You’ve got your eureka moment, an idea you believe is going to ignite/disrupt the world as we know it, a concept that is forever going to redefine the way we use technology in our daily lives, and so on. The truth is that ideas no matter how simple and grandiose, need money and capital to be realized. Obviously, you also need other superb resources who believe in your goal and vision with the same sort of passion as you.
Convincing people about the viability and awesomeness of your personal this-is-it moment can wait, raising funding for your startup cannot. After all, someone needs to fuel up this thing before it can gain traction and admirers in the industry. So, let’s take a look at the hardest step in launching your startup from the ground. Not a simple undertaking admittedly, but with the right person, the right investors and the right confidence, closing the deal is possible. We give you 5 options to look into when scouring through for funding:
1. Family and Friends Are the First Resort
Do you know most people may not believe in the ground-breaking idea you came up with but in the person behind that idea? That’s right, and you can imagine what if it was Steve Jobs who was floating a radical idea. Say what people will about his people skills but the man had a penchant for delivering results.
That example might be considered a little off-kilter though, as the first people that you might invest in your startup could be none other than close friends and family. They can prove to be the proverbial straw that does NOT break the camel’s back but rather they’d help you get started at least. Consider your friends and family as the people who can help you secure your first round of funding. This can give you enough leeway to create value around your idea and hopefully catch the eye of the people in the industry.
Be advised though that most often than not, startups can’t even take off. It’s just what it is. There is always the risk of jeopardizing your family’s money and friendships in the process. So, when looking for funding from the close folks, determine if they are in a position to afford to lose it. And as a courtesy, be sure to warn them upfront about the risks associated with this venture.
Heard of incubator programs like Y-Combinator or 500 Startups? They offer you some seed money sure, but there are more than just a few bucks exchanging hands. Not only do you secure good funding, you also get access to top-notch guidance and mentors in the industry, those who are well-versed with the startup culture and issues that permeate them. If you need some smart people who know the ins and outs of the startup scene, joining hands with Incubators is your best bet.
3. Issue Preferred Stock
So, you are launching your startup. And a lot of people who are getting into raising money for their baby also believe in securing common stock that founders are liable to receive during the course of funding. These shares come with beneficial provisions, such as liquidation preference and rights. Having some preferred stock for yourself as a founder’s privilege (and for investors) is going to make your venture a lot more attractive for people to throw money at. Investors believe you are serious enough to pay them and that too ASAP, so that way it’s all quid pro quo for both parties.
4. Convertible Debt
One method that has proven to be immensely popular in the recent years is that of convertible debt. Incubators like Y Combinator are known to secure at least $150,000 in convertible debts for every startup that qualifies for them. In layman’s term, a convertible debt can be turned into liquid equity in the future, subject to certain goals and milestones your startup achieves. That’s like having another round of funding waiting for you.
5. Last, But Not the Least, Venture Funding
So, what happens when you set up a startup venture pool and get investments from partners? That money comes when people set up a fund with certain objectives, objectives your startup can help them achieve.
That’s how you can set the ball rolling folks. Funding a startup isn’t easy but it’s not impossible either. And for entrepreneurs who want nothing but the kitchen sink, this guide can help you get started properly.