Funding Basics: Raising Startup Capital for Your Business


According to a report from the Small Business Administration (SBA), about a third of businesses fold up during the first two years in operation. One common reason for the failure of these businesses is the lack of funding. Money, after all, is the lifeblood of any company. The business will close down if it runs out of cash or fails to secure sources of funding.

If you want to put up a small business, you’ll need cash to get your startup off the right foot. Here are three ways to help you raise funds for your business venture:

Bootstrap Your Business

Self-funding or bootstrapping is an effective way to inject money on your startup. That involves dipping into your savings or getting friends and family members to contribute to your business venture. With bootstrapping, you’re telling investors that you’re serious about starting a business and willing to risk your money for your idea.

If you’re going to bootstrap your business, you’ll need to keep your expenses at a minimum. Although you can’t lower the payments on home loans and other fixed costs, you could cut back on discretionary expenses like weekly restaurant dinners and cable subscriptions.

Find an Angel Investor

business professional

Some well-off people like to put their money on potentially successful startup ventures in exchange for a stake in the business. Usually, these angel investors have achieved success in a particular industry and are currently searching for lucrative opportunities within the same industry.

The benefit of angel investors is that they have the funds to get your startup venture off the ground. On top of that, they can provide valuable advice based on their successful experience. If you have a great relationship with these investors, they could even leverage their network to open more opportunities for you.

Finding an angel investor, however, is no easy task. Some prefer to keep a low profile, while others are only identifiable when you check with financial advisors and business owners.

Once you do find an angel investor, present a powerful elevator pitch. This short speech should answer the following:

  • Why your product or service will be a hit to your prospective customers
  • The return of investment (ROI) that investors could expect from your startup
  • How your business is different from other companies
  • Why you’re the best person to run the business

Enter Entrepreneurship Competitions

If you genuinely believe that your business idea can change the world or revolutionize how things are done, sign up for entrepreneurship contests. These competitions could finance your startup venture if you win.

These contests also serve as free publicity or advertisement to interested investors. So, don’t feel bad right away if you don’t land that coveted cash prize. If your business idea is fantastic, angel investors may get in touch with you and decide to invest in your venture.

Self-funding your business, looking for (and convincing) angel investors to put money on your startup, and entering entrepreneurship contests are just a few ways to obtain the money you need to move your business forward. When going through your funding choices, evaluate the option that’s best for you. Weigh the pros and cons to determine if the funding option will help you achieve your business goals.

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