Do you have an idea that you believe can be the next million (if not billion) dollar company? You are quite confident that you will make a dent in the industry and is already preparing for giving the next TedX speech. But hold on there. Starting a business is not easy as it sounds and you will see several highs and the lows throughout the journey. Despite the hardships, running a successful and profitable business is a satisfaction in itself.
The startup journey starts with finding a perfect idea, validating the concept and then finding the perfect co-founder for your firm. These initial stages are hard to get, and you may need mentors from the very beginning itself. Being crystal clear is the key, but achieving that stage is a long run and requires patience and practice. Once the basics are done, the next hurdle that an entrepreneur faces is funding.
What inhibits most entrepreneurs to the next step is funding. Getting money out of the investors pocket is not an easy task and requires a lot of efforts and confidence to get the money out of their pocket. Getting Venture capital funding or angel funding is not the only way to get your business of the ground. There are several sources that you can get your money from.
Finding proper funds for your business
There are a lot of things that an investor looks for before getting into an agreement. From previous experiences to your minimum viable product and your balance sheets, investors get through a lot of things before investing in a company. Below, down are some ideas regarding the alternate funding option, which you can use to take your startup to the next level.
The funding can be divided into two parts – Equity-based and Debt based. Mostly the traditional intuitions like banks give money based on debt, but you should have sufficient collateral in place to ensure this thing. Venture capitalists and angel investors mostly fund based on equity, that is, they get a pie from your business.
Let’s delve deeper!
These may sound confusing, but each has its merits and demerits. Some of the other options that can help you fund your startup are listed down below.
1. Bootstrapping – The initial investment that you need to initiate the process has to come from your pocket. Every other guy has an idea and a dream, but dreams and purpose are useless unless they are implemented. You may not need an entire war chest to win the battle, but try to build a war chest as you go along. Bootstrapping is the first step in any business. It may not be huge, but it should be sufficient for a long time.
2. Family and Friends – If you are running out of money and are in a very early stage of your startup journey, getting the help from your near and dear ones might be the best option. If your immediate family believe in you and see potential in your business, they may be quick in investing something into the market.
Money often destroys relationships. So you need to be careful while dealing with your family or friends. Make sure you make a legal agreement regarding the agreement. The terms and conditions should be well mentioned while special mention must be made how you will be returning the money.
3. Incubators and Accelerators – If you are starting a company, then incubators are the first thing you should look for. Incubators provide with working space, startup advice and training and some time with funding opportunities. On the other hand, if your startup has grown out of that initial phase, getting your startup into an accelerator is the next best thing that can happen to your startup. Accelerators are meant for late-stage startups and help them to grow further.
4. Angel investors – Angel investors are high net individuals who invest mostly in early-stage startups. They can either invest individually or in groups. The token size varies accordingly. Getting investment from the angel investment is tough but once you have made it, getting funds from other investors gets a lot easier. Before contacting angel investors, one has to prepare thoroughly to get in the business.
5. Crowdfunding – Crowdfunding is one of the most popular ways of raising fund today. Your investors are your first customers too, and they open the opportunity to sell more and more product through word of mouth. Apart from that, crowdfunding also helps traditional investors to gauge the popularity of your products and can open your ways for angel investing too.
6. Loans. Debts and Credit cards– Credit cards are the easiest way for getting your funding, but the high interest rates can be a barrier. It is generally not recommended to get the money from the credit card, but if you are making enough money and credit card is just a few time thing, credit cards can prove to be great. On the other hand, business loans are hard to get too unless you don’t have a running account or something huge for the collateral then your chances for the loan might be less.
7. Partnership and licensing – Sometimes it is not good to make a move on the same path. Suppose you have invented something new and your product can be a great hit. You need not follow the traditional way to make and market the product. You can partner with leading manufacturer and sell your product or come to a different agreement. Moreover, this can be the best method if you do not want to face the hardships of a startup.
The options are endless for the right product, and hence a lot depends on the proper planning and implementation of the product. Once your product is out in the market, you should have enough strength and courage to make a dent in the industry. There is a long list of companies that have bootstrapped a long way and did it on their own. Failures are bound in the journey, but one should not lose hope with every setback and should bounce back, bigger and better.