From food wagons to e-commerce startups, ground-breaking solutions can help alleviate some of the utmost complicated challenges that your business might face. And yet, the road to startup victory is tiled with countless trials of whom fundraising remains the most crucial one. Regardless of an extraordinary increase in startup funding, attaining seed capital is not a game.
How Funding Works
Raising funds for a startup is one of the most stimulating and challenging tasks for a business to handle. Executives, founders, and C-level professionals look for investors, endowments, and other alternatives of funding to aid the startup’s growth. If successful, the startup will have the capital to keep on enhancing its ventures, or else, the startup may become on the verge of closing its doors incessantly. Luckily nowadays, capitalizing on startups is at an incomparable high. Global Venture Funding reached $437 billion in 2021, which is a notable upsurge from $284 billion in the year 2020.
When Should You Think About Raising Capital?
There isn’t just one accurate answer to this specific question, and in fact, it depends on most of the characteristics and nature of each business. Some startups may require assembling capital for buildout while others want to raise funds to remain in business. A business will need to raise capital when they know that the shot of funds will enable the company to intensify its value and growth meaningfully.
Each form of funding has its conditions and limitations, therefore, being aware of this and the real potential of your business is a needed requirement before settling on the source of capital that best fits you. Here is when the help of a fractional CFO might be useful.
Let us enlighten you with the basics of raising startup capital, so you can distinguish what forms are accessible and how you can obtain money to start and stimulate your startup.
1.Crowdfunding
The crowdfunding approach brings together investors that are ready to invest in a project and entrepreneurs or businesses that need a financial boost. This strategy will enable you to employ a significant amount of capital from several entities to finance your startup. Nowadays, crowdfunding has become a popular way to raise funds thanks to the usage of social media and crowdfunding sites that connect stakeholders and entrepreneurs in one place, under the promise to upsurge the hyper-growing startup by escalating the sum of investors.
2.Personal Assets
Another potential source to raise capital for your startup is personal assets. Self-financing is a common, but also risky form of funding a company. Using your assets can give you the freedom to use the money as you consider and at your own risk. Using this way of funding might also demand from you: panning, supervising, and controlling each financial move you make.
3.Angel Investors
“Angel Investors” have a big amount of capital and are ready to capitalize on innovative startup ideas. Many startups have effectively escalated their businesses after receiving millions from angel investors. The capital that angel investors offer may be a one-shot expenditure to aid the startup to pull out of the ground or a continuing booster to fund and carry the hyper-growing startup through its challenging initial phases.
4.Venture Capital
Venture Capital is a form of private equity where capital is invested in projects, businesses, or startups that represent a significant risk, usually, this threat might come from the newness of a business or the volatility of the market where the company intends to grow in. It is a kind of funding that investors offer to startup businesses and trivial corporations that show a long-term potential for growth. You must know that venture capital usually arises from wealthy investors, venture banks, and other monetary foundations.
5.Business Incubators
If your startup is in its initial phases, you can utilize business incubators to fund your ventures. These expressly planned programs will allow your startups to grow while functioning at a lesser cost through the initial steps of startup development. You should know Incubators want an application procedure to join and often necessitate a promise for a specific time.
6.Loans From Microfinance Providers
What will you do if you cannot raise capital using previous means? You still have another choice, that is, Microfinance loan providers. They allow access to monetary benefits to those who cannot access traditional banking loan services. If your startup’s demands are limited, and credit assessments are not an option, then raising capital by obtaining loans from microfinance providers is a good option.
If you’re struggling with raising capital for your business and need the help of a financial advisor or fractional CFO contact us and let us chat over some coffee soon, and we will make sure to find the best professional for your business.