Even the most brilliant inventors in the world often need to seek outside investors to get their ideas off the ground. Many of the world’s most successful businessmen started with investors. Innovation doesn’t come without a price tag, so outside sources of income are almost always necessary. However, needing funding and finding someone to provide it to you are two entirely different things. A common question asked by both start-ups and innovators is often, how do I get funding for my project? Let’s look at the best funding options for start-up companies, so you continue down the path of innovation.
Consider a Kickstarter Campaign
Kickstarter is not the only platform of its kind. Still, since its inception in 2009, it’s been a popular place for start-ups and investors alike to get funding and support from the public instead of seeking out more traditional methods like Angel Investors. This type of funding is called crowdfunding, and it allows businesses to raise money and gain exposure to possible customers after they launch. Creating a crowdfunding campaign isn’t very difficult. You just set up a profile, describe your business or idea, and set a goal for the amount of money you want to raise. The downside? You typically have to pay a fee or a percentage of the funds raised to the platform. You also need to tell a compelling story and hope your Kickstarter campaign pays off. Despite its drawbacks, many companies have raised thousands and even millions of dollars off platforms like Kickstarter.
Consider a Loan or a Credit Card
This may be the least desirable option on the list, but it is both reasonable and a traditional way of securing funds for your business. There are pros and cons to taking this route. The biggest negative is that financing is difficult to obtain for start-ups because they tend to be unstable. Almost 90% of start-ups fail long-term, making financial institutions unlikely to invest, even if you have a great idea. If you do get approved, especially post-pandemic, many financial institutions are offering great rates. This gives you a low-cost and long-term way to pay back the money borrowed without having to barter equity like you would with an Angel investor or Venture Capitalist.
Getting a small business credit card is also an option, but again comes with drawbacks. Most credit cards offer very high-interest rates. It’s possible sometimes to sign up for a credit card with an incredible introductory offer like 0% APR for a certain amount of months, but if you don’t pay the bill back in that time frame, you’ll get charged for the interest from the purchase all at once.
Consider an Angel Investor or Venture Capitalist
Many entrepreneurs think Angel Investors and Venture Capitalists are the same, but they are very different. Both, however, offer you funds for your start-up in exchange for equity in your company. This gives them a higher return on their investment than they would get with more traditional investments. The biggest win for start-ups is that typically if your business fails, you aren’t on the hook for the money you borrowed. If the company doesn’t take off, you won’t be buried in a mountain of debt. Typically, Angel Investors and Venture Capitalists are aware of the risks they are taking and are familiar with start-ups. Thanks to their history in the field, they can also offer excellent business advice to help you flourish.
The main difference between Angel Investors and Venture Capitalists is that an Angel Investor is one person and is investing their own money. Venture Capitalists are usually a board or business that is drawing funding from different sources of capital to offer support. Both offer similar terms of exchanging money in return for equity, so they are great options for start-ups looking to take less risk while still gaining big rewards.
Seek Help from Family and Friends
This may not be the most desirable option on the list, but it remains a valid one. Often those most excited about your innovations will be the people closest to you. Many successful businesses like FUBU were launched with support from family and friends. In FUBU’s case, Daymond Garfield got his start when his mother took out a second mortgage on her house. Years later, he’s now a significant investor with a permanent spot on Shark Tank. If you have an extensive network of family and friends who understand and support your business venture, you may want to lean on them for an investment to help you get your start-up off the ground. You are protected from high interest rates and risks of bankruptcy if it doesn’t work out, and you also get to keep your equity.
Grants
Grant money is not just for non-profits. Many countries, including the United States, offer grant money for various businesses, both large and small. For example, the European Union’s HORIZON program offers almost 3.1 billion dollars for start-ups alone. While you may need to hire a grant writer to help you with the applications, it’s worth the investment. Grants don’t need to be paid back, so they give you a significant advantage compared to loans and investors. So, before you opt for a loan, consider scrolling through the listings for grants in your country. You may be surprised by what you find.
Fahad Alrajhi Group
Start-ups and small businesses often have the passion for achieving their vision but lack the financial means to get there. Here at Fahad Alrajhi Group, we seek to bridge that gap by investing in your company so we can succeed together. If you, or someone you know, owns a start-up and are looking for investors, contact us today, so we help you realize your dream.
