It is the dream of every entrepreneur to battle the odds and emerge victorious in every situation of the startup journey. There is a deep-seated pride instilled in the entrepreneur when it comes to fighting till the end and not giving up.
But many times, it happens that the entrepreneur is living in a world of dreams and is usually oblivious or ignorant of the really world. This happens because a large number of the entrepreneurs are college students who are used to leading a relatively cushy life. So, when they step out of their campus and face the real world, it is then that they realize the kind of ride they are in for.
And not having the capital to sustain the venture in its early days is one of the leading reasons why over 90% of startups fail in the first two years of operations.
But many startups do end up raising the initial funds. Let us have a look at the different sources of doing so.
1- Ask your friends and family!
This is one of the initial ways trough which you can raise capital for your venture. Since your friends and family are really close to you, they have a higher chance of listening to your idea and supporting you. They will usually be ready to provide you with an interest free loan or even a donation for your venture.
You need to realize that if you are unable to convince your friends and family members to believe in your dream then it is going to be really hard for you to make other high-profile investors to believe in you.
2- Crowdfunding is the new way.
These days there is a new force behind raising funds for your startup. Though there are restrictions on crowdfunding in certain countries like India but it is quite a booming source of revenue.
Crowdfunding usually happens through two different ways. One is through either making investments online on the designs of the product. And the other is through pre-booking. This method has helped many people in the Western countries to raise the funding required for the startups.
You can go here to read more about the topic.
3- Look around for angel investors.
Angel investors are usually the first signs of seriousness when it comes to operating a startup. Angel investors usually make the seed round or the first rounds funding.
They are ready to take the high risks involved with a hope that the startups will be successful. In exchange of the heavy risk, they usually take a good chunk of the startup’s equity. This can seem really hard to get but there are various angel networks on the national and international level that can be approached for this.
4- There is a debt financing way too.
This is usually the bank’s method of funding your venture. But these days it is not unusual for VC firms to go for debt financing method. This method usually eases the risk on the investor.
Though each deal is different based on the various terms signed between the investor and startup founder, some common parallels can be drawn between them. In these deals usually, a fixed amount of money is provided as a loan to the founders. The rate on interest is usually negotiable. This loan can be in exchange for equity or part equity and part royalty deal.
5- Stay careful of the hungry venture capitalists.
When you are looking to get investments from the venture capitalists, you are now stepping into the real playing arena. You are now up against the big boys. These investors are some of the most experienced and profit minded people you will meet.
Getting a deal from the VC firms is no easy task. There are dozens of meetings and presentations to make. There will be the checking of your company financials and a strict due diligence.
A round of funding from the VC firms usually means an added pressure on the founders to deliver their worth. But there are a lot of positives that come from the VC firms. There is an added strength of business management advice, increased visibility and a lot of funds to scale up really quick.
6- Bootstrap the entire journey.
This is usually one of the simplest ways of financing your startup. This means extreme optimization of the funds that you are spending on yourself and the startup. It can be quite difficult but if it is properly handled it is quite possible for you to build an innovative product and create true value to your consumers without overspending.
Most investors usually look for signs of bootstrapping as it shows the belief that a startup founder has on the idea and its feasibility.
So, these are some of the ways through which you can get your startup up and running. There is no definite formula for deciding what will work best, it all boils down to the intuition of the founders and the opportunities chased.