Successful business development depends on many factors. You can come up with a unique idea, analyze the market and competitors, draw up a business plan, etc. But still, there is always a chance of failure. It is impossible to calculate and think about everything in advance. A business leader must be able to effectively and quickly solve new problems and challenges, make complex decisions, and feel changing trends with funds for a startup.
The next problem that a startup leader must solve is finding funding. Indeed, the lack of funds is the main reason for the closure of startups. Don’t you want to replenish the sad statistics? Then let’s look at effective methods for raising funds to work and promote your project.
Ask family members or friends
The method is familiar to many entrepreneurs – those who received funds for their business from parents, friends, or acquaintances. Such a method has an important advantage. You can easily get funding because you communicate with close people who are often uncomfortable with rejecting you. But at the same time, you risk spoiling relationships with loved ones if the project does not live up to your expectations. In order not to lose close friends or relatives, immediately discuss and discuss all issues, including different scenarios for the development of events. Such an approach will help you avoid an unpleasant situation if your startup fails.
Fundraising on a crowdfunding platform- funds for a startup
Such a method is popular among creative startups and social projects. Its essence lies in the fact that a large number of small investors who are interested in your project finances the project. Investors invest their funds for future rewards. This is a finished product, a percentage of future profits, an exclusive product, etc. You can also set the level of funding/reward. The more the investor invests his funds, the more bonuses he’ll receive, etc.
In recent years, crowdfunding sites have become very popular. Various professional platforms allow you to post a description of a startup and organize fundraising. Crowdfunding is the best solution for small startups. Social and charitable initiatives receive good fees. Creative projects are also gaining popularity. In America and Europe, the most popular areas are medicine, biotechnology, and robotics. However, this may be another area. The author of the project can correctly present the idea and interest sponsors. People are ready to support unique, vibrant projects with a clear and understandable idea.
What are the benefits of crowdfunding for funds for a startup?
Crowdfunding has several advantages over other funding methods:
- Fast fundraising. This usually happens from 10 days to 2 months
- Successful projects receive wide publicity. You simultaneously find investors, potential partners, and clients
- Launching a project on a crowdfunding site is an excellent test of the idea for strength. You’ll be able to assess the level of demand and interest before spending real money on implementation. In fact, you reduce the risks of project failure and check its feasibility
- Crowdfunding is a chance for start-up entrepreneurs to start their own business with minimal risks and without a budget
Help from Business Angels- funds for a startup
A business angel is an individual who invests in promising startups at the initial stage of their development. In addition to financial assistance, business angels help to actively develop the project and transfer useful contacts and management skills. For such help, you’ll have to share part of the project. Most often, it’s 10-30%. As a rule, business angels are experienced entrepreneurs, top managers of large companies, and people who have built successful careers. So working with such experienced people increases your chances of success. Where can you find business angels? They attend thematic exhibitions and events, communicate on closed forums, chat rooms, etc.
Venture financing of the project
What is venture capital funding for a startup? This is the provision of funds to young projects in exchange for a share in them. At its core, the scheme is very similar to the help of business angels. However, there is an important difference here. Venture capital funds finance yield prospects, while business angels are usually people and ideas. Therefore, business angels willingly enter the project already at the initial stage. While venture funds consider projects at later stages. For example, when scaling an already operating business.
Such a tool allows the best projects to receive funding. Usually, grants are directed to the development of certain industries or technological areas. To get it, you need to win the competition, and then strictly follow the program for using the funding received. The advantage of such financing is that you’ll not need to give any shares of the business, grants, or interest for their use. The main drawback is that the flexibility of the project is reduced since it’ll not be possible to change the direction of its development.
All grants can be divided into two groups:
This method of financing is gaining popularity in recent years. Accelerators are companies. They support startups. They offer an educational program. It lasts from 2 to 6 months and allows you to establish a business model or find business partners. The accelerator buys out a share of the project’s business and sells it later. The disadvantage of such financing is that some projects take 20-30 or even 50% of the business share. This may just ruin the startup in the future.