Great, you have a groundbreaking startup idea. Now what? No matter how groundbreaking your idea is, it won’t reach the public if you have no funding to start with. So one of the main things to prioritize is how to get funding for your startup.
If you don’t have a finance background, you probably don’t know where to start. Don’t beat yourself up. Most don’t, and that’s fine. Here are ways how to turn your vision into reality:
Funding from Friends and Family
Don’t hesitate to pitch your startup idea to your friend or family. Besides, you can take it as verification if your idea will indeed sell. So if you manage to entice those who are closest to you purely because of your goals, then you’re on the right track. Whether you borrow money from them or ask them to invest in your dreams, it’s a great help for your company.
However, there’s always the downside of borrowing money from your close relationships. We can all agree that money is one of the quickest ways to lose friends and affect familial relationships. So even though you trust them, make sure to plan your approach carefully.
Accelerator or Incubator
An accelerator and incubator business program exist intends to guide startups. It also advances their business models and strategies for the better. The main goal of such programs is to polish your startup and make it appear enticing to investors.
Most of these programs are situated near colleges that have strong business backgrounds. It’s a place where fresh business ideas can get a great start while being exposed to amazing connections. The downside to both business programs is their focus on tech-heavy startup ideas. So if your business is the opposite, you might have some difficulties finding something that works for you.
An accelerator advances the growth of a company that has a business model and idea in place. Accelerator business programs help a startups’ foundation and push them forward to key influencers or investors. Such programs operate on a set timeframe that usually lasts up to three to four months.
During the period, startups build their business with the accelerator’s provided capital and mentor’s support. In the end, startups will have the opportunity to pitch their business to investors. Usually, accelerators use a traditional and formal business model for the application process to their program. Interested individuals must apply for a slot.
Before applying, take note that such programs are highly competitive. So expect the top startup to be prioritized. So make sure to polish your business idea and make it scalable and investable. Overall, you should highlight points that show your startup can grow rapidly within a tight timeframe.
An incubator supports startups that are entering the beginning stages of building their business model. Such startups have an idea for the marketplace but have no business model for transforming the idea into reality. Unlike accelerators that have a specific timeframe, an incubator business program is open-ended.
This business program focuses more on building a startup with longevity than on how fast your company can grow. Usually, incubators mentor startups for one year and a half. So, incubators invest time and resources to help advance local startups. Generally, they create jobs or find ways to license intellectual property.
In short, such programs do not have the pressure to deliver startups that can grow fast. Instead, like its name, incubators focus on fostering a local startup and supporting its growth. So for the application process, even the less scalable startup idea is considered a great candidate.
Small Business Loan
Banks offer loans specifically for small businesses. However, they tend to be careful when lending money to small companies. So research some alternative lending companies that are available within your area.
However, the downside of reaching out to alternative lending companies might be predatory. So make sure to research with caution as you process. As much as possible, know the company you’re borrowing from.
You can also search your local area if they have established an organization or administration to help startups. For example, in the U.S., the Small Business Administration can help you get cash infusions without standard backup requirements.
Trading Equity or Skills
Another idea on how to get funding for your startup is through trading. You can exchange your services with another acquaintance that does freelancing on the side. For example, if you want to create a web design with on-point branding, you can barter your area of expertise.
You can also search for startups that can trade with you. This approach will not only lessen your funding needs, but you can also network along the way. However, not everyone will be willing to trade skills or equity. So don’t be offended if they refuse your offer.
Venture Capital Investors
Some professional investors invest institutional money in qualified startups. For example, Accel Partners usually invests in scalable startups with a proven business model. Create a pitch that has a warm introduction and highlights points about why it’s worthy of investment.
Angel Investor Groups
Most areas in the metropolitan area have groups of individuals with a high net-worth interested in supporting startup ideas. Usually, angel investors are willing to fund millions of dollars to a startup that caught their interest.
So if you’re interested in gambling on this approach, you can use online platforms to reach them. For example, you can use Gust or find your angel investor through local networking.
If you have a fantastic startup idea and have excellent social media marketing skills, you can start a crowdfunding campaign. However, this approach is highly competitive as other businesses also seek to fund their companies.
So the key to making this work is to excite your startup idea and generate a lot of buzzes. However, as you create some noise, make sure not to oversell yourself and frustrate interested backers. So to avoid such animosity, polish your crowdfunding campaign.
Small Business Grant
Small Business Administration (SBA) organizations offer grants to small businesses run by minorities, veterans, or women. So if you fit into the category, it’s worth giving it a try. However, if you’re able to apply for grant funding, double-check the stipulations. You don’t want to blindly accept a grant that requires you to pay the money back.
Even though you have an outstanding startup idea, not all have the opportunity to appear on Shark Tank. However, there may be local contests around your area that run a local Shark Tank competition. Since it’s locally focused, you may have less competition.
As you join contests, it’s a great way to practice your pitch and polish it for other investors. The only loss in this approach is your time. However, it’s worth it as you get to bring awareness to your business.
One of the most common ways how to get funding for your startup is through bootstrapping. Yes, it means you’ll fund your own business. This money may come from credit cards, personal savings, or mortgages. However, if the startup doesn’t succeed, you may end up with a debt that you need to manage.
In the end, there are lots of ways how to get funding for your startup. However, for a more foolproof approach, why not try at least three or more on this list of How to Get Funding For Your Startup just to have a backup plan?