Lack of funding is always the major reason for businesses failing very early. According to a recent study, almost 94% of the businesses fail due to less money or funding. Money is the base for every business. It is a competitive world out there and you need money to survive. So if you are looking to start a business, you need to consider options on how you can raise funds. Here are some things that would help.
Bootstrapping, also known as self-funding, is an effective way of financing for your startup. It would be hard for a new entrepreneur to get investors on board. It will be difficult to get people to pitch in money into your business without showing some traction and a plan for potential success. You can always use your savings or turn to your friends or family to contribute money which you can pay back later. It is also better with people you know, as then the interest rates would be flexible and those people will not be that hard on you.
Crowdfunding is one of the newer ways of raising funds for a particular business. The best thing about Crowdfunding is that, not only is it a great way to raise funds, but it also serves as a great marketing tool for your business. It is a great way to establish interest among buyers for your product. How crowdfunding works is; You put up your product or business idea on a crowdfunding platform. You describe your product, how it works, explain your business goals, how much funding you require and for what reasons. The consumers can then decide if they want to donate money for the business depending on their interests. Kickstarter is one of the famous Crowdfunding platforms in the US.
Angel Investors are individuals who have a huge amount of money with them and they invest in upcoming startups that have potential to grow into a successful business. They also provide mentoring services and assist young entrepreneurs in their decisions regarding the business. They invest a particular amount of money for a certain equity or stake in a company. It depends on the valuation of the company.
Incubators and Accelerators
Other sources of funding include Incubators and Accelerators. They are more or less similar to each other although they have some fundamental differences. Incubators are governmentally funded, take no equity, provide services like management training and office spaces. Accelerators generally take equity, are not governmentally funded. Incubators focus more on the nurturing of the business, as well as the entrepreneur and guides the business in every step of the way. Accelerators on the other hand, helps the business take a giant leap, and focuses on faster ways of making money and making the business successful.