There always exists an analogy between entrepreneurs and investors. Huge grants and allocations from the private as well as the government sector have paved the way for many young entrepreneurs and have encouraged them to start their own businesses.
Often, these startups rely on external fundings which has triggered the concept of funds raising. The main intention of this blog is to help potential entrepreneurs find the most suitable fundraising platforms.
So, let us see how these fundraising platforms work for the startups.
How Fundraising For Startups Works?
To start a new business, one needs to be of good financial standing. So, funding is the initial help that is provided to the startups in the form of money, either to start a business or run it smoothly.
Simply put, fundraising is the process of asking for financial help from outside to manage the expenses, operational tasks, development, and growth of the business.
There are two ways to generate funds for your business.
1. In form of Debts
2. By sharing the company’s partial ownership
Let us know now about the various fundraising platforms.
Different Platforms To Raise Funding
1. Bootstrapping or Self-Investment
Bootstrapping is the most effective and efficient way to finance your startup. This way of fundraising is about starting your business with your own money and then managing the further expenses with the sales that come in.
Entrepreneurs can even ask their friends and family for the funds as they are more likely to help you with any intention of getting the borrowings back.
The concept of crow-funding is about getting funds and finances from more than a single investor at a time. In this case, the investors provide you the funds based on your business goals, pre-orders, working plan, and future plans towards success.
3. Angel Investment
There are ample investors in the market who are willing to invest in promising business ideas. They have cash in abundance and hence are known as Angel investors.
These investors work with huge networking groups or sometimes even alone to provide funds to the potential and rising entrepreneurs. When the business gets mature and reaches its goal, these startups earn their share.
Big companies such as Yahoo, Google, and Alibaba have made their way to success with the help of Angel investors only.
4. Venture Capitalist
For the companies that have high and promising potential, Venture capitalist provides is the best way to raise funds. This funding platform is professionally managed.
Typically, they invest in the form of shares to the businesses which have crossed their idea stage and are entering the phase of seed stage.
They tend to exit when the company is at its exit stage and releases its IPO. These venture capitalists even provide mentorship and expert consultancy to the businesses.
5. Bank loans
Banks, the most authentic and accountable place to get help from, provides the funds in two ways.
Working capital, to smoothly run your business and swiftly generate a cycle of revenue.
Funding, based on your project report and business plan to start a business.
6. Government Programmes
There are several programs launched by the governments to boost innovative ideas. Such programs help young entrepreneurs bloom their ideas by provings financial aid to them.
7. Incubators & Accelerators
Entrepreneurs that are in the early stage of their business can consider accelerators and incubators to get funds for their business.
Incubators provide all the tools, training, and networks to the businesses while accelerators help the businesses take a big leap and run smoothly.
These funding platforms require a time commitment from the startup owners and usually run for 6-8 months.
Companies like Airbnb and Dropbox have boosted their business by raising funds from accelerators.
Also Read – How Startup Studio Help You To Grow
It is crucial to raise funds for your startup ideas but is only advantageous if they are utilized efficiently.
Even if you are self-sufficient to start a business, outside help is still needed to make smooth business transitions for the long run.