As a startup, you’ll face many problems initially; biggest being how to finance your startup. A business needs investments to turn their idea into a legit business. From renting office space to hiring employees, you need financing for everything. And many startups land before they’re airborne, why? Majority of the time it’s because of insufficient finances. Here are ten creative ways to finance your startup:
1. Crowdfunding Crowdfunding is a concept which allows businesses to pool in small investments from various number of investors. Sites like Kickstarter, Indiegogo and RocketHub let you run campaigns with your goal amount. Many businesses have started using crowdfunding as it doesn’t force the companies or individual investors to put in a big amount. Although one should always read the terms and conditions of these sites clearly as some also charge a fee for the amount generated. Crowdfunding has emerged as the go-to way of generating finances for new businesses.
2. Angel Investors Not all startups use their own savings for investment, some may approach influential and head in the game investors for financing. Shows like Shark Tank which airs on Colors Infinity show aspiring startup founders seeking equity from well established investors. The basic idea of angel investors is that they’re successful businessmen who are willing to invest in potential startups but for a share of equity. Sites like AngelList, Indian Angel Network, Let’s Venture, Hyderabad Angels, Circle Up etc are some online platforms where you can connect to angels. But as crowdfunding, do follow up on details.
3. Product Presales Selling your products before the launch of the company is a good way to raise funding. Often this method is overlooked, but it’s a creative way to finance your startup without starting it. One should carefully assess the pros and cons before presaling products, as some entrepreneurs find it difficult to cope up with orders.
4. Microloans Lots of private companies and non-profit organisations provide loans to businesses who don’t normally qualify for bank loans. In turn for the loan, these organisations give economic opportunities to the business. Microloans are beneficial for small startups.
5. Venture Capitalists Similar to angel investors, there are venture capitalists who seek to invest in potential startups with an aim to earn some money on their investment. They look to invest in upcoming startups and deem it best to have a share in the equity to have some control over the company.
6. Business Grants There are some government funds allocated to invest in new technologies and causes. The Govt Of India has launched a 10 Crore startup fund to boost the startup ecosystem in India. A good way to search for such grants is from Grants.gov, they have around 1000 federal grant programmes. The process might be longer than traditional methods but doesn’t require giving up equity.
7. Purchase Order FinancingSome companies find it difficult to complete orders because of insufficient funds to purchase the material to make the goods. Order financing organisations will provide funds to purchase the material and follow up on it once the goods are sold. Companies most suited for purchase order financing are manufacturing companies who specialize in goods and not services.
8. Business Incubators and AcceleratorsEarly startups can use incubators and accelerators as a funding option. These organisations are associated with major universities or even large companies. They provide free resources to startups including office spaces and consulting. There is a difference between the two though, incubators act as mentors and provide parent like guidance to startups and accelerators work in the same way more or less but are more useful to take a giant leap. Both of them are 4-8 month programmes which require a lot of commitment from the businesses owners. Some examples are - Y Combinator, Amity Innovation Incubator, AngelPrime and CIIE.
9. Friends and Family LoansThe most sought out way is approaching your family or friends. Unlike other organisations or investors, your close ones have personal interest in your venture. This is the best way for early startups is to gain credibility within their personal social circle. Although there might be some cons with this, it’s one of the safest after self funding.
10. BootstrappingThe primary choice of financing your startup should be self financing also known as bootstrapping. You can invest your savings or generate some money before you start your business. This is the most safest and dedicated ways to finance your business. Not only does it instill commitment but also you don’t have to give up any equity or control. The first rule of business is the more you risk, the more you gain. Without risk, there is no profit. So investing your money is more viable than taking loans which you might not be able to pay back if the company doesn’t yield any profit.
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Tanya Kathuria is a media enthusiast pursuing her bachelor's in Literature from Jamia Milla Islamia. She loves writing and also has two of her own blogs: Just Oreo Things and The Mughmara Chronicles
