According to a recent study, over 94% of new businesses fail during the first year of operation, Lack of funding being one of the reasons. The long yet exciting journey from the idea to revenue-gathering business needs a catalyst named capital.
Now, when would you require funding depends largely on the type and nature of the business.
Here are some funding options for startups that will help you gather capital for your business.
Bootstrapping your startup business
Self-funding, also known as bootstrapping, is an efficient way of startup financing, especially when you are just initializing your business. First-time entrepreneurs might have trouble getting funding without first displaying some traction and a plan for potential success. You can also get your family and friends to contribute. This will be easy to gather due to fewer compliances. Many times, family and friends are flexible with the interest rate. Bootstrapping is also about expanding resources, both financial and otherwise – as far as they can.
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Crowdfunding As A Funding Option
Crowdfunding is one of the ways of funding a startup that has been becoming popular lately. It’s like taking a loan, contribution, pre-order, or investments from more than one person at the same time.
In crowdfunding, An entrepreneur will put up a comprehensive description of his business on a crowdfunding platform. He will mention the goals of his business, how much funding he requires and for what reasons, plans for making a profit, etc. and then consumers can understand the business and decide to give money if they like the idea. Those contributing money will make online pledges with the promise of pre-buying the product or giving a donation. Anyone can contribute any amount of money toward helping a business that they really believe in.
Get Venture Capital For Your Business
This is where you make the big decisions. Venture capitals are professionally managed funds that are invested in companies that have huge potential. They usually invest in a business against equity and exit when there is an IPO or an acquisition. VCs provide mentorship, expertise, and works as a litmus test of where the organization is going, a scalability point of view, and evaluating the business from sustainability.
A venture capital investment may be suitable for small businesses that are ahead of the startup phase and already generating revenues. Fast-growing companies like Uber, Flipkart, etc with an exit strategy can gain up to tens of millions of dollars that can be used to network, invest, and grow their company quickly.
Some of the well-known Venture Capitalists in India are Helion Ventures, Nexus Venture Partners, Kalaari Capital, Blume Ventures, Accel Partners, Canaan, Sequoia Capital, and Bessemer Ventures.
If you want to grow really fast, you probably require outside sources of revenue. While many lending options may make it simpler than ever to get started, responsible business owners should ask themselves how much financial assistance they really require.