Funding for Startups - The Fuel to Your Fire

"That's the secret. Convince yourself that your startup is investing in, and then when you explain this to investors they'll believe you." -PAUL GRAHAM Founder, Y Combinator

For any budding entrepreneur with an idea to start their enterprise, the biggest challenge is probably arranging the capital to start his business. In a world run by money, you have to spend money to make it. Many business plans have failed to reach its full potential due to the lack of financial backers.

After all, no matter what you do, the end goal is to earn money; to generate revenue and maximize profits.

There are many ways in which entrepreneurs look to get funding for their startups. Depending on the financial status of the entrepreneur, type of startup and amount of capital needed, they may adopt any of the following methods. In addition to traditional ways of Bootstrapping, Selling Assets and Bank Loans, there are also newer and more professional ways like Venture Capital firms, Crowdfunding, and so on. Here are some prominent ways in which you can earn money for your business. 

Bootstrapping

Bootstrapping means that the entrepreneur finances their own business. They use their monetary savings and resources to do business. This is done for small-scale startups and during the initial stages of most startups. Here, the financial side of the startup is also handled by the entrepreneur.

This is less complicated and more flexible as far as the economic side of the business goes. All the monetary transactions are based on personal relationships and are highly flexible. The cost of raising money is also less.

Venture Capitalist

Venture Capital is a dedicated industry which invests in companies with high potential. They are major financial backers for startups and are preferred by small businesses that have already started generating revenue. They invest against equity and usually exit the scene when there is an acquisition or IPO.

Pros of VCs

Venture Capitalis preferred by a large section of entrepreneurs because of the help that they bring to the table. In addition to financial backing, they also provide expert advice and consulting services, mentorship, business evaluation, and guidance. They help the startup to go in the right direction. They can be dedicated companies or subsections of large enterprises with a lot of money to invest in the right places.

 Cons of VCs

 The main negative aspect of VCs is the small wiggling room associated with it and lesser loyalty. VCs look at it purely as a business opportunity and aims to make profits out of their investment in the shortest time possible, usually three to five years. So, the entrepreneurs are usually expected to make compromises and changes to make their business more profitable economically and be flexible with your enterprise. This results in the VCs having a fair share of power which may not be liked by the founder.

 Angel Investors

These are investors with surplus cash and interest to make investments in upcoming companies. Angel investments are a boon for startups, and companies like Google and Alibaba formed with their help.

 These investors can also be a group of individuals. In addition to monetary investment, they may also provide advice, mentor-ship, and other consulting help for your startup.

 Even though the amount of money that they can invest is usually less than that of VCs, they tend to be more open to taking risks and demand less from the company as far as control and flexibility is concerned.

 Business Incubators and Accelerators

 Companies in the initial stage prefer these. These are found in major cities and function with Government, Corporate or Joint Funding. They act as systems which help to nurture and develop startups into a matured enterprise.

 Incubators are more like a continuous system which nurtures a company like a parent does for their offspring, and accelerators help a firm take a big, significant step towards developing itself. However, both terms are usually used interchangeably.

 Most business incubator setups are at a dedicated location and have all the facilities needed to run a business from that place. They run for four to eight months and requires a lot of commitment from the business. These facilities provide them with the much-needed resources, guidance, and exposure to their field for them to succeed in their business.

 Startup Village, AngelPrime, and Villgro are prominent incubators.

 Crowdfunding

 This is a new and prevalent form of accumulating capital for business. In crowdfunding, you accept loans, donations, investments or pre-orders from multiple people, hence the name.

 Here, the entrepreneur puts up a detailed description of his venture on any crowdfunding platform. This brochure will contain information about the business plans, ideas to make profit and expense details. Anyone can access this and fund the business if they like the idea.

 The benefit of Crowdfunding is twofold. In addition to helping you get money for your business, it also helps you to gain popularity and assists product marketing. It also gives the entrepreneur an idea about the possibility of the product being popular with the target audience. It may also attract significant investors and VC firms if the campaign is successful.

However, Crowdfunding is a competitive area, where similar companies may fight for the same piece of cake. Here, you need to have a solid business plan to be on top.

Other ways to find Capital

 There are many other ways by which companies find money for their business. Many governments and private sector organisations offer funds for promising startups in exchange for their services or as a public outreach program. Loans from Banks, Micro-financing and NBFCs are also viable options for capital. There are also various contests for Entrepreneurs which offer prize money that can be used as capital.

 The Value of Money

 Every business idea needs some amount of capital to become a reality. This capital amount depends on the type and duration of business and the expenses involved. Depending on the amount of money required, the method of gaining it may vary.

 In any case, obtaining funds is crucial to starting a business. Every startup needs an initial setup involving technology, raw materials, infrastructure, and human resources. All these needs can be met only with enough money, which is obtained in the form of capital.

The Verdict

Money makes the world go round, and the startup world is no different. Someone who has a brilliant idea cannot bring it to fruition without investing time and money on it. The money part is crucial and is met using different methods of accumulating capital. With increasing risk appetite, there are many methods which an entrepreneur can adopt depending on the amount of capital needed and time duration.

The future is yours, but only if you make a move today!

About Me:

I am a technology enthusiast! Especially when it comes to cutting-edge technologies like Block-chain, Machine Learning, Deep Learning.My enthusiasm has earned me 4 Patents and included me in 'Top 12 influencers in Canada' by Thomson Reuters. If you are looking for sustainable, cost-effective solutions for your business, product or service !Then connect here! Also I am available for Fractional CTO Services! Check benefits of having me on board!