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5 Little-Known Facts that Could Affect Your Startup Capital

21 November 2019 | 0 comments | Posted by Jane Walker in Money Talks

Methods of getting startup capital

Securing capital for a startup is something many people who are looking to start their endeavour are struggling at the beginning of your venture. You can’t look into starting a business if you don’t have the funds to keep it going. And with millions and millions of startups that are currently on the market, the market may seem a bit oversaturated. That’s precisely why securing the necessary capital for your startup may seem a bit challenging.

However, it’s essential to know that there are a lot of ways you can fund your startup nowadays and obtain the necessary capital to keep you going. With that in mind, let’s explore some of them.

Angel investors

Angel investors sound like they came straight from the fairy tales. However, the fact is that these individuals are simply people with enough funds that are willing to invest in your business and help it grow. But to make angel investors interested in funding your startup, you will need to offer them an appealing business proposal.

The way it works is that several individuals who are willing to provide monetary assistance to startups get together, collect all the business proposals and then vote on which ones they want to put their money in.

That said, you will need to know someone who will connect you with these individuals. Otherwise, your chances of securing the necessary funds will be pretty slim.

Venture capital

Venture capital is another way small businesses and startups can secure the necessary funds. These professionals, however, are mostly looking to invest in new technology and markets that have the potential to grow fast.

So, if your startup doesn’t fall into one of these two categories, the chances are that you won’t manage to secure the funds. Surprisingly, only 4.4% of startups in America are backed by venture capitalists. Additionally, it’s important to note that aside from funds, venture capitalists often offer mentorship and guidance.

Furthermore, do know that these professionals are looking to make an ROI as soon as possible. So don’t expect them to stick around once they manage to do so.

Bootstrapping

Bootstrapping is the most common self-funding option for the majority of startups. If you have a business idea you firmly believe in, you can invest in it yourself. Additionally, you can even see if your friends and family are willing to pitch in. Furthermore, you should look into different investing and trading options that will allow you to generate enough funds for your startup.

But, to do it right, you will need to be well versed in these matters. That’s why you should try to learn as much as possible about the market you’re trying to tap into, as well as get familiar with the market psychology to ensure that you’re making the right decision.

Pouring all of your funds and savings in a business without knowing the ins and outs of the market you’re looking to tap into may have some serious financial consequences.

Bank loans

When it comes to securing funds for a startup, people usually tend to oversee the most obvious of ways. Bank loans are another common way individuals can secure enough capital for their endeavours.

On the other hand, this option is not so appealing to some individuals because you will need to offer some collateral if you want to get approved for a loan. What this means is that you need to be confident in your business idea.

Otherwise, the chances of being able to comply with the terms of the loan will be quite slim. Also, you need to be aware of the interest rates at all times. While a bank loan will offer you the complete control over your company initially, unless you’re able to meet all of the requirements, things can turn quite quickly.

Crowdfunding

The chances are that you’ve probably heard about numerous crowdfunding platforms by now. And yes, while it’s certainly worth a try – especially if you have a great business idea – there are some things worth mentioning.

First of all, these platforms may lull you into thinking that your business idea is incredible even though it is not. Unlike some of the investors as mentioned above, these usually won’t ask you to provide a detailed business plan. And while this may sound good to you initially, you can easily end up biting more than you can chew.

Secondly, some platforms require you to set a sum and a timeframe in which you hope to reach that amount. If you fail, however, do know that you won’t be getting a single dime. Finally, the crowdfunding platforms, although they are running strong right now can quickly go bust, which will – again – leave you penniless.

Final thoughts

Coming up with a great business idea and having confidence is not enough to start a business. However, it is more than enough to get you going and try to find the best way to secure the necessary capital for your endeavour. Once you manage to get your business off the ground, the rest will depend entirely on you and how ready and willing you are to do all it takes to make your business competitive.

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Recommended reading

If you enjoyed this post and have a little extra time to dive deeper down the rabbit hole, why not check out the following posts on startups.

Tags: Startup, Capital Raise , Guest Post

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