Before you dive into launching your dream venture, there's one important question you need to answer: How will you fund it?
From investors to family support, there are plenty of ways to gather the capital you need. Let’s explore four tried-and-true methods to help you bring your startup to life and set it on a path toward success!
Consider Investors
A common way is to find venture capitalist or angel investors.. The key difference is that venture capitalists are typically groups of professionals who actively seek out startups to invest in, while angel investors are usually individuals or small groups who offer financial support to early-stage businesses.
In both cases, entrepreneurs will need to give up a portion of their business in exchange for funding. As the company grows and becomes profitable, investors will receive a share of those earnings based on the percentage of the company they own. Some investors may even demand a significant stake, making them nearly as influential as the founders themselves.
The main downside to this option is the loss of control. As an entrepreneur, you may have had a clear vision for your product, but that vision could shift if investors become heavily involved in the decision-making process.
Talk to Friends and Family
Entrepreneurs usually tell their closest friends and family about their idea first. These relatives and friends see the changes in the ideas and how excited they are to begin. They are also probably the first people, besides the entrepreneurs themselves, to know the difference the product or service will make, and to truly believe in it.
Of course, there are some risks in taking money from friends and family, too. If the company fails and a relative or best friend loses money in the fallout, it could put strain on the relationship.
Apply For a Loan
Every business and startup should have a relationship with a bank. Not only do entrepreneurs need checking and savings accounts, but they also will eventually need merchant services so they can accept payments via debit or credit card. One day, you might have a good amount of employees that you will want to offer benefits, such as retirement plans. Working with a bank is a great way to accomplish each of these things.
That same bank might be worth looking into for a loan. Many financial institutions are enthusiastic about small business lending. You will likely need to present your business plan and explain how each and every dollar of the loan will be spent, but this option is best not overlooked. Additionally, building a relationship with a trustworthy bank is never a bad thing.
Find a Grant
Grants are offered by a variety of sources, including the state and federal governments, community foundations and banks. Some people shy away from grants because they are time and work intensive. They often involve a rigorous and competitive application process. The positive side of grants is that they don't lead to lost equity and the money is usually more of a gift than a loan, meaning the entrepreneur isn't indebted to anyone.
Many of these grants are put on by larger companies and banks as part of a social or giving-back initiative. If your startup idea has a solid business plan and fills a need the institution is passionate about, you could be a good candidate.
Once you find the funds needed to begin the startup, work hard to make your vision a reality. It'll take dedication and perseverance, but with your newfound financing, you've already cleared one of the hardest obstacles.
