How startup get funding? How to raise funding for your startup? 10 Best Ways.

How startup get funding ? How to raise funding for your startup? 10 Best Ways

The recipe for a successful business is a brilliant idea, strong enthusiasm and startup funding. According to recent stats, 29% of startups fail because they run out of cash. Startup funding is a critical component to your business venture and is a big issue to tackle. Even experienced entrepreneurs might face the obstacle of securing funds for their startup. The key is being ready and understanding the different options available through the different stages that your startup goes through. Finally, evaluating your options and not letting money stop you from pursuing your dreams.

There is an old management saying, “measure twice, cut once” which refers to the benefit of doing some planning. It’s the antithesis of “ready, fire, aim” which seems to be so prevalent in today’s society. The benefits you will receive from doing even some basic planning before you hit the fundraising trail are enormous.

This post has some basic advice on how to plan your raise before you hit the road. Many points will seem obvious, but we can tell you that most people get even the basics wrong.

Top 10 Best Ways to Raise Money

for Your New Business

1. Create a list

It sounds obvious but the starting point for any fund-raising planning is to create a list of prospects. I know this is CRM but I assure you most startups don’t do this or don’t do it well. Given the limited nature of how many people you’ll approach (i.e., not that many) I actually just do these in Google Sheets.

You can use this just internally for you and the people on your team helping you in the raise, or if you have existing investors or advisors you can open it up to share with them.

2. Personal savings

Put your money where your mouth is and go ahead and fund those early steps yourself. Investors will always try to figure out how invested you are in your idea and funding your own startup is definitely a good sign for them.

3. The business itself

The preferred startup funding source: let the business pay for itself and grow your business from the revenue coming in. In reality, this is the best type of funding and it shows that your business is truly taking off.

But your difficulty here is timing, as expenses typically come before revenue. Therefore you need to find a way to get cash up front. A great way to do this is by working with annual plans and prepaid orders.

Growing your business this way will allow you to keep total control and you’ll have a constant reminder of the importance of sales.

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4. Take help from family and friends

Self-made entrepreneurs often refuse to seek help from their family or friends. However, many of the world’s top business tycoons have admittedly borrowed money from their closed ones early in their entrepreneurial journey. Hence, you shouldn’t hesitate to do the same.

Taking short-term or long-term loans from family or friends doesn’t usually require you to pay added interests. In some cases, you don’t even need to pay them back. At the same time, it’s advisable that you only take a part of the total required funding from your family and friends in order to reduce the burden.

5. Seek grants from government and private bodies

Although you shouldn’t expect to cut a big check, there are several grants available, offered by both government and private bodies in the interests of promoting entrepreneurship, boosting the economy, generating employment opportunities.

These financial injections can help you set up the operations, purchase manufacturing equipment, and provide salaries to employees. However, winning grants can be tedious, time-consuming, and overall a complex process. In India, the government offers startup grants as part of its Startup India’s FFS (Funds of Funds) initiative.

6. Crowdfunding

Crowdfunding is a favorite of the digital economy, and probably the quickest way of obtaining finance for a new business. You don’t even have to be massively tech-savvy to launch a crowdfunding campaign, but what you do need is a compelling pitch, one which strongly references your start-up’s potential for growth, as well as a knack for interacting with your cash-rich community. If all goes to plan, you’ll have capital you don’t need to pay back, without ceding any operational control.

As a side benefit, crowdfunding is a nifty form of advertising, a way of stimulating public interest in your company before it’s even made its debut. The difficulty, needless to say, is in getting your voice heard in the vast crowdfunding landscape.

7. Get an angel investor on board

There are many online angel investment networks, as well as local investor groups you can pitch to in person, so do your research and start submitting your pitches.

Find the right angel investor and not only will you benefit from their financial support but also their wisdom: oftentimes, they offer mentor-ship as a side dish alongside their capital. On the other hand, they generally offer less financial backing than banks and venture capital funds.

8. Seek venture capital

Finding a venture capitalist who shares your vision, or at the very least believes in your ability to turn your idea into a successful, profitable venture, is a good way of raising cash. Of course, you will need a fine-tuned business model, ideally one that’s ready to scale.

The main con with this option is that venture capitalists are typically looking for the next big thing, and so many entrepreneurs struggle to convey the scale-ability of their enterprise. Venture capital funds, by their very nature, have a short shelf life as they generally seek to recover their investment, turn a profit then move on to the next fresh start-up.

9. Incubator or Accelerator

Business accelerators and incubators have sprung up all across the country, particularly near colleges with a strong business program. These spaces are part communal workspace and part mentor-ship development centers. Young businesses can get a great start here while partnering with some amazing people.

The downside? They are often focused on tech-heavy businesses, so you might struggle to find one that works for your company.

10. Bank loans

We use banks every day and bank loans are a very common source of startup funding.

A bank loan is money that you borrow over a fixed period of time from the bank. Depending on whether you borrow against an asset or not it is called secured or unsecured. Depending on whether the interest rate is fixed upfront or might change depending on certain market changes, it can be fixed or variable.

In order to get a loan, you will need to convince the bank of the viability of your project and your ability to pay back the loan on time without any problems. Your application will be thoroughly reviewed and typically banks will focus on your future cash flows, which is not always a great fit for startups.

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Needless to say, all of the aforementioned options require a good deal of consideration. What might be right for one budding tycoon may not be right for another. For example, you may have an excellent bank manager whom you implicitly trust, and a robust line of credit, making a bank loan the perfect option. Or you could have a supportive network of financially-secure family and friends willing to back your idea to the hilt. Perhaps a combination of funding options is best, but only you will truly know. The important thing is to go with a funding option with which you are comfortable and confident so that you can focus on turning your business idea into a success