Establishing a successful business from scratch takes work. It needs long-term planning, discipline, and excellent leadership skills to take it off the ground. One significant challenge business people experience is funding their startups.
Getting funding for an idea or a business plan is challenging because investors are looking for startups with a proven market that can demonstrate the founder’s ability to operate and grow the business. For businesses to achieve their objectives, many need to raise capital from external sources. There are many fundraising options, and selecting an appropriate financing approach is critical to your startup’s survival.
You may be talented with lots of potentials and have fantastic business ideas. Despite that, you may find yourself burying those ideas due to funding challenges. Keep pursuing your dreams because below is a list of fundraising options you can consider for your budding business.
1. Family And Friends
Although you can approach friends and family at any stage of your entrepreneurship journey, the best time to do so is when your venture is in the early stages of development. This is because, at this stage, your business is at the most significant risk, and people who don’t know you well may not want to get involved. They will need plenty of financial evidence to lend a helping hand. However, friends and family have your best interest and will most likely be willing to get your startup off the ground. Another benefit of raising funds through friends and family is the ability to tap into their networks.
Crowdfunding is a reliable fundraising option that can raise considerable money from a broad base of small-scale investors. Since crowdfunding has become a mainstream fundraising option, crowdfunding platforms have become increasingly selective with who they take on board. For this reason, chances of getting acceptance are slim, and you have to show that you’ve raised a substantial amount of your target capital before they can lend a helping hand.
3. Corporate Dinner Parties
Holding a corporate dinner party can be a great way to raise funds in a less formal setup. It doesn’t have to be a lavish party. Just a simple outdoor or indoor dinner would do. For warmer nights, you can hold the event outside with outdoor lighting and simple, inviting décor. Make your invitees understand the purpose of the event is to raise funds for a good cause.
The intrigue and uncertainty of participating in contests make them an ideal option for raising funds for your startup. Many people love to participate in such sessions as most of these events involve fun game nights, refreshments, and the winners walk away with cash and other prizes. To attract a larger audience, contest organizers sometimes ask people to donate funds per their capacities, which can be their entry fee for the event. Such gestures encourage people to contribute even more if they find the event engaging and fun.
Most contests are competitive with winners chosen for their creativity, innovation and solutions they create for problems in the community. You need to make your project stand out to improve your chances of winning. Whether you articulate your ideas through a presentation or pitch it through a business plan, it should be comprehensive enough to convince anyone that your idea is worth investing in.
5. Government Funding
There are government departments that lend a helping hand to well-defined startups that appear to have a well-defined structure. These organizations assist small businesses to start and support them to remain in business. There are different kinds of loans, including disaster, emergency, or startup loans. Apart from financial support, they offer advice on winning contracts with government entities. They also give free business counsel to help businesses flourish and expand. Check with your state, county or city’s municipal offices for information about firms that partner with businesses and offer much-needed financial support.
6. Fundraising On Social Media
Through social media, nonprofits have an opportunity to connect with younger donors. Social media has nonprofit tools to engage donors who show interest in a business’s activities. When you create engaging posts, videos, games or questionnaires, you can capture a donor’s interest and ensure they commit to partnering with your vision. Apart from raising funds, nonprofits can use social media to create awareness about a startup, sharing their programs and activities that might benefit the community. You can also reach out to potential donors in a less formal way. Social media is a cost-effective way of creating awareness for your cause and can help you reach your goals.
7. Online Advertising
Another way startups can garner more support is through online advertising. Digital marketing is less costly than traditional advertising options like TV or print media. Social networks like Facebook or Instagram allow you to reach a specific audience with targeted advertising. That way, you only pay to reach a defined audience that will be more responsive than generalizing, like TV advertising. Startups can benefit from specific social media ads that target potential donors based on their demographics, occupation, age, interests and online activity.
8. Peer-To-Peer Fundraising
Peer-to-peer is a creative way of raising funds while educating and empowering your following. This fundraising strategy encourages potential supporters to participate in your fundraising efforts. Properly planning a peer-to-peer fundraising campaign can magnify your efforts and attract new supporters to your cause. Try integrating fundraising software to automate your workflows and get the best out of your fundraising efforts. By incorporating automation, you can easily create captivating membership campaigns that streamline donor management and helps you to strengthen relationships with your donors.
9. Recruit Volunteers
Nowadays, startups are fortunate if they attract committed donors. The reality is that most startups depend on volunteers. As a new business, you may have to rely on volunteers from time to time before you can afford to employ permanent employees. Social media marketing is a fundamental tool to help you create awareness and recruit qualified individuals to help get your startup off the ground. Crowdfunding and peer-to-peer campaigns on social media allow startups to use volunteers to raise awareness about any cause. Many highly talented, skilled university graduates are looking for opportunities to sharpen their skills in exchange for recommendations.
10. Fundraising Through Networks
Take advantage of opportunities to appear in public events, product launches and any other opportunity to raise your startup’s profile. Make press and media appearances, contribute freely by sharing information, and present yourself as an authority in your field. Individuals tend to support projects from people who are familiar to them. Please take advantage of those public forums and share your ideas and how communities will benefit. Once people know the benefit of the product or service you’ll be launching, they will be willing to part with some cash to support the project. You’ll be surprised by how supportive people are, especially if they’re convinced about your business’s benefits.
11. Engage Influencers
Influencers are an effective alternative whenever you want to reach a broad audience with minimal effort. Sometimes, all it takes is a tweet or a Facebook or Instagram post from an influencer of good repute to post and potentially reach millions. Whether you want to create awareness about your startup, increase your following or invite potential donors to partner with you, an influencer can help you achieve that with minimal effort.
Research and identify industry influencers who can sell your ideas to the right target audience. Also, ensure that the influencer you settle for has a healthy engagement rate with their audience. Depending on your business type, you must determine the best online platform and if your preferred influencer is active on that platform.
Facebook and Instagram are popular as celebrity influencers have a massive following on those networks. Whether you advertise on their Facebook stories, reels, or Instagram live, settle for an option with a positive ROI. You must consider the best date and time for scheduling posts to maximize reach. If you choose social media, create content and schedule posts at a time when most of your audience is online and is likely to see and engage with your post.
12. Pitching Potential Investors
Preparing an outstanding presentation about your startup describing your core ideas, the implementation process and the projected positive outcome is a fantastic idea. Once the business plan is ready, you need to research and find potential investors to whom you can pitch your ideas. Ensure the investor is captivated by your idea by ensuring your presentation is well mapped out, leaving nothing to chance. Also, understand what different investors need. The most common options are angel investors and venture and micro-venture capital.
Angel investors are affluent individuals who use their net worth to make investments. They support startups and small and medium enterprises in exchange for equity: their financial assistance funds expansion or acts as one-time investment support. Angel investors are expected during the initial funding needed by startups. Since they are using personal finances, these investors prefer being part of the first official funding because it gives a clearer vision for an exit if they choose to leave in the future.
Venture capital involves a team of individuals with pooled financing from private investors. They can either be an institution or a company with sufficient funds, industry expertise or both. They desire to invest in startups with the expectation of high growth with a future potential of advancing by acquisition or IPO. They provide capital to companies that want to scale or need investment opportunities.
Micro venture capital
While micro venture capitals follow a similar structure as traditional venture capital, the main difference is the size of the investment and the stage in which they offer support to a startup. Generally, micro venture capital support startups in the initial seed stages to minimize costs. Usually, they target startups with no consistent capital but need assistance getting their startups off the ground.
13. University Funding
Most startup ideas and innovations happen during campus life. Many students enroll in MBA programs to start their businesses. Some begin while still in college, where they gain experience making their presentations and developing a fundable business plan. Venture funds and grants targeting students are some options college students can leverage.
Additionally, accelerator programs help student entrepreneurs by offering mentorship and training programs. They also provide opportunities to pitch to investors and get much-needed funding. University-affiliated accelerator programs are available, so it is best to check with your university’s entrepreneurship faculty for similar opportunities. Well-established universities have multiple accelerator programs, while other institutions accept applications from any university.
14. Source For Royalty And Advance Payment
Some customers or businesses will see value in your ideas and may be willing to pay you in advance to complete your project. Selling products before launching is a highly effective way of raising funds to finance your startup.
With excellent marketing skills, you can get consistent customers and request partial advance payment, especially from customers with large orders. You can launch your business and process your first order with that money. With this strategy, you can be sure of complete payment before or on the due delivery date. Please make sure you are flexible and accept different payment options to make it convenient for customers to pay you upfront.
15. Vendor Financing
Getting financing for tangible assets is a lot easier than a cash advance on future sales. Most manufacturers and distributors are convinced to defer payments until you sell your merchandise if your business relies on tangible products. From your creditworthiness, suppliers will make credit extensions of up to 30 days or longer, depending on your track record. This frees up the much-needed capital you can utilize and invest in product development, marketing, overheads or salaries. Manufacturers are willing to give 100% financing on every gadget your startup needs, including furniture, fixtures, servers or computers.
Consider approaching vendors to give you flexible payment options where they can extend your credit period or give you better payment rates. Be willing to negotiate and speak out if you feel your repayment plan is unachievable.
16. Swap Your Expertise And Get Support For Your Startup
Engage in barter trade, whereby you trade your skills for something you need for your startup. For instance, if you’re handy, you may offer to fix broken household fixtures for your landlord in exchange for office space. Or, you could locate a partner outside your field who isn’t a direct competitor. Offer them benefits like writing content for their blogs, marketing opportunities, or customer referrals in exchange for funding, expertise or access to resources that you require for your startup.
17. Start A Side-Hustle
A side hustle is a practical way to support a new startup. Turn your hobby into cash. Finance that business that you desire so passionately but financing it has become a stumbling block to achieving your dreams. You may be an excellent cook, a great graphics designer or an experienced accountant; market these skills and earn some cash to support your new venture.
Consider engaging in online sales for items that are in good use that you no longer need. Doing so will help you declutter your spaces while making some cash. Register on eBay and sell those shoes, handbags or clothes that no longer fit you. Use Craiglist for bulkier items like furniture and home appliances.
Now that you know how to fundraise for your startup, you can drop all limitations and follow your dreams to financial freedom. As you grow your brand, continue reviewing your business plan and the financial data you need to adjust regularly. Maintain your milestones to ensure you’re always on the right track. Make the necessary readjustments to ensure that you’re able to achieve your objectives.
Don’t curtail your dreams of owning a business due to the financial challenges you may be experiencing. There are many financial possibilities to get funding, even with a low credit score. Apart from conventional lending institutions like banks, which present stringent measures before considering your loan application, there are other flexible selections for you to consider. These alternative financial options give you a second chance at getting your business funded without prejudice or requirements you may not meet.