A recent survey found that almost 94% of new businesses/startups fail during their first year of operation. Lack of funding is among the most frequent causes.
Money is the lifeblood of any business. Global venture capital reached $437 billion in the third quarter of 2021, rising from over $284 billion in 2020.
With an average deal size of $25 million globally, startups worldwide profit from this inflow of funding. In 2021, investors contributed $641 billion to startups globally.
A brief process of funding your startup
1.Determine how much money you’ll need.
Before submitting applications or approaching your network, determine how much money you’ll need.
2.Create your business plan.
Many financiers and potential investors will require a business plan which gives an indication of your plans, costings, expected profits, timelines and more.
3. Gathering necessary documents is also essential.
These can include bank statements, business financial statements, tax returns for your firm and yourself tax returns, and any business-related legal documents.
4. Select the appropriate funding source for you.
Make sure you do your homework to determine which is ideal for your business. We’ll delve into the different kinds of funding for startups and the differences among all the available financing options.
Here are a few startup funding examples and how you might want to use them for securing the top buck!
“Bootstrapping” is among the most popular methods for starting and running your startup. To put it simply, you finance your business yourself.
These funds could come from your savings, low- or no-interest credit cards, or home equity loans and mortgages. This can be a fantastic option when your startup will need money fast to pay daily expenses. But also remember, if you sign up for a line of credit, you must make minimum monthly payments with interest on time.
Angel investing involves the exchange of capital for an ownership interest in your firm. You’ll boost your chances of success but give up some of the control of your company in the process.
Your next move is to get their attention if you still think this trade-off is worthwhile. Angel Investors usually look out for these factors in your startup:
- The excellence, zeal, devotion, and moral character of the founders.
- The market opportunity being pursued and the company’s potential to grow very big are both being looked at.
- A well-thought-out company concept and any preliminary signs that the idea is taking off.
- Engaging intellectual property or technology.
- A reasonable valuation with reasonable terms.
- Whether it would be feasible to raise subsequent stages of startup capital if progress was made.
Crowdfunding may be a possibility for you if you have a sizzling concept and are skilled at using social networks. Since many businesses target crowdfunding, creating a lot of buzz is necessary to get through the background noise.
Despite having a few downsides, crowdfunding is always a good shot at securing funds for your startup operations. Here are some major crowdfunding platforms:
First and foremost, remember that not every startup needs venture capital. You should be aware from the outset that venture capitalists seek out technology-driven businesses with a high potential for growth in industries like information technology, communications, and biotechnology.
Additionally, venture capitalists anticipate a significant return on their investment, which is frequently realized after the company begins offering shares to the public. Make sure to look for investors who will benefit your company with relevant experience and knowledge.
Grants and subsidies from the government.
It sounds like a dream to receive free funding for your company, doesn’t it? It doesn’t have to be with government loans and grants.
However, many subsidies are only available to specific sectors of the economy or population. This implies that some might only be for research, technology, or health companies. Others might be initiatives for female-owned businesses.