Seeking funding for startup founders is one of the key determinants to the success or failure of a business. However, many of us entrepreneurs who've gone through the startup journey can testify to how frustrating and discouraging it can be to acquire the required capital to propel a startup. It is quite difficult to understand the best place, person, or even form of funding to rely on when growing a startup.
So, does that mean that your quest to find capital for your startup is doomed? Not at all! Here are 5 great ways that we recommend; and one or two of them will surely work for you if your idea is viable;
1. ICOs (Initial Coin Offerings)
Initial coin offerings are a relatively new way of funding startups that is gaining huge traction around the world. It is most popular among cryptocurrency and blockchain startups. This form of funding allows startups to raise money from their users by allowing them to buy a stake into their business (somewhat similar to equity crowdfunding). In return, the user gets a token or digital currency, which is similar to owning a share in the business.
ICOs are a great way of funding in that you can raise a very large amount of money in a very short time period (even in a matter of minutes). However, ICOs have received plenty of criticism and are being scrutinized by regulators. They operate in a lawless world and are even prone to theft attacks by hackers if not well secured.
2. Family funding
Family funding is one of the best and easiest ways to get capital for your startup. You simply need to convince your parents or able-siblings about your idea and ask them to contribute to your course. They can either loan you money to kick start your business or decide to give you capital in exchange for a stake in the business.
One great advantage of family funding is that family mostly invests in the person, rather than their idea. It is therefore easy to get family funding if your family believes in you. However, family funding is limited as you cannot raise a huge capital unless your family is really wealthy.
3. VC funding
Venture capital funding is another great way to source for startup funding. Venture capital firms are professional companies that specifically bring together huge sums of money and look for potential startups to fund in exchange for equity. They then participate in helping the startups to grow with a plan to exit the business by selling off their equity when there is an IPO or acquisition.
The pros of venture capital funding include having access to huge capital, expertise, mentorship, and other important resources from professional investors. However, the downside in VC funding is that VC firms look for more stable startups with huge opportunities, and they ask for a relatively large control in the business.
Crowdfunding is another very popular and trendy way of getting startup funding today. It involves getting funding from numerous investors (mostly from around the world) through online platforms such as Kickstarter and Netcapital. Investors, who are normal people on various crowdfunding platforms, review your idea and if they really like it contribute towards its materialization. In exchange, you can either reward them with gifts (such as free products or subscriptions) or equity stake in your business (equity crowdfunding).
The major advantage with crowdfunding is that you get to test the market and see if there will be demand for your product. It also helps you to generate interest in your product or service even before launching. However, crowdfunding is highly competitive and therefore your idea and business strategy need to be rock solid to earn funding.
5. Angel funding
An angel investor is an individual with surplus money and a keen interest in investing that money in startups. Angel investors are also a great source of funding as they can additionally provide mentorship advice towards your business. They sometimes work in groups and have strong networks that can really help to grow your startup all round. Companies such as Google, Yahoo, and Alibaba actually had this type of funding.
However, Angel funding generally requires you to part with a larger stake in your company and you get lower amounts in investment compared to Venture capital funding.
There goes your list on the 5 best ways to raise funding for your startup business. Each has its pros and cons. So, evaluate each one of them keenly and select the one with more benefits or one that is highly applicable to your startup.
Any other options you think are worth mentioning?