Cash is king and no startup can survive without it. Sure, you have a world-changing idea; but without access to capital, it will be almost impossible to build the product of your dreams. As such, most founders find themselves locked in a battle to not only get the engineering for their product in place but also raise the capital they need to make it happen. While we can’t help with the engineering, here is a list of the best financing solutions for successful founders.
This might come across as a bit altruistic, but self-financing, or bootstrapping, is one of the better ways to fund your startup – especially in the beginning. When you are just starting out is when expenses are low, so getting your minimally viable product together and out into the market without taking on debt or investors is still possible
Another plus of self-financing is that it will actually make your case for investment even stronger. This is because investors of all stripes like it when a founder has a ‘skin in the game’ – i.e. they are willing to risk their own money.
In some ways, customers are the cheapest form of financing a founder can find. Granted, customers don’t come free, but if you have a world-changing idea then you should also have a good idea of who the early-adapters will be. As such, you want to target these adapters by making sure they have access to your product.
In addition, there are several crowdsourcing sites which will help a founder to expand the reach of their early product such as Kickstarter or Indiegogo. Both sites are a great place to raise awareness of your product and to gain some early customers.
This brings us to the third financing solution for founders – crowdfunding. This is when you can use the power of the crowd to raise capital, and awareness, of your startup. That being said, crowdfunding is not a panacea and the space has grown quite competitive. In fact, there are so many sites and potential projects that it can be difficult to stand out from the crowd.
As such, any crowdfunding campaign needs to be conducted with a clear goal and established tactics in place. The best advice is to start small. Don’t look to raise $1 million from your first crowdfunding campaign. Instead, focus on small steps that will win over early backers and then try to ramp up from there.
In addition, your crowdfunding campaign will need to be multi-channel. Don’t just rely on the crowdfunding site alone, tie in social media, video, networking, and other elements to raise awareness about your campaign.
4) Alternative Finance
Depending on your long-term strategy this can be a great way to go. One advantage of alternative finance is that it will help you to set up business credit for your company from day one. While banks are not the right channel for startups or small businesses in general, many alternative lenders have burst onto the scene.
These lenders specialize in the needs of small businesses and they provide a number programs which can help a founder get the capital they need. This includes microloans, revolving credit lines, or other products and often the repayment options are more flexible than traditional credit options. However, some investors will look down on debt, as such, you will want to tightly manage your debt levels to make sure your startup is attractive to future investors.
5) Angel Investors
The face of startup investing is changing dramatically. In the past, the only option was venture capital. However, these groups have become increasingly more focused on mature startups and this has created an opportunity for investors who solely focus on early-stage companies.
Some of these investors are called ‘angels’ in that they fly in from above to help when no one else will. Most angel investors are quite experienced and they are often looking to make bets that will pay off big in the short-term.
In addition, getting an angel investor on board can be time-consuming. Depending on the investor’s process, you should expect that it might take eight months to a year, if not longer, to close the initial funding. However, many angels bring so much more than money and the best angels can offer access to market or to additional investors.
As you can see there are several options for founders to finance their startups today. While some of these options require more time and preparation than others, they can all fit together as you devise the best way to get your startup off the ground.
Just like everything else with your startup, put together a plan and work it through. Before you know it, you will be on your way to changing the world.