Suppose you’ve got a top-notch revolutionizing startup idea, now what? Funding! Even if you were to invent some automated perpetual motion money-making machine that prints currencies constantly without your say – assuming the impossible that you manage to violate the second law of thermodynamics – then even you’d have to seek for funding options, lest how would you build that dough printer?
A reliable funding source is as important as having the idea itself. Many business startups fail to find investors because they don’t have any knowledge of whether they really exist, and if they do, where and how to find them. Hence, they struggle to make progress, achieve traction, and hire top-tier partners.
So, if you have a startup idea and looking for the best funding options, then here are the 5 reliable funding sources for your business startup:
1. Startup Accelerators
Startup accelerators are known to support businesses that show promising growth and a result-oriented approach. They help startups through mentorship programs, entrepreneurial education, corporate seminars, and of course, financing.
There are many accelerators such as YCombinator, 500 Startups, Techstars, and many more who have helped myriad startups thrive by financing exorbitant investments to produce million-dollar successful exits.
These programs are cohort-based and fixed term, and also provide opportunities for wiring connections between young entrepreneurs and renowned mentors and investors. Many worthy businesses have had success through accelerators such as Uber, Airbnb, Reddit, and Stripe. Hence, it can be a good shot to play.
A lot of times it happens that startups require heavy investment for which investors might be reluctant to provide a huge capital at the early stage. In such a case, crowdfunding comes handy to raise your required figures.
In crowdfunding, a large group of people gathers investments from numerous investors, and each individual brings funding from different sources to add up to make the required capital to meet the target. Sources can be charities, campaigns, or companies with a low budget yet high aims.
According to stats, the crowdfunding industry is estimated to raise more than $300 billion by 2025. Moreover, now it’s easy to compare top online fundraising and crowdfunding platforms to hit your targeted startup amount and lift your early-stage business off the ground.
3. Angel Investors
“Angel investors” is truly a perfect word to ascribe to funders; they really are angles because they give you what you need to make your business come true: the funding. Angel investors invest their money in your startup to multiply their money by your idea.
Angel investors are seasoned entrepreneurs who are willing to lift startups by raising their capital from a crunch out of their net-worth. In return, they demand equity ownership in the company as an investment favor. Usually, they spend around $25,000 to $100,000 on a startup, which might escalate depending on the return-on-investment. Moreover, funding via this route might be time-consuming as it includes formal documentations, pitch desks, and some series of payment rounds.
Before finalizing on an investor, it’s good to see if that’s really an angel. They ought to be recognized by the Securities Exchange Commission, have a net worth of at least a million-dollar, and make $200,000 a year. These are some of the qualities of a true angel investor.
4. Private Equity Firms
Private equity firms provide financial assistance by investing in the private equity of business startups or companies already on the run to receive a periodic management fee and the shared interest in the profit earned by the beneficiaries.
Most startup founders find this option useful because equity firms often bring along operating partners who are experienced and dedicated to working with business startups to increase their worth. Sometimes equity firms merge with other privately-held investment companies to reduce the risk or to raise heavy fund amounts.
Top private equity firms invest through various associated strategies like growth capital, venture capital, and leveraged buyout. The ultimate purpose is to provide opportunities to individuals with novel startup ideas and attain a positive profit margin as a return on investment. They also multiply their money by selling the portfolio of companies – carried interest – under their investment-pact.
5. Government Funding Programs
There are numerous government funding programs as well that provide support and monetary assistance to talented candidates with promising startup ideas. The organizations also provide funding as loans with less interest rate.
The organizations such as Small Business Lending Fund, Small Business Administration, etc. receive myriad applications from deserving individuals; hence, a good completion can be expected, but the access is relatively fast. So it’s good to look to present a novel idea to raise your chances.
Grants are usually focused on tech startups and science & technology-related businesses. Moreover, government organizations might ask you to come up with some other funding to match with theirs – like half yours and half theirs. Also, the agencies are more inclined towards low-cost setups and projects because they receive huge requests for funding; thus, they focus more on giving an opportunity to all rather than one complete startup.
Finding the relevant and accessible funding opportunity might be difficult, but with proper research and understanding, one can leverage the available options to lift the startup and turn it into a successfully running business.
Moreover, if you have found a source, it’s good to keep an eye on all other available options as well, rather than going for some specific ones.
“I’ve found that entrepreneurs tend to fixate on one or two funding sources – often to their detriment. Better to keep all options on the table”, suggests Zwilling, the CEO of Startup Professionals.
Gate-Maker.com is a tech support company with a vision to inform, empower, and showcase Tech Entrepreneurs in order to bridge the gap between starting and becoming successful Tech Entrepreneurs.