5 Ideas for Funding Your Startup

5 Ideas for Funding Your Startup

Raising money is the toughest hurdle any entrepreneur has to face.

As soon as you mention the words “money” and “startup” in the same sentence, doors slam in your face. Acquaintances dash across the street to avoid having to say hello to you. Even bankers look at you with disdain.

Remember, though, that your refusal to give up can make all the difference. Thomas Edison once said it this way. “Many of life’s failures are people who did not realize how close they were to success when they gave up.”

With sufficient funding, you’ll be able to institute effective marketing strategies, develop new products, hire employees and pay yourself.

If you find yourself stalling when you think about raising money for your startup, consider the following suggestions.


1. Bootstrap Your Startup for Greater Control

Bootstrapping means that you use your own funds to start your business.

An advantage to bootstrapping is that you’ll retain more equity in your own company. You’ll also be more inclined to work hard in your business. You’ll be frugal with whatever funding you do have.

Not only that, but by investing your own money you’re demonstrating to the world that you believe in your company.

The best way to get started with bootstrapping your startup is to begin a disciplined practice early on of saving money for the express purpose of starting your business. This mindset of saving will spill over into your business once it gets rolling, making your company leaner and better able to compete.

Eventually, you just might find that prospective investors will be more interested in your business because you started it with your own money.


2. Turn to Family and Friends

If your family and friends have the resources and are willing to help you, you’re a very lucky entrepreneur indeed. Their confidence in you and your products and services is another demonstration to the world that your business is every bit as good as you say it is, and their faith in you can act as a magnet for prospective investors outside of that close-knit circle.

One thing to watch out for, though, is that when your family and friends invest their money in your startup they could expect to have more of a say than you would like in how you run your business.

In order to avoid this turn of events, set up investments from family members and friends as long-term loans with low interest rates.


3. Look into Business Grants or Loans

Because small businesses are a boon to the economy, governments around the world have established grants and loans for entrepreneurs.

The main benefits of government grants are that you do not give up any equity in your business when you accept one and, unlike a loan, a grant does not need to be repaid. However, grants can be difficult to find and so narrowly targeted that only a handful of businesses will qualify, and the competition for each grant can be fierce.

Like grants, small business loans can also be difficult to obtain, but you can improve your odds of funding your startup with a loan by approaching the lender as if you were applying for a job with them, persuading them that their investment in your startup will benefit them.

If you do your homework, you can come away with a decent interest rate as well as the funding you need to boost your startup to the next level. Often, especially with government loans for small business, the repayment periods are long and the interest rates are fair.


4. Take It to the Crowd

Present your business idea to a crowdfunding site and give ordinary people an opportunity to take a chance on your business.

With debt crowdfunding, investors get their money back with interest. With other types of crowdfunding people either pledge to purchase your first product or simply donate their money in a good-hearted gesture of faith in your eventual success. At the very least, a crowdfunding campaign can give you a way to gauge how your product will be received in the market.


5. Pray for an Angel

Angel investors are those who specialize in funding startups. Often, all they want in return is to be involved in the day-to-day running of the business. In other words, they either want a seat on your board or they want to be on your management team.

Ideally, angel investors are well connected individuals who act as your strategic partners, reaching out to their contacts to improve your product’s visibility. If you’re lucky enough to find an angel investor, your business is off to a great start.