When you have a great business idea, funding is nearly always the sticking point. It’s a great idea, after all, but how can you raise the money to get it started?
If you have a tech-based idea, you may have an easier time attracting attention from venture capitalists or angel investors, but as more companies work that angle, finding an investor is harder than ever. So how can you get your business off the ground?
But getting your startup off the ground is the first step.
Like with most aspects of business, you’ll need some money to do this.
If you’ve never been through this process before, it may seem intimidating.
Not sure where to start?
There’s no one right answer.
In fact, you can get money from multiple sources.
We have outlined 7 ways for you to get your startup funded below.
1.Friends and Family
Borrowing money from friends and family is a classic way to start a business. While it may be harder to convince investors or banks of the quality of your idea, your family and friends often believe in your dream.
They may be more willing to help fund your company.
The downside? Borrowing money is a quick way to lose friends and sour family relationships. Be careful if you decide to proceed this way.
2.Small Business Loans
Some banks specifically offer loans to small businesses, but banks historically are careful about giving money to small companies. It can be difficult to qualify.
There are alternative lending companies, however, who may be better equipped to help you get your business off the ground.
The downside? Some of those alternative lending companies are predatory. Make sure you know who you’re borrowing from before you sign on the dotted line.
Angel investors are typically individuals who invest in startup or early-stage companies in exchange for an equity ownership interest. Angel investing in startups has been accelerating, and high-profile success stories like Uber, WhatsApp, and Facebook have spurred angel investors to make multiple bets with the hopes of getting outsized returns.
Crowdfunding gives startup entrepreneurs the opportunity to raise startup funding for their business, and can help a company promote its products or services. Setting up a crowdfunding campaign is not very difficult. You set up a profile on a crowdfunding site, describing your company and its business, and the amount of money you are trying to raise.
People who are interested in what you are trying to do can donate to your campaign, typically in exchange for some kind of reward for their donation (one of your products or services, a discount based on how much donated, or some other perk), or for some form of equity or profit share in your business.
5.Fund your startup yourself
Costs to start a business are at an all-time low, and more than 90 percent of startups are self-funded (also called bootstrapping). It may take a bit longer to save some money before you start and grow organically, but the advantage is that you don’t have to give up any equity or control. Your business is yours alone.
6.Offering Equity in Exchange for Funding
Equity, on the other hand, means a percentage of ownership in your business offered up at market value in exchange for money.
This is what investors will typically deal with. Clearly, to offer equity to an investor, you need to have some perceived value or proof of concept to instill confidence.
7.Getting a Government Grant or Loan
This is an often-overlooked way to get your startup funded.
Many people don’t know that their government may be offering convenient loans or full-on grants for aspiring entrepreneurs in their midst. Because new businesses are a large source of economic growth in industrialized economies, governments have it in their best interests to support the individuals looking to throw their chip into the ring.
If you’re young (say, under 35 years old) or if you’re creating a new business in science or technology especially, you’ll have a decent shot at landing some funding. What’s more, governments at various levels tend to have their own individual loans available. To find this funding, search at the city, province/state, and federal levels.
There are many different ways to get funding for a business, and a lot of it really varies based on your experience level and track record. For early entrepreneurs, we here at Foundr are big fans of bootstrapping as long as possible, as attested by many of the entrepreneurs that Foundr has featured.
However, when that option is no longer possible or becomes a hindrance to growth, there are several great options to choose from.
Do you have any other great ideas or tips to land funding for your startup online business? Or any questions on these sources? Hit us up in the comments.