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What’s the most basic ingredient needed for a business to thrive and flourish? You can have all the enthusiasm in the world, and the greatest work ethic known to humanity, but that won’t get you anywhere unless you have the one thing that makes the world go around – money.
That’s why many startups fail to even get off the ground. A good idea is just that - an idea - unless it has the necessary capital behind it to turn it into a business.
How then can you get the financial backing that you need to get your startup off the ground? There are plenty of ways, all of which vary in success levels and risk. Here are some of them.
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Bootstrapping your business
Ever heard of that phrase ‘pull yourself up by your bootstraps’? It’s a common phrase heard mainly in US political discourse, and it essentially means that you’ve elevated yourself to a certain point through hard graft and without any major outside help.
When it comes to funding a business, the term bootstrapping means finding a way which doesn’t rely on significant cash injections. It might be using your own savings or money or going cap in hand to friend or relatives for small donations which add up to give you just about enough capital to get your startup off the ground.
Friends and family can be a good source of funding. They are likely to believe and trust in you and what you are doing. They can also be more flexible when it comes to loans than external sources might be. They might not even ask for repayment, just a share of the success of the business.
By approaching the right friend or family members or dipping into your pockets yourself, you might find you can scramble together enough cash to get your business operating.
Crowdfunding
Crowdfunding is becoming an increasingly popular way for entrepreneurs to receive money to help grow their business from those who believe in it. You can pitch your startup or business idea to complete strangers online, and if they like what they hear, or it chimes with them on a personal level, they can donate money towards the course.
There are lots of crowdfunding platforms out there, but among the most popular are the likes of Kickstarter, Patreon and GoFundMe. This method of raising capital often works best if you can connect with people on a personal level or offer them a product that doesn’t exist anywhere else.
That’s why the majority of the top 10 business crowdfunding campaigns of all time are all technology startups. The Pebble eWatch raised over $10 million in seven days to bring the first affordable smartwatch onto the market, The Dash secured nearly $4 million in funding inside of two months to start production of the world’s first wireless smart in-ear headphones and Formlabs campaign to bring affordable 3D printing to the masses raised just shy of $3 million with anyone who pledged $2,299 or more receiving a printer in the Spring of 2013.
Angel Investors
Angel investors are already successful entrepreneurs who are willing to stick some of their vast fortunes into new startups in an attempt to help get a business off the ground – generally in exchange for a percentage of the company or repayment at a later date.
The benefits that an angel investor can bring to a startup don’t just start and end with the finances. You also get the expertise and knowledge of an investor with a proven track record of building a business from scratch, giving you an invaluable source of information and inspiration.
If you’re a budding technology company, for example, who better to have as an angel investor pumping not only cash but also ideas into your startup than someone like Bill Gates? That makes angel investing one of the most sought-after types of funding.
Venture capitalists
Venture capitalists are rather like angel investors in that they are successful entrepreneurs looking to put money into the next big thing. The difference is that these are funds managed by professionals whose overriding concern is making money.
They invest in a solid business rather than equity. Once your business has grown to the point that they can make a significant profit by selling their shares, then they’ll pull out and look for another investment.
While you’ll be gaining the expertise of a significant number of investors, you’ll also likely be surrendering control of a large portion of your business as the venture capitalists will want to do whatever it takes to increase the value of their holding. Having said that, the desire for success will often mean that they have the drive and determination to push your business onto the highest level.
Take out a loan
Borrowing money from a lending institute can help you get your business off the ground. A bank might be willing to support a startup with a strong business plan in the form of a business loan, but you’ll need to ensure that you have a watertight case as to why you should receive funding and that the company is going to thrive.
Alternatively, and more riskily, you could look at a personal loan. These are smaller amounts, normally up to around $15,000 which would be held against your name and could be used to get your startup off the ground. You can click here to find out more about this quick and relatively straightforward way to access funds.
Win financial backing through contests
Want some real out of the box thinking? Then how about entering contests in an attempt to win financial backing? You might be familiar with reality television programs such as Shark Tank in which entrepreneurs bid for investment in their companies from a set of successful businesspeople.
These competitions aren’t just restricted to television. Lots of established businesses now run contests in which they’ll ask startups to battle it out for funding by pitching or showcasing their business. It’s a unique but increasingly popular way of securing the capital needed to get your startup moving.