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.
Conclusion
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.
