Ready to Launch Your Startup? Here are Five Ways to Raise Capital
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Launching a company is difficult, and limited funding is the most common barrier to entry to the startup world. Do you have a great idea, but you’re trying to figure out how to fund it? Are you already running a startup, but cash is running out fast? Here are some ways to raise capital for your startup:
Saving money isn’t easy, but it’s the most straightforward way to raise funds for your business. If you’re still working a regular full-time job, commit to saving a part of your current salary to help fund your dreams. Review your monthly expenses and eliminate unnecessary expenses like subscriptions and expensive lunches. If you live with roommates or a significant other, consider sharing expenses to reduce cost per person. This might include shopping in bulk, sharing an Amazon Prime account (or any subscription for that matter), and taking advantage of family memberships at the gym.
If you’re already committed to your startup on a full-time basis, you should be auditing your operations regularly and eliminating unnecessary expenditures.
Friends and Family
Hitting up family and friends for money can cause a lot of drama if not done correctly. Make a list of people with whom you have a good relationship, who believe in you, and might be willing to help you kickstart your dreams. Be ready to answer questions about your business’s viability, how much work you are willing to put into the company, and the milestones you expect to hit. Support from friends and family can come in the form of gifts or loans. Make sure that you know the terms of their support before accepting it.
For most people, saving and asking friends and family for money can only take you so far. At some point, the scale of your business might require vast quantities of cash. At this stage, crowdfunding might be your best bet. Sites like Kickstarter, Indiegogo, and GoFundMe can be great options for raising capital without giving up equity in your company. Crowdfunding campaigns are also great ways to gauge public interest in your product before you begin full-scale manufacturing. Don’t be fooled; an effective crowdfunding campaign will require an enormous amount of planning. Not only will you need to craft a compelling story, but the most successful campaigns often show off a functioning prototype. Donors will want to see your product in action, and they will want you to convince them about its overall value.
Get a Loan
If you genuinely believe in your project but haven’t been able to secure external support, a business loan might be the right option for you. Business loans have several pros. They can supply much-needed cash at fairly low-interest rates (if you have good credit). You also don’t need to give up equity to get a business loan. However, getting a business loan can be difficult and is often not a viable option for first-time entrepreneurs.
VC funding is perhaps the most commonly-known way that startups raise capital. VC firms often have funds of tens or hundreds of millions of dollars and can offer unmatched access to resources. The catch is VC funding doesn’t come free. Investors usually take equity in exchange for funding. Acquiring VC funding can require considerable time and resource investment. The competition for funding and attention from VCs is fierce, and startup founders often spend years refining their pitch before they even get noticed. For some founders, the pay off is worth it as VCs are known to write checks for millions of dollars for startups they believe in. If you decide to go down this route, here are some Black-led VC firms to check out.