FUNDRAISING

Startups do more than coffee and hard work. Every business needs funding, and this is a special point for startups. Proper early-stage startup funding can make the difference between hiring a key employee or losing much-needed talent.

Finding startup funding can seem like a hopeless and pointless task. But with the right knowledge, you can search in the right places to get the right kind of funding and get your startup exactly where you want it.

Types of Financing Startups and Which Companies Need Them:

There are many types of startup financing options. While every type of financing will make you money, no two are the same. Think about your current situation as you read the following descriptions to determine what type of startup funding might be best for you.

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1.????Small Business Loans:

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When it comes to sources of financing, small business loans are the group's bread and butter. Small business loans are similar to personal loans, which means that a fixed amount of financing is approved with an interest rate attached.

You can get a small business loan through banks and other financial institutions, many of which can be found through the Small Business Administration (SBA). Keep in mind that just like a personal loan, you will need strong business credit. This will help you get a bigger loan at a lower interest rate and will reduce the amount of loan costs in general.

Perfect for: Any company with decent credit and responsible spending habits can be a great candidate for a small business loan. Make sure you have a plan for the money before you get it, as wasting a business loan can be costly. It's also unlikely that a second loan will be approved immediately after the first one, so again: spend the first loan wisely.

2.????Funding Rounds:

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Many startups go through multiple funding rounds, which are periods during which companies seek different types of funding. Funding rounds are grouped into three groups: Series A financing, Series B, and Series C financing, each corresponding to the stage of the company. In each funding round, money is usually exchanged for company shares, which means that investors expect a return on their investment.

Funding rounds may be necessary to start your own business, invest in core marketing, or help put your product on the shelves.

Best for: Many companies with seed capital, and even some without it, will go through funding rounds. If you're comfortable replacing part-ownership of your business with the necessary financing and you have a solid business plan, you may be ready for Series A financing.

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3.????Venture Capitalist:

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Venture capital (VC) is a type of private investor that funds promising start-ups. Venture capitalists are often members of a larger venture capital firm. These companies often have boards of directors that vote on which companies to endorse.

If the company is selected by the venture capital firm, venture capital will contact you to make a financing offer. Traditionally, venture capitalists buy shares in a company, which means they can expect payment in one form or another, as long as the company is successful. But, if their business doesn't work out, the venture capital has basically made a bad investment and won't get anything in return.

Perfect for: If your startup is off-the-shelf and has minimal viable products, you might be a good candidate for venture capital. Venture capitalists are entrepreneurs, but they are not in the business of taking undue risks. To get venture capital investments, startups must be ready to offer their services or products to the masses, but they lack the funds to do so.

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4.????Angel Investors:

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Angel investors are people who have the money to support startups and aspiring entrepreneurs. Unlike venture capitalists, angel investors generally stand on their own and do not participate in a board of directors or corporation. But, like venture capitalists, angel investors generally expect a return on their investment, because they have purchased some type of stock or real estate from your company.

Like venture capitalists, angel investors can be left in a tailspin in the event of a bad investment. This makes it a safer option than traditional business loans. But remember: you are selling shares in exchange for financing. This means that you may no longer have complete control over your business as you will have to respond to the demands of your investor.

Best for: If you are looking to attract angel investors, you will need to make sure that your business is organized and has a plan going forward. Angel investors are generally considered early-stage financing, which means that they provide financing to companies at an early stage. This makes angel investors a perfect match for companies with more than just an idea.

But it is difficult to find angel investors, such as unicorns, and they are not always as regulated or regulated as a venture capital firm. Angel investors can be friends or family members. This makes them a wild card. If you know someone who has money, they may be a potential angel investor.

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5.????Crowdfunding:

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For many people who have a business idea and have little or no funding, crowdfunding is the way to go. Crowdfunding is a type of funding in which private backers (individual investors) buy your product or service before it becomes available. This gives business owners who have an idea the opportunity to fund their project in exchange for providing that product or service to their sponsors.

Crowdfunding can be achieved by hosting local or digital events, but it is more commonly achieved through crowdfunding platforms, such as Kickstarter or Indiegogo. These platforms allow users to easily explore thousands of ideas and endorse ideas that interest them.

Perfect For: If you have a consumer-oriented product or service, you could be a strong candidate for crowdfunding. You'll want to have a plan for using the money and, most importantly, a detailed map of the money needed and how to use it. On many platforms, including Kickstarter, you need to set funding goals or overall goals to provide transparency to investors.

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6.????Equity Crowdfunding:

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Equity Crowdfunding is similar to crowdfunding in that you seek funding from a large group of people. Unlike traditional crowdfunding, you don't sell your product or service. Stock crowdfunding is the sale of your company's shares. This means that you are essentially selling several stakes in your company, through shares, revenue sharing, etc.

Ideal for: Since equity crowdfunding involves the sale of equity and is not a viable product or service, equity crowdfunding may be more appropriate for an early-stage business. If you are comfortable selling stocks and have a solid business idea, equity crowdfunding can be a great way to start your business.

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7.????Incubators:

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A business incubator, also known as an accelerator program, is a group dedicated to helping ambitious companies take off. Incubators are usually set up and funded by other companies that want to help startups reach their full potential. Incubators often provide a space for companies to work, financial assistance, and even mentorship.

There are many incubator organizations available, so be sure to research more about local and international options if you're interested.

Best for: Almost any startup or entrepreneur can benefit from an incubator. Those with a solid business idea and their team will get the most out of it, but even early-stage startups that are barely up and running can benefit greatly from the right incubator.