Starting a business begins with providing a solution for someone else’s problem.
But, it’s simply a fact of life that “money makes the world go around,” and despite having a solid idea or business plan, raising funds for your startup can often be overwhelming. If over $55,000 can be raised for a potato salad party, there’s certainly a way for your own business to navigate the choppy waters of raising capital.
Luckily, there are multiple paths to take to get your startup or small business out of the coffee shop and into its very own office space.
1. Business Incubators
Incubator and accelerators are beginning to pop up in many emerging cities as a means to provide support, management and business basics to startups in exchange for equity. These incubators jump start businesses and can operate as a physical space or through virtual interaction.
The benefits of joining an accelerator can include:
- Networking opportunities
- Legal and tax counseling
- A resource for capital
- And more
The National Business Incubation Association is a global organization that aims to advance entrepreneurial efforts by providing access to a variety of resources with the involvement of thousands of members in over 60 nations. The best way to figure out if an incubator or accelerator is right for your startup is to shop around and find the best fit for both your current and future needs.
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2. Grants & Competitions
Grant writing or applying to competitions can seem intimidating, but it’s worth the chance to secure a reliable source of funding—although it can be difficult to know where to begin. The process can be simplified by using a search tool for available grants, or by utilizing government resources, to find the possible funding opportunities made available by 26 federal agencies that award grants to individuals or emerging businesses.
Image via Business USA
In addition to federal funding, most states also have programs for technological or eco-friendly development. Even competitions like Chase Bank’s Mission Main St. serve to make small business dreams come true for the lucky winners. These funding streams offer the possibility for high rewards with minimal upfront effort.
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It seems like everything and anything under the sun has been funded by a means of crowdsourcing—so why not your startup? Kickstarter has launched a model for rewards and/or equity-based funding that has spurred dozens of similar platforms.
From IndieGoGo and Fundable to Angel List, there are many different outlets that offer niche crowdfunding services whether your project is a non-profit, an app or a specific kind of product. Some sites provide the option of keeping the money you raise while others go beyond the transactions and also give industry advice if you’re a creative or trying to launch a small business.
Related Article: Does Crowdfunding for Startups Actually Work?
4. Small Business Loans & Credit Lines
Taking out personal credit lines or private loans may not be the most enticing option, but it could be just what your startup needs to gain some footing. More than 65 percent of small businesses use credit cards to finance their operations.
It’s worth weighing the liability of taking out a significant private loan or a line of credit for the business, especially when it comes to repaying the installments in a timely manner. There is a very real concern of sales being slow that could result in payments falling behind and risking your personal credit rating and ability to borrow.
If a private loan may seem intimidating, there’s also the option of taking a Small Business Administration loan through the U.S. government.
5. Angels & Venture Capitalists
Sometimes an idea or project is just so captivating that people just want to throw money at it—and that’s when an angel investor comes in. For a percentage of equity, the angel investor can provide the initial funds for the startup. Popular TV shows like Silicon Valley navigate the various challenges a startup faces when trying to gather funding, including some unique dilemmas when it comes to venture capitalists.
There are often feelings of obligation and guilt towards the investor, especially if their contributions are significant. As for your business, you can find investors through sites like Gust or by networking with members from the National Venture Capitalist Association. This can be a more time-intensive route for funding because of the constant pitching and networking required to gain trust for the startup’s branding.
Taking money from someone in order to produce a viable product can be all sorts of nerve-wracking, so creating a strong professional relationship with the potential investor is hugely important.
A huge takeaway when it comes to getting funding for your business is to never, ever give up. Even the founder of Pandora.com was rejected by over 300 potential investors and ran out of money before the business became the successful music-streaming giant it is today. For more resources, you can check out the U.S. Department of Commerce’s Minority Business Development Agency and set up a Google alert to keep an eye on any new business developments.