How to Get Funding For a Startup- A Beginners Guide
Starting a small business is always exciting. And at the initial stage, if you don’t find the investors, don’t fret, instead think, most successful companies in the world were at one point where you’re now today. Of course, if you’re an entrepreneur, just thinking will not help you get your job done.
Remember that you may need to speak to hundreds of investors before finding the right one for your startup. I know the founders of famous, successful startups that had to knock on hundreds of doors before getting funding.
Here are the three primary ways you can consider to understand the basic startup funding ideas.
1. Self-funded
The first and foremost thing is self- funding. If you’re an entrepreneur, the first thing you can expect is funding from your side. See, we are not telling you to fund in millions, but to help you get by. This is the first investment you should do as an entrepreneur because you’re the only one who can detect and have the overall knowledge about how much investment you need for your business. Therefore, investment from your side is like putting the first brick in your business foundation. Invest as much as possible for you.
2. Ask Friends and Family
This might be the easiest and most cost-effective way of raising money for your startup.
Talk to your family and friends about your business plan and its requirements. You need to make it clear if you want a loan from them or investment funds. A loan may be the easiest for both parties in certain situations — you just pay it back over time, with interest.
An investment means family or friends would hold a stake in your startup and share equal risks with you. However, with an investment, you might be able to get excess money upfront, and unlike a loan, you will not be paying it back in installments. Investors will only get money if your business becomes profitable. But don’t be informal or casual the way you generally approach your family members or friends. Do a proper pitch and let them know when they can expect to make their money back. If they’re investors, explain the risks openly.
Caution- In a case of business loss, it has been observed that some ups and downs in relation occur; therefore, it’s better to explain the whole business plan by covering both profit and risk scenarios.
3. Angel Investors
An angel investor has the money, resources, and strong financial background to make a company successful. If an angel investor comes on board, he will likely invest enough to barely any other investors required. They invest high in your business. However, angel investors always expect a high return on their investment. And they won’t invest in just anything until and unless a powerful pitch doesn’t come from your side — the business case has to be airtight.
Angel investors invest their capital in a startup, especially when the business is just beginning. An angel’s investment will mean his shares in the company. Companies like Amazon and Apple both got their start by aligning with angel investors.
They may simply like your plan, trust your goals and vision, and believe that your business will be successful. That’s why you need to be able to articulate your business plan well. A short meeting over coffee with an angel investor might be all it takes to secure a fund for your startup.
There are online resources available to find angel investors, such as the Angel Capital Association. The association lists angels by state.
These are the few crucial ways you can consider and understand how to get funding for startup business.
