A startup is not only a business. It's a dream project. In each year, entrepreneurs around the world begin their startups with a lot of hope and expectations. Unfortunately, most of them fail. The higher failure rate does not indicate bad startup planning. One of the common reasons for startup failure is the lack of sufficient funding. Most enterprises cannot be implemented due to constant funding.
As a result, some great business ideas get lost prematurely. As a founder of a startup, you should have a deep knowledge of financial management. You have to find out the sources of funding for your startup. In this article, we have covered some funding opportunities for startups. We have gathered these ideas from the opinions of experts who have observed the funding process of the leading European startup. Keep reading.
What is startup funding?
Simply, it is the amount of money you need to start a business. Startup finding is also called startup capital. The source of startup funding may vary. Each entrepreneur has to ensure startup funding because it is extremely crucial to turn a good idea into an actual business. Read the following portions of the post to gather some excellent startup funding ideas.
Proven funding opportunities for startups
We are sharing with you some proven sources of startup funding most entrepreneurs went through.
Self-funding is like oiling your own machine. When you think about startup funding, your personal savings come first to launch the business. As a starter, you need to have some savings to support the business for at least the first few months. Self-funding is crucial for getting further external funding as well because it creates trust among investors to check out. It also helps to be highly committed to your startup.
Some business models require massive investment in the primary stage, where self-funding may seem an ineffective idea. But, it is still essential to have a portion of your own capital.
Family and friends
Friends and family are not only for fun. They are your first assistants in every stage of your life. Like sharing your joys and sorrow, you can share your startup ideas with them. When you need external funding sources, your inner circle is highly recommended to discuss the matter. In short, ask for some funding from your friends and family. These people are your first-degree network. But, some entrepreneurs still find it difficult to seek family support.
Usually, it depends on the relationship between you and them. A study finds that about 38% of entrepreneurs got their startup funding from their families. A positive side of getting funds from them is that they help you financially and remain as a supportive companion.
Crowdfunding is a good approach to funding your startup. In the age of the internet, people often share their personal and professional problems on online platforms, particularly on social media, to find out a solution. Crowdfunding is the way of sharing your new business idea and challenges with an online investor community.
When you share your business model and its potentiality, you likely will get support and donations from intending investors if the idea is truly eligible.
The government from every country is committed to developing the national economy and people’s way of life. This is why the government loan program is a common term across the world. They issue the loan to encourage young entrepreneurs who have a unique and innovative business idea. It is actually a nationwide development in the long run. Unfortunately, a huge number of entrepreneurs are unaware of them or don’t know how to apply for this fund.
If you are qualified, you will likely get the loan by following a few steps. The interest rate is even less than the regular loan. Based on the economic state and finance, the government loan scheme may vary from country to country.
A bank loan is a very common fund to boost your startup. Though it looks appealing, a bank loan can be hard to get. You have to be ready to face some complications before applying for a bank loan. In general, the most bank will deny your startup funding request. Banks want to ensure that you have a clean and good credit history or some assets to mortgage to the bank. This is why a bank loan may not be a good idea if you are entirely new in a business. But, bank loans are excellent if you want to expand your existing business or grow your profit level. In short, you have a bank loan as working capital.
Investors are one of the quickest sources of startup funding. They invest capital as a partner of a business and with the expectation of profit. This is a task with high risk. But, a wise investor never pours his money here and there. They will analyze your business models from different angles and admire your idea if it seems low risk and highly profitable. Every investor wants to ensure that you will utilize the money wisely.
Though investors provide instant cash, dealing with them can be very risky and stressful. You must fulfill their expectation within a certain period. Besides, discovering the right investor for your business can be hard work because most of them usually avoid a very new business.
This way of startup funding is less risky, but it is very competitive. The organizers arrange these contests to discover innovative entrepreneurs. The contest winner must have a unique product or a highly profitable business plan. Gathering startup funding from contests has several benefits. A winner does not only get funding for business but also has massive media coverage. This is an excellent way of building your personal brand before you launch your startup. But, your plan has to beat all other competitors to win the contest.
Growing your startup absolutely requires outside funding. But, if you have an excellent innovative idea, be confident to get the fund.