Guest article by Anthony Coggine, HR professional and business writer
Finding funding for your startup can be the most daunting task. In order to launch your company, you’ll need to raise the proper capital. But, where do you find people who are willing to invest in your idea? And, if you are able to secure funding, how do you determine the terms of said funding? How much of your company are you willing to hand over? How much control do you need? This guide attempts to answer these questions for you and help you form a plan of action for your startup’s funding.
There are many paths to funding your startup, but only one is the right one for you. Below are 5 smart startup funding strategies that may work for you:
1. The Self-Funded Startup
You may think that every successful startup courted venture capitalists. We see startups that secure hundreds of millions of dollars from large firms and giant tech companies, but seldom do self-funded startups make the news.
The truth of the matter is that not all companies requires millions of dollars in initial funding. A small online business owner may need only a few thousand dollars to begin their venture. If you’re startup does not require a large office building, proprietary technology, or a massive R&D team to start, then you might not need to sink an exorbitant amount of cash into its first stages. In which case, your own personal funds can launch a new company.
2. The Crowdfunded Startup
If you need a large sum of money, but are still looking to bootstrap your startup, crowdfunding may be a great option for you. Mind you, the projects with the best funding have a great deal of digital marketing and advertising dollars pouring into their crowdfunding campaigns -- so you may need to still make a sizeable personal investment.
3. The Angel-Funded Startup
Perhaps the most alluring of all startup funding strategies. Angel investors truly are miracles. They give you the funds you need to start your business. What do they want in exchange? If they’re a true angel, then very little involvement past the initial investment. Angel investors of this kind usually take the form of family and close friends. Usually, however, the cash investment is low, typically no more than $10,000 to $50,000.
Angel investors outside of family and friends can invest quite a bit more into your business. But, that being said, their terms will be very different. Their involvement with your business could be rather extensive.
4. The Venture Capital Startup
The most impressive funding usually comes from venture capital firms. Attracting these large deals is difficult, and often, you must give up a portion of your company to secure them. By the same token, it is more likely that you’ll receive business coaching and mentorship.
If you’re company needs a large budget for R&D, this may be the only startup funding strategy that works for you. On the other hand, if you wish to have complete control of your startup from start to finish, this funding strategy will absolutely not work for you.
5. The Combination Startup
Often, startups don’t simply go to one funding strategy. Entrepreneurs will fund their projects with personal funds, money from family and friends, and acquired funding. You aren’t limited to just one strategy. In the very early stages of your company, you may use only personal funds. As things get further along, you may utilize crowdfunding platforms like Kickstarter and Fundable to reach new goals. Strategies change as your business grows.
Arriving at the right startup funding strategy can seem impossible. Weighing your options will greatly alleviate the stress of securing funding. Whether you chose funding your project yourself, crowdfunding your project, or turning to angel investors or venture capitalists, you should stick to what you feel comfortable with.
While there’s no way of knowing how interested others will be investing in your business, it’s important to retain your enthusiasm for your idea -- and you can retain that enthusiasm only if you proceed with what you believe is right for your startup. Examine your funding options, choose the best fit for you, and secure your funding in the way you see as best.