Need Some Business Funding for Your Startup? Try these 4 Financial Options
When you are having a viable business plan, you would be having a clear idea about precisely how much funding you would need and exactly what it would be utilized for.
All you need to do now is to find the funding sources or options and then look for ways to effectively find the perfect funding partner for your business.
You may need to consider scaling down the idea as per Forbes, “You can focus on scaling down the idea to its minimum core, where you can afford the risk to prove the idea or model.
Then, focus on generating revenues from that use case to propel you to additional capital sources (i.e. bank lines of credit as others have posted).
In the end, no matter where you go, someone is going to ask you why you need the capital.” Here are some important funding options for your business.
Self-funding is often referred to as bootstrapping and is an effective startup funding solution particularly when you are just initiating your business.
A fresher or first-time entrepreneur would naturally have difficulty in getting funding as he needs to build credibility, demonstrate some traction and come up with a strategy for potential success.
It is best to consider investing from your savings or rely on contributions from your close friends and family. This surely would be easy and convenient to raise money because of fewer formalities or compliances involved.
Moreover, this could be the most cost-effective way of raising capital for your business because in most cases, friends and family are pretty flexible with the rate of interest.
Bootstrapping must be regarded as your first funding option as it has its own advantages. When you invest from your own pocket, you are actually tied to the business.
Investors are often impressed on this count.
However, bootstrapping could be considered only if the requirement initially is quite small.
There are some types of businesses that would be necessitating a huge amount of money right from the beginning. These businesses must not opt for bootstrapping.
Crowdfunding is a novel technique of raising capital for your business. It is certainly an effective way of funding startups.
It is just like taking out a loan, contribution, pre-order, or investments from more than an individual investor. A number of investors are involved.
Crowdfunding would be working like this.
An entrepreneur would be presenting a detailed description pertaining to his business to the crowdfunding platform.
He would require stating his precise business goals or aspirations, specific plans for achieving profit, the amount of funding required and specifically for what reasons etc.
Funding partners could go through your details and give you the required funding assistance if they are happy with your business idea.
Crowdfunding makes a lot of sense.
Crowdfunding doesn’t just get you the funds you need – it’s also a fantastic way to generate genuine interest in your brand as well as the product or service that you might be offering.
Financing and marketing go hand in hand when you adopt this approach and it also allows you to gauge what kind of demand you might have and how your target audience would receive your product.
By cutting out middle-men like brokers and investors and putting the onus of funding in the hands of the consumers themselves, it allows for more meaningful connections and could also open up avenues for venture capital investments down the line.
Get Angel Investment
Angel investors are people who are having surplus cash and willing to invest in your business or other upcoming startups.
They generally operate in groups for collectively screening the proposals before taking the final decision to invest.
They are ready to offer advice or mentoring along with funding capital for your business. We know that angel investors have been responsible for starting up several prominent organizations and that may include Alibaba, Google, and Yahoo.
This sort of investment is more popular during the initial stages of a company that is registering growth. Angel investment is marked by a number of shortcomings.
Moreover, angel investors would be investing lesser as compared to venture capitalists. It is best to seek funding from venture capitalists and angel investors than accumulating overwhelming credit card debts.
Opt for Venture Capital
Venture capitals are actually professionally managed funds that are invested in organizations that promise incredible potential.
The venture capitalists usually would be investing in any business against either equity or exit once there is an acquisition or an IPO. We know that Venture Capitalists would be providing expertise, as well as, mentorship.
Things to Consider for Identifying the Right Funding Partner
Define Clearly Your Relationship Aspirations
The relationship between investor and brand could prove to be really complicated. Both wish to look their very best for their precious partner.
However, once funding is involved, opportunities and strengths would be getting embellished. This implies that you need to consider approaching venture capital funding with excitement and caution on an equal footing.
Understand Your Metrics
This looks quite basic, however, a lot of people start talking to funding sources even without bothering to learn the fundamental metrics these companies actually care about.
Most venture capitalists would be using common formulae while evaluating firms or businesses for investing in.
Some of the most common and basic metrics are average order value, revenue, conversion rate percentage, customer lifetime value, site traffic, customer acquisition cost, and cost involved in customer marketing.
You must not rush into funding options instead; take your time before making the right choice.
Weigh the pros and cons of all funding options available to you.
Choose the one that best suits your business’s unique requirements. You may identify the venture capitalist that is just perfect for your business requirements.
After you conclude that the VC funding is best-suited to you, consider matching your business, cultural, and long-term requirements with the VC’s persona.
You may choose the right business funding so that your business grows consistently and won’t bog down due to a shortage of capital.
About the Author
Daniel Ng is a freelance writer who has been writing for various blogs. He has previously covered an extensive range of topics in her posts, including business debt consolidation, Finance, E-commerce, and start-ups.