Funding for a business idea to start journey to a billion dollar business, is a big. For funding a upcoming billion-dollar start-up is excellent—but how? You must need a website, a tech team, some office space, and, of course, at least enough cash coming in each month to pay your rent.
Which means you need money. Whether it’s a fresh new app or a swanky café, most businesses and entrepreneurs require at least a little funding to get off the ground in their early days.
Bootstrapping, to Begin With
While first getting started, entrepreneurs use “bootstrapping,” which means financing the company by scraping together personal funds that they can find. It typically is a savings account, credit cards, and home equity lines they may have.
Using the money we have instead of borrowing or raising is an excellent approach. Entrepreneurs continue to bootstrap until the business is profitable. It can be beneficial because it means we won’t have extensive loans and monthly payments that bog down, especially if we run into snags along the way.
However, if looking to scale the business quickly, it can be advantageous to bring outside sources of funding. So, what happens when funds run out, or decide we need something more? It will depend on the type of business we’re building, but there are familiar places to start, ultimately.
Consider Family and Friends
Asking friends and family for money might seem like a daunting prospect—but tapping those closest to you is often an excellent first step before getting external funding. It can never hurt to ask.
Before we ask our friends and family for money, we should have a business plan at the ready. This way, we can explain precisely what we’re selling and what we plan on charging. How we’ll make money, and whether we’re asking for a loan, an investment, or a gift. They would expect to get back the money they put into our business, and if so, how much.
Explore Alternative Funding Sources
Few micro-loan organizations lend to start-ups and entrepreneurs. These cater to low-income entrepreneurs.
Look Local
If we’re launching a small company or a tech start-up that we see as the next Facebook, we’ll want to check out our local business development center. Many boards help small businesses across the country. Not only can these boards help connect you with groups of entrepreneurs for networking and investors for funding, but they can also help you determine what type of loans and finance we might qualify for and help we apply.
The local chamber of commerce might also be a treasure trove of information and guidance in terms of where to get local funding. Large cities have organizations and programs that exist solely to bring business into the community.
Taking Out Loans Consideration
If we can show that we’ve started gaining traction and making money and that a loan would help us earn even more, we may qualify for a bank loan. Many banks have recently announced an increased investment to small business firms.
Look for Angels
If we have a tech start-up, we’ll probably eventually need more capital to get going or to hire people and get office space, bootstrapping and crowd-funding will help. We’ll likely need to reach out to outside investors. An excellent place to start is angel investors, usually established business professionals with high net worths who are looking to invest in promising companies.
To find angels, ask other entrepreneurs in the network, We can also look for a website that helps future entrepreneurs make connections with interested investors.
In addition to giving direct loans, angel investing groups host events or competitions that can help provide new entrepreneurs with additional networking opportunities. Check your local community for these groups.
Venturing into Bigger Capital
Venture capitalists require an in-depth and airtight business plan, but they can also give us more significant money. VCs invest in different companies for clients and hope to make money from one or all of them to pay back the client’s investments. We have to make ours stand out. We should know that VCs are looking for returns of their original investment, generally within the next 5-7 years, so it’s always best to have an exit strategy in mind.
The optimum way to get meetings with VCs is through introductions from entrepreneurs or investors—which means that if we’ve decided to get VC money, it’s time to leverage our contacts and networks to see who we can talk to. Cold-calling a VC may not be the most uncomplicated one, it’s somewhere to start.
Ready to Shoot
Funding and its potential funder can be the hardest part of getting business off the ground. It is also the most rewarding one. Once gotten approved for a loan, or found people to invest in the industry, we can get back to—or start—our dream job!
Though it can be a long road to success, finding allies along the way like friends, angel investors, or venture capitalists to help keep business afloat can make all the world’s difference.