8 different ways to fund your new business

According to a recent report, 94% of new businesses fail in their first year. Lack of resources is one of the most typical reasons, any company's lifeblood is money. The long, laborious, but interesting journey from concept to profit-generating company needs the use of cash as fuel. As a result, at almost every stage of their business, entrepreneurs question themselves, "How can I finance my startup?"

The nature and manner of your business will largely influence when you'll require funds. However, if you've determined that you need to raise funds, here are some of the funding choices available to you.

Here's a guide to a few startup funding options that will help you raise money for your business.

Bootstrapping

Bootstrapping, or self-funding, is a smart way to earn money for a startup, particularly if you're just getting started. First-time entrepreneurs have a difficult time collecting funding if they don't have any traction or a plan for success. You might put your money into investments or enlist the support of family and friends. This will be simple to raise due to fewer formalities and compliances, as well as lower raising costs.

Bootstrapping also entails maximizing the use of available resources, both financial and non-financial.

Crowdfunding

Crowdfunding is a relatively new method of business fundraising startup that has recently gained a lot of traction. It's the equivalent of getting a loan, pre-order, contribution, or investment from multiple people at the same time.

It is how crowdsourcing works: An entrepreneur will use a crowdfunding platform to post a detailed description of his firm. Consumers can read about the business and donate money if they like the idea. He will state the aims of his firm, strategies for turning a profit, how much funding he needs and for what reasons, and so on. Those who donate money will make online commitments in exchange for a chance to pre-order the goods or donate.

A financial donation to a firm that you believe in is possible for everybody. Why should you think about crowdfunding as a source of capital for your business?

The nicest part about crowdfunding is that it can increase interest in a product, which helps with both marketing and financing. It's also useful if you're unsure whether the product you're developing will be popular. This method eliminates professional investors and brokers by putting money in the hands of ordinary people. If a company runs a successful campaign, it may be able to obtain future venture capital funding.

Also keep in mind that crowdfunding is competitive on an online fundraising platform to raise funds, so unless your company is exceptionally well-established and can draw regular customers with only a description and a few photos on the internet.

Angel investors

Individuals with additional money and a strong desire to invest in emerging firms are known as angel investors. They also work together in networks to collectively screen offers before investing. They can also provide mentoring or guidance in addition to cash.

This sort of investment is most frequent in the early stages of a company's development when investors demand up to 30% equity. They'd rather take more risks in their investments in exchange for higher returns.

Venture capital funds

It is here where the big bets are made. Investments in high-potential firms are made through venture capital funds, which are professionally managed funds. They frequently put their own money into a company and then leave when it goes public or is acquired. VCs provide information and guidance, as well as act as a litmus test for where the firm is headed, determining its long-term viability and scalability.

Small businesses that have progressed past the startup stage and are now successful may benefit from a venture capital investment. Fast-growing companies with an exit strategy in place, such as Flipkart, Uber, and others, can gain tens of millions of dollars to invest, network, and develop their businesses more quickly.

Larger, more solid prospects, as well as organizations with a strong team and high traction, are frequently sought. You must also be flexible with your business and occasionally give up some authority, so this may not be the best option for your business fundraising if you aren't interested in a lot of mentorship or compromise.

Incubator and accelerator

Hundreds of new businesses are helped each year by these efforts, which can be found in practically every major city.

Even though the two terms are often used interchangeably, there are a few fundamental differences between them. Incubators act as a parent to their businesses, giving them refuge, resources, training, and a network. Accelerators are comparable to incubators; however, an incubator assists a firm in walking, whereas an accelerator assists a business in running/jumping to new heights.

These programs usually run for 4 to 8 months and need the business owner's time commitment. You will be able to connect with mentors, investors, and other company founders through this platform.

Winning a competition

The number of contests has increased, which has tremendously benefited in optimizing fund-raising potential. It encourages people to start their businesses if they have a good idea. In such competitions, you must either build a product or prepare a business plan.

Winning these competitions may attract media attention as well. ProfitBooks profited immensely from becoming a regional finalist in Microsoft BizSparks in 2013 and winning the Hot100 Startup Award in 2014.

You must make your project stand out to increase your chances of winning these competitions. You can pitch your idea in person or with the help of a business plan. It should provide enough information to persuade anyone that your proposition is worthwhile.

Bank

When it comes to financing, banks are usually the first place that comes to mind for businesses.

The bank provides two types of financing to businesses, a working capital loan is the first, and funding is the second. A working capital loan is a loan that is used to fund one complete cycle of revenue-generating operations, and its limit is usually defined by hypothecating stocks and debtors. When seeking finance from a bank, the typical process of presenting the business plan and valuation details, the project report on which the loan is sanctioned, would be followed.

Product pre-sale

Selling your items before they are on sale is an often-overlooked yet very successful strategy to acquire funds for your startup. Remember how Apple and Samsung started taking pre-orders for their products months before they were officially released? It's a terrific approach to increasing cash flow and anticipating consumer demand.

Wrapping up

If you want to expand quickly, you'll almost certainly require outside funding. You may be unable to take advantage of market opportunities if you bootstrap and remain without external finance for an extended period.

While the abundance of lending choices may make getting started simpler than ever, smart business entrepreneurs should consider how much financial support they require.

The big question now is: how do you get your company ready for an online fundraising platform? It's better to start with a solid idea and creativity.

We built and support a powerful, easy, and practical online fundraising platform that is free for nonprofits and intuitively easy to use for donors.