Finding funding is one of the most major challenges a startup has to face, while it is often a requirement for it to be set up. If you are a new entrepreneur and are looking for ways to finance, we have identified five ways, both traditional and alternative in order to give your business the financial boost you are looking for.
Bootstrap means “doing something without the help of others”. For example, if a new entrepreneur has bank deposits or other resources, he can self-finance his start.
The advantages of bootstrapping are many. First of all, the new entrepreneur is not forced to put his idea off so as to seek out investors. On the contrary, it takes all the time to develop more data and gain the customer traction that will allow him to earn better investors’ funds in the future. At the same time, it has been proven that entrepreneurs who fund their own venture with their own capital seem to be more responsible, mature and committed to the success of their startup.
Family and Friends
Funding from family and friends is very common in Greece, due to the family tradition and culture.
The main advantage of this funding is the easy and immediate realization. These people believe in you without the need to convince them. On the contrary, investors demand to see first results before making any funding. Otherwise, they don’t trust entrepreneurs so easily.
Business angels (BA) are private investors who are interested in investing with equal funds in a company in exchange for a company share. It is often the first “outside” financing of a company. Business angels are usually entrepreneurs themselves and invest either individually or as members of an angel fund.
Business angels will fund you during the first stages of your project by taking risks that Venture Capitalists would never take. They believe more in the idea and people and less in numbers and measurements. That’s why this type of funding is quick and without personal guarantees. Thanks to their long business experience, they will contribute to the project with expertise, experience and the advantage of a good network of contacts which most of them have and use it to promote your project.
Venture Capital is undoubtedly the most popular and impressive source of funding. It is provided by a professionally organized fund of investors who make high-risk investments in start-ups, particularly in technology. Venture Capitalists will invest much higher than Business Angels. On the other hand, Business Angels will invest in an idea, while VCs will invest, since the company has made its first steps and has proven its ability to progress.
Crowdfunding is literally a source of online microfinance. It is about a new and promising way of funding companies using online platforms in order to submit a call for crowdfunding and raise funds. The creator of the campaign presents his/her idea directly to the publicby defining funding packages and offering perks in the same time as incentives. The most popular crowdfunding platforms are Kickstarter and Indiegogo. The main advantage of crowdfunding is that those who invest in an idea do not acquire shares in the company; on the contrary, the entrepreneur is the one who maintain the absolute control. A successful crowdfunding campaign is appealing for both Business Angels and VCs, based on the market demand.
Today, the financial resources in the investment environment hide multiple opportunities for new and small businesses. So, before selecting a funding mode, do a research and find out the way that suits exactly the profile and needs of the business you dream to create. Sometimes imagination and humor are the key moves for the success of a startup!