Over 90% of startups fail in the first year of the starting 38% are due to a lack of funding sources funding sources, which accounts for the majority of failure rates.
Statistics here outlook the importance of financing for startups. These modern times have blessed us with a wealth of options and the luxury of choosing the best one that suits us. Investors may also find your business worth interesting if you have extraordinary ideas for startups. In any case, you need money to succeed in your business, but the real challenge is where and how to get the money you need.
To help you answer these questions, we bring you this detailed guide to finding startup funding sources.
Why do you need funds?
Finding funding sources is essential to the growth of your startup. Relying on savings or liquidating existing assets is also not the best option. The main reasons for needing funding are:
Working Capital
If you do not have enough capital to cover the required operating costs, your business may face a serious financial crisis. Loans can cover short-term financing issues, but they are not a permanent solution and impact scalability.
Buying Assets
You need money to float and upgrade your ship. Investment is needed to keep up with growing technological advances. This is critical to the growth of your business.
Debt Restructuring
In the early stages of a startup, you may need to borrow or ask for capital to grow your business. This debt can complicate your financial plan. Finding investors and other funding sources can greatly help reduce your financial burden.
The most common Funding Sources
1. Startup Bootstrap
Bootstrap, also known as self-funding, is probably the most well-known type of funding in the early stages of the startup. When starting a startup, it is difficult to find funding sources without showing some traction and growth potential.
Consequently, you dip into your savings or borrow money from friends and family to raise the capital you need.
2. Crowdfunding
Crowdfunding accepts loans, donations, pre-orders, or investments from multiple people at the same time by posting a detailed description of your business on the crowdfunding platform.
The good thing about crowdfunding is that it helps market your products and allows the general public to fund potential ideas. However, don’t forget to always present a clear picture of your business so that the public can understand your business.
3. Angel Investors
Angel investors are wealthy individuals who enjoy investing in promising start-ups. Angel investors have helped Alibaba, Google, and many other large corporations in the early stages of growth.
Angel investors may work in groups, the screen offers, and find viable investment options. They give a fair amount of fairness to a company’s investment execution and prefer to take risks to achieve higher returns.
4. Venture Capitalists
Venture capitalists or venture capital companies are individuals who specialize in managing the funds to invest in startups with great potential. They provide mentoring expertise and assess the growth of the company.
Venture capital investment is ideal for companies that have passed the seed stage and are already generating revenue. If you have a fast-growing company with an exit strategy, you can go for this investment strategy.
5. Incubator and Accelerator Program
The Incubator and Accelerator Program helps hundreds of startups build a foothold in the market. This is a great funding option for early-stage startups.
Incubators and accelerators are similar in terms of the services they provide. However, accelerators can help startups make a big leap toward their business goals.
Bottom line —
Debt financing is considered a downturn in financial planning but can be used when immediate financing is required. So, there is nothing right or wrong. It’s all up to you.
Ready to grow your business? Speak to our growth experts and learn how to expand your customer base, drive revenue growth, and optimize your business operations.
