Whether it is your first time embarking on a business start-up or you have gone through the process before, there is one constant that affects every new business venture – and that is funding. Unless you find yourself in the fortunate position of having a big lump of spare cash lying around (which would beg the question why you are reading this article in the first place), you will need to fund your start-up elsewhere.
Having the right tools will not only get you off to a great start but it is likely to save you money and allow you to get the most out of the start-up capital that you raise. Top startup marketing tools from lead generation to content management and data analysis can all prove to be invaluable assets.
Whichever way you choose to fund your start-up, your finances are likely to come from one of the following sources:
- Friends and family
- Business development loans and credit cards
- Partnering with an Investment Angels such as Venture Capitalists (VCs) and High Net Worth Individuals (HNWIs)
- Personal financing aka Bootstrapping
One: Friends and family
While we haven’t listed the above in any order it is interesting to note that friends and family are often the first port of call for potential business start-ups. Maybe it has something to do with trust and believing in your vision. After all, it is probably those closest to you that are both easiest to convince and most likely to trust you. Another plus point is that in many instances you won’t be asked to pay interest (or very little anyway) and there is likely to be less pressure on you concerning how quickly they expect to be repaid.
With statistics claiming that over 80% of Americans make online purchases, it logically follows that potential investors are likely to come into contact with your business online too. Attracting crowd-funding (multiple investors) is likely to work much better if you already have a social following. Platforms like Instagram and Twitter allow you to showcase your “social proof” to potential investors and highlight your active engagement with your followers.
If you are adept at content marketing, starting a blog is a solid tried and tested method for gaining followers who may also have some potential investors among their ranks. An active blog allows you to illustrate your skills, with exceptional content being a key selling point.
Three: Business development loans and credit cards
Traditional banks and financial institutions provide funding but if you are a “new kid on the block” you should be prepared to jump through a few hoops. These days, banks aren’t too keen on taking risks without security. A business credit card is another option that involves the bank but unless you are already in good standing with them that too could be both limiting and risky.
Four: Venture capital and investment angels
There are many high net worth individuals out there who have already made their fortunes and either they or their investment companies are always looking for new investment opportunities. These “investment angels” are likely to want a piece of the action, however, and rather than simply investing for a return they may want to “buy into” your start-up.
Five: Personal financing or bootstrapping
From 5000 personal loans to maxing out their credit cards, you may be interested to discover that more than a handful of big performers used the personal finance or ‘bootstrapping’ approach when funding their business start-ups. Famous names that bootstrapped their way to success include GitHub and Craigslist. While they attribute their early formation to this method, it can be risky and “putting your money where your mouth is” may not be for the faint hearted or those with a family to consider.