that 27% of businesses could not get the desired funds. If you want to fundraise for your startup, you must have self-confidence in your business. There are many other ways as well to raise capital. For example, you can apply for a bank loan or lend money from a non-banking financial corporation. Whatever is your way, do not depend on only one way. Make your business pitch strong and try to raise money through various platforms. This will help you to get a hold on your fund problems.