By Steve Blissett
When you have settled on a business plan and how much funding assistance is needed, and what it will be used for, it is time to consider what funding option is best for your business. Stepping out into the start-up journey can be a stressful time, and so I wanted to prepare you with a guide on what funding options are available to start-ups and when it may be best to consider one over the other.
Obviously, banks are a good start point for loans and overdrafts. You will need to provide a well-considered business plan and sound financial forecasts to help the bank with their lending decision. You may be asked to be a guarantor for the loan.
Here are some of the top start-up funding options available today:
1. Start-up Launch Platforms
Some companies have been set up specifically to help start-up businesses get their feet off the ground, offering information, research, and assistance with all aspects of getting a business launched, including ways of connecting with investors. Startups.co is a great example of these types of platforms. It houses one of the largest start-up communities in the world and provides an extraordinary opportunity to get in front of some investors in your space for both funding and mentoring.
2. Angel Networks
Angel networks provide access to angel investors who are wealthy individuals who invest in small companies that look promising. Most angel investors will not only invest in your start-up, but will also sit on your shoulder, offering mentorship, solid advice, and provide access to their network of contacts. Angel Investment Network is a great place to start your search. It has thousands of angel investors who provide information on the type of investments they are seeking.
3. Crowdfunding Sites
Crowdfunding sites provide you with access to many different types of investor – from the general public with an interest to participate in the “next big thing” (Kickstarter and Indiegogo) to philanthropists who believe in helping others realise their dream (RocketHub), to accredited investors seeking new ideas to fund.
Each crowdfunding site has its own focus and way of incentivising investors, so study each one carefully to see which one most closely aligns with your strategic goals and vertical.
4. Incubators & Accelerators
Rather aptly named, an incubator or accelerator gives you a whole host of investor resources to watch that business grow up and succeed. These investors are primarily interested in taking on a bigger role to help turn your idea into a viable business model as well as provide the funding sources to make it happen.
These incubators and accelerators even offer a physical space to set up your office, making it easy to work with you directly. This can offer excellent networking opportunities as the space is usually within the same building used by other start-ups, making it a great place to exchange ideas and grow together. National Business Incubation Association (NBIA) has a directory listing to help you find a business incubator member in your area. In exchange for funding, they may want a piece of your start-up, so you will need to decide how much you are willing to give up.
Start-up accelerators, such as Ignite and Seedcamp, offer advice, small seed funding, and exposure to other investors through their own networks.
5. Government Schemes
Traditional sources like the government funding are still a good source. The benefit of these is that these come with no interference or expectations that they will get a stake in your business.
6. Professional Social Networking Sites
LinkedIn! The first social network many rush to for business networking. While this may seem like the only option for networking with investors online, it is not the only professional social networking site available for seeking investment. Beyond LinkedIn, there are numerous professional social networking sites that can help connect you with all types of investors across all business segments. Many of these new professional social networking sites can connect you with investors from other countries who want to become involved in global business and this can result in them bringing your product or service to their part of the world.
Some professional social networking sites to consider for investor connections include Cofoundr and Meetup.
7. Friends & Family
Friends or family members are often the easiest to convince as they already believe in you and are passionate about helping you succeed. Just be sure to keep your personal and professional relationships as separate as possible by getting everything in writing and clearly explaining the risk involved in investing in a start-up. Don’t risk losing friends or family over a business arrangement.
The most important aspect of seeking startup funding is that you never stop talking. Never stop marketing your idea or talking to people about your funding requirements. Stop now and you may never find your perfect match.