Would you invest in something that isn’t credible?
Yeah, I guessed it right.
Well, this is what most of the investors and banks or financial institutions think.
To finance a startup, it becomes a crucial hesitation between what if it doesn’t bloom and the money is lost?
Credibility, credit ratings, uncertainty, poor credibility of the borrower, these are some reasons why a startup can have problems when searching for investors.
A well-established organization provides with perks that a startup cannot, for the longest time. However, this doesn’t mean you cannot take the plunge of starting something new.
Always remember that all these well-known companies were also a startup once!
In case you are blank and have no idea where to start from, this piece will prove to be your head start.
Listed below are ways or sources from which the initial funding can be availed so as to at least establish the company’s foundation.
Table of Contents
Seed Funding
As the name suggests, ‘seed’ means initial or the beginning of something big and thus this source refers to the early investment in the business.
This is the money that can be or is used for market/product research and development.
An investor invests in this startup in return for equity or some convertible note stake.
Seed fund options include money borrowed from friends and family, angel funding, crowdfunding, to name a few.
Angel Funding
Also known as seed/private/informal investor, angel funding is similar to seed funding.
This also refers to early-stage investment where the individual provides capital in exchange for equity. Usually, this capital given is in the form of own funds.
There’s no fixed amount of minimum investment though the sum ranges from a few thousand to a few million.
Angel funds bear high risks subject to dilution and require a high return on investments.
Crowdfunding
This refers to the practice of funding a project or venture by raising small amounts from a larger number of people through the internet.
Generally, crowdfunding is of two types – Reward funding and Equity funding.
Rewarding funding doesn’t rely on location. The distance between the creator and the seller is of about 3000 miles and the founders are hopeful enough of high returns. This sometimes results in revising the expectations when the desired returns aren’t met.
Equity funding, on the other hand, is a collective effort of individuals to support the project someone else has initiated. It involves the potential of high returns on investment.
Bootstrapping
This is the process of self-financing. With little or no outside cash and with no external help, bootstrapping is using only existing resources such as personal savings and personal premises to grow or start a business.
You won’t reach your desired destination unless you begin somewhere. It isn’t impossible to run and manage a startup, just that it involves an encounter with a few hurdles that if thought of strategically can be a cakewalk.
Not all new stage businesses are uncertain, some carry crazy potentials to rise and raise above. This potential is noticed by the investors by observing the team spirit and the concept idea. Thus, make sure to work on the outline and the blueprint of your organization so that it is effective enough to attract investments.
