New businesses frequently face fundraising struggles during their earliest stages. For some, these challenges can cause their business to fail before it ever gets off the ground. For example, over a quarter of startups polled in a recent survey said they could not obtain the necessary funds to grow their business. If you are an entrepreneur or a small business owner, here are some ways you can obtain crucial fundraising when getting started.
1. Clarify Your Business’s Story
Before you officially start raising money, it’s important to nail down your business’s story and exactly how you planned to use raised funds. Potential investors will want to be clear about where their money is going and how it will be used. Whether you plan to crowdfund your business or seek out angel investors or VCs, you will need to have this step completed before moving forward.
2. Crowdfunding
Crowdfunding has recently become a popular fundraising technique for startups of all kinds. There are several popular crowdfunding sites available, including Kickstarter, Fundable, RocketHub, and Indiegogo. If you decide that crowdfunding is the right choice for your company, be sure to carefully research each option and understand the pros and cons before committing to a particular platform.
3. Angel Investors
Another way to raise money for a new business is through angel investors. Angel investors are individuals who are frequently looking for opportunities to invest in up and coming companies. These investors typically require an equity share in exchange for their investment. If you choose to seek out angel investors, you’re in good company — angel investors have funded some of the world’s most successful companies, including Yahoo and Google.
4. Venture Capitalists
New businesses can also pursue venture capitalists for investments. Like angel investors, VCs will typically require an equity stake in your company. However, many VCs prefer to have a say in running your business, while most angel investors usually will not. If you choose to partner with a VC, clarify your vision for your company and ensure that you are on the same page before making any deals.
5. Revenue Loans
If you can’t stand the idea of sacrificing equity in the early stages of your business, you can opt for a revenue loan rather than seeking an outside investment. Revenue loans, or revenue-based financing, don’t require you to have large amounts of collateral or assets to obtain the funding. Instead, you can secure these loans with a minimum amount of monthly revenue, ranging from $25,000 to $150,000. If your company has already created a steady income, revenue-based financing may be the best method to raise additional funds while maintaining equity.
6. Debt Financing
If none of these options seem right for your business, you could always try to obtain traditional debt financing, although this can be challenging in the beginning stages. While debt financing is not ideal for every company, it’s another option that allows new businesses to avoid exchanging equity for startup funds.
Fundraising in the early stages of business development can be challenging, but with some planning, your company should find ways to obtain the necessary financing to grow. Research each of these options thoroughly and decide how you will raise capital based on your business’s unique needs and goals.