4 ways to fund your startup
The decision to begin a startup is a big one. Success can come down to a variety of factors. Does your idea fill a vacancy in the industry? Is it better than other solutions? Will people respond to it?
Possibly the most important question entrepreneurs ask themselves is whether they can afford to dedicate themselves to the venture. Financing is key when commencing a startup. The greatest idea can flop if the entrepreneur doesn't have the funds to get it off the ground.
There are many ways to get funded. According to Inc. Magazine, a common method many entrepreneurs use is to find venture capitalist or angel investors .
The main difference between venture capitalist and angel investors is the former is generally a group of professionals who search for startups to fund, while the latter is typically a small group or possibly just one person who is willing to help finance a business. In both scenarios, the entrepreneur will be selling part of his or her startup. This means that, when the company begins to prosper, part of that money will be paid to the investor. The amount depends on what percentage of the company the entrepreneur sold. Many angel investors are willing to help finance a business in exchange for 49 percent of the company - this means they are nearly equally as influential as the person who began it.
The main downside to this option is losing control of the startup. When you first envisioned the idea, you probably had a clear idea of what the final product would be. However, this might change if investors have a big influence over the company.
Talk to mom
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. Because of this, they could become a startup's most passionate investors, TechRepublic explained .
"No one will love your ideas as much as your family," said Travis Fox, co-founder of 3Form Media, an entertainment and media software company, according to TechRepublic. "They can share your belief in your vision or plan, and that kind of support has a value all its own."
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 to. 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
TechRepublic explained grants are an often-forgotten method of gaining startup funds. 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.
. 5 Best Ways for Funding a Startup
. How to fund your startup without venture capital
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