In terms of financing your startup, it is crucial to understand the capital funding available for startups. There are a lot of ways to fund your startup and finding one that fits you best is key.
Self-Funding
Self-funding a startup is when the startup founder(s) invest their own capital fund or find other ways of funding without the involvement of a third party.
Bootstrapping
It is the practice of using your own funds to finance your startup venture. Bootstrapping can be utilized in various stages of your startup! For example, you can use your own savings to build your business and when you already have an established company, you can re-invest the revenue into the company’s growth. One of bootstrapping’s most attractive features is the fact that you have complete control of your startup since there is no exchange of capital for equity. On the other hand, it is more likely for the startup to have a slower growth rate at the beginning while the founder(s) take a bigger financial risk.
Bartering
Bartering is an exchange of goods and services without the exchange of money. It is a way of funding your startup since you can reduce costs by exchanging, for instance, your service in return for the lending of a local. In addition, is necessary to know the monetary value of your services before exchanging them for it to be a fair trade between parties. This method helps startups to reduce costs and expenses; nonetheless, it also means having to provide, in some cases, more services than expected.
Credit Cards
Using personal credit cards to fund a startup is a recurring practice but the biggest downside is having high-interest rates. To do it, make sure you first know the amount of interest you would have to pay, as well as the penalties and repayment plans you get.
Angel Investors
Angel investors are high-net-worth individuals who provide financial backing to entrepreneurs and startups. This type of investor usually looks for riskier ventures mostly in their starting stages and is interested in a high ROI (Return On Investment). They are also on the lookout for interesting and feasible opportunities. In some cases, the Angel Investor is part of the founder’s closest circle of family and friends who make a one-time investment.
Crowdfunding
Crowdfunding means having involvement in some digital platforms. These platforms can have a global reach to potential investors. for your early-stage startup that seeks a part of your equity. To go more in-depth on crowdfunding check this out!
Venture Capitalists
On opposite ends of angel investors, Venture Capitalists, usually referred to as VCs, are private equity investors that provide capital to companies. VCs want a high growth potential in exchange for an equity stake. They tend to find young businesses with a high potential for growth and development. Additionally, VCs are known to normally invest through a firm.
Incubators & Accelerators
Both incubators and accelerators have a thorough applying process. When looking be sure to look into the network and mentors that can be found in the chosen solution. As far as timelines, accelerators have a set one while incubators do not. Above all be sure to join the one that fits your specific needs. Ask yourself where your startup is in terms of growth since that could determine the best choice for you.
As can be seen, there are many different paths to finance a startup. Notwithstanding, there are more solutions that are not mentioned! Do your research on capital funding to know which one works best for your situation. Furthermore, always keep in mind what you feel most comfortable with.