Funding is an extremely significant aspect in line with meeting the vision of a business. Both funding and fundraising are fundamental modern business scenarios that support the growth of a startup. Funding is required to take the best advantage of the existing and upcoming market opportunities. Even if you initially go for bootstrapping, outside funding is required to sustain in the long run.
Money makes startups and goes round. No matter the business model, the market, the mind-blowing idea, you’re going to need a little (or large) cash injection if you’re going to make your mark on the world.
Types Of Startup Funding
1. Venture Capital
One of the most popular forms of startup funding is through venture capital. High-net-worth individuals, giant super funds, corporates, and other groups invest in venture funds, which are managed by investors, who invest in startups on their behalf, taking equity stakes in the business. VC funds are typically looking for startups with high growth potential, but it can be about more than just a return. Many VC firms also have their own specialist areas and will look for founders they can have a good working relationship with, and businesses they can add value to.
So far in 2019, we have seen some more modest deals, with the Internet of Things startup GoFar raising $1.3 million; software startup Curious Thing securing $1.5 million in seed funding; and, Kiwi edutech startup Kami completing a $1.4 million raise led by Aussie VC Right Click Capital.
2. Angel investors
These are typically high-net-worth individuals with particular expertise or interest in a specific industry or technology, looking to invest in it. Often, they will be keen to contribute to the startup’s success with skills, knowledge, and contacts.
Some startups will rely on just one angel, but often, more support comes flooding in once one reputable backer is on board. Equally, there are several angel groups such as the Sydney Angels and women-focused network Scale Investors. Although angel investment comes with high-interest expectations and lesser investments compared to Venture capitalists; it is important to remember that Google, Yahoo, and even Alibaba were a result of Angel investing.
3. Go for Crowdfunding
The concept of crowdfunding is quite similar to mutual funds on a basic level. In this option, more than one investor is involved and they offer a fixed amount of money based on your business idea, goal, plan of action, and plans of making a profit. All you need to have are people who truly believe in your business idea.
Crowdfunding is gaining popularity as it ascertains the belief that your idea is also believed by other experienced players in the market. Crowdfunding also helps you in getting the crucial funds from the idea stage itself. You can gather crowdfunding from friends, family, and entrepreneurs who believe in your business concept and have the means to come together and fund your aspiration.
4. Consider Self-funding
Popularly known as bootstrapping, when it is hard to convince others of your business idea and vision. Often investors ask for traction before investing, the initial round of self-funding allows you to prove the feasibility of your idea and build confidence in the investors for a further round of funding.