Lack of funding turns to be one of the common reasons why most startups fail. Money is the bloodline of any business. The long painstaking yet exciting journey from the idea to revenue-generating business needs a fuel named capital.
That’s why it is the most thought over question or subject matter for any startup. Who would be my investors? When will I be able to pay myself? How do I start crowd funding? Is it worth it?
Here are a few funding options I came across –
#1 Crowding funding could be your go-to
As new age as crowdfunding is, it is one of the most up and coming ways how startups are kick-starting their funding game. It’s like taking a loan, pre-order, contribution, or investments from more than one person at the same time.
This is how crowdfunding works – An entrepreneur will put up a detailed description of his business on a crowdfunding platform. He will mention the goals of his business, plans for making a profit, how much funding he needs and for what reasons, etc. and then consumers can read about the business and give money if they like the idea. Those giving money will make online pledges with the promise of pre-buying the product or giving a donation. Anyone can contribute money toward helping a business that they believe in.
Also keep in mind that crowdfunding is a competitive place to earn funding, so unless your business is absolutely rock solid and can gain the attention of the average consumers through just a description and some images online, you may not find crowdfunding to work for you in the end.
#2 Raise Funds By Winning Contests
The current trend of government participation in startups and MSMEs is very motivating. They are coming up with many challenges such as Swadeshi Challenge and now the ARISE program for incubators and investors.
An increase in the number of contests has tremendously helped to maximize the opportunities for fundraising. It encourages entrepreneurs with business ideas to set up their businesses. In such competitions, you either have to build a product or prepare a business plan.
Winning these competitions can also get you some media coverage. We, at ProfitBooks, benefitted a lot when we were regional finalists in Microsoft BizSparks in 2013 and won HOT 100 startup award in 2014.
You need to make your project stand out to improve your success in these contests. You can either present your idea in person or pitch it through a business plan. It should be comprehensive enough to convince anyone that your idea is worth investing in.
#3 Quick Ways To Raise Money For Your Business
There are a few more ways to raise funds for your business. However, these might not work for everyone. Still, check them out if you need quick funds.
Product Pre-sale: Selling your products before they launch is an often-overlooked and highly effective way to raise the money needed for financing your business. Remember how Apple & Samsung start pre-orders of their products well ahead of the official launch? It is a great way to improve cashflow and prepare yourself for consumer demand.
Selling Assets: This might sound like a tough step to take but it can help you meet your short term fund requirements. Once you overcome the crisis, you can again buy back the assets.
Credit Cards: Business credit cards are among the most readily available ways to finance a startup and can be a quick way to get instant money. If you are a new business and don’t have tons of expenses, you can use a credit card and keep paying the minimum payment. However, keep in mind that the interest rates and costs on the cards can build very quickly, and carrying that debt can be detrimental to a business owner’s credit.
#4 Get Funding From Business Incubators & Accelerators
Early-stage businesses can consider Incubator and Accelerator programs as a funding option. Found in almost every major city, these programs assist hundreds of startup businesses every year.
Though used interchangeably, there are few fundamental differences between the two terms. Incubators are like a parent to a child, who nurture the business providing shelter tools and training and network to a business. Accelerators so more or less the same thing, but an incubator helps/assists/nurtures a business to walk, while accelerator helps to run/take a giant leap.
These programs normally run for 4-8 months and require a time commitment from the business owners. You will also be able to make good connections with mentors, investors, and other fellow startups using this platform.
#5 – Few more tips
If you want to grow fast, you probably need outside sources of capital. If you bootstrap and remain without external funding for too long, you may be unable to take advantage of market opportunities.
While the plethora of lending options may make it easier than ever to get started, responsible business owners should ask themselves how much financial assistance they need.
Now the big question is – How do you prepare your business for fundraising? It’s better to start from the beginning with good corporate governance as it might get hard to go back later and try to exert fiscal discipline. To address these concerns, invest in good accounting software and keep your finances in order.