Fund for a Start-up business
Entrepreneurship! The tag that is making headlines all over the world. Companies like Intel, Amazon and other renowned companies are investing on university dropouts and other individuals. But why? It’s because, internet and other tools available have given individual wings of freedom leading to innovation and invention.
The ability and confidence to start a company right after their UG or even during the last 2 years of their UG improved drastically over the past decade. Start-Ups ranging from App building to creating complex industrial products have taken shape. Inspite of the resources available through different means, every Start-Up requires the initial fund. It might be ranging anywhere from $5000 - $Millions. But where does these funds come from? Or from where can a Start-Up acquire these funds? Following are the most viable options for any Start-Up to consolidate the funds:
Bootstrapping (Personal)
Bootstrapping is an ideal way to fund your company initially, where the investment is expected to be below $10,000. If you are an IT Geek and capable of building some amazing Apps with the help of 2 or 3 members as your creative team, then your savings might help you to do this. You may be able to upscale your company, but can earn enough to quit your day job if you’re right on the target.
Family & Friends
If your investment ranges anywhere from $10,000 - $25,000 and you have some relatives and friends who really trust in your capabilities and abilities, you can opt this way. But industries professional state that, this option should be the final one to be sought after, as you can’t file a bankruptcy over your friends and family’s money if your company fails.
Angel Investors
If you are good at socializing and have a network with other entrepreneurs and local companies, angel investors can come in hand. The investments can range anywhere from $25,000 - $250,000, and come at the price of certain amount of equity and profits from your company.
Venture Capital
Venture Capital is often supported by real time industrialists, who usually invest in upscaling your business and expanding it. This form of investment is driven into high margin business sectors like IT, Communication and Biotechnology. Only if a start – up requires more than $Million, one need to seek venture capital. Venture Capitalists often take a higher equity and are quite promising in developing your company but at a higher risk project.
Incubators
This sector (often known as accelerators) is made up of Universities, Organization and other groups who provide various resources like logistics, office space, consultation services, legal help and other resources in return for an equity in the company.
Bank Loans
Bank loans are the most sought source of funding for Small scale and Medium sized enterprises. The process includes submitting a business plan, showing some assets and providing relevant documentation to the bank. Even though the process might take a while, it would be worth waiting for young entrepreneurs.
Government Allocated Funds
This bucket often gets overlooked, but it should be a major focus for entrepreneurs who ideas are around the government agencies technological future plans and advancements. If your innovation can prove helping to the govt. authorities, you might well be in the race to receive government grants, subsidies and funding for your start – up venture.
Whatever form of you investment you seek, everything involves complex decision making on various factors like, Economy, Business, Market, Innovation and Competence. You need to decide whether your start – up is kept in mind of long – term or short – term expansion and benefits. Usually long – term based start – ups have greater benefits post the 5 year time line and generally reap high benefits later. It’s again upto an individual to work out on the pros and cons of various types of funding opportunities available.
Recommended Read :
- Bridge Loan Start Ventures
- What is Vendor Financing?
- Raising Fund From Family and Friends for Start Up Venture
- How to Secure a Micro Loan for Start Up Business?
- How to Invest in a Start Up?
- Risks Involved in Start Up Investing
- How Can I Become An Angel Investor?
- How Risky is to Become An Angel Investor?
- What is Bridge Loan?
- What is Venture Debt Financing?
Everyone has a dream to start their own business and be successful. Every business was a small start-up initially. Sourcing funds for start-up is a very important issue these days owing to the tremendous rise in competition. There are variuos avenues like Angel investors, peer-to-peer lending, venture capitalists etc, who invest money in start-ups. This article gives valuable information on their functioning.
Funding for a start-up is the most crucial process of business. It is the most basic step one needs to take very carefully for setting up a business. The article describes almost every source of fund for the same. The various sources such as venture capitals, angel investors etc are the ones described here.
A good effort in all!
This tutorial really saved my day. I was looking for some points which will help me to organize a fund for a startup. I understand different methods of fund raisings and its uses. The points seem so useful so that it can be bookmarked for a reference .Thank author for this great post, well done!