Startup funding Guide: What you need to know

by
Marta Zadravec

Are you having a brilliant idea for your startup, and have a hard time funding it? You need to learn your best options on how to fund a startup. Here is a quick guide on how to get your started and fund a startup.

The unfortunate reality for most entrepreneurs with an idea is that money is often a prerequisite. Despite the wide array of funding sources, there are three general categories: Bootstrapping, Debt, and Equity. In recent years, crowdfunding on platforms such as Fundable has become a powerful source of funding for both bootstrapping and equity techniques.

Debt as a Form of Startup Funding

Simply put, debt is capital you have to pay back. Generally, debt is easier to come by in terms of funding your startup, as there are far more lenders in the world than equity investors.

Because lenders are more indiscriminate in the industries they lend in, a traditional loan is one of the most frequent and viable roads to funding.

Entrepreneurs often look to avoid going into debt. However, these options are not as scary and complicated as they sound. There is often a very good route for startup funding. Startup Funding is a critical component of your business venture and is a big issue to tackle.

Offering Equity in Exchange for Startup Funding

Equity refers to capital a startup founder receives in exchange for stock in his or her company. This is what investors will typically deal with. Clearly, to offer equity to an investor, you need to have some perceived value or proof of concept to instill confidence.

Equity investments are most valuable in businesses that involve high risk and normally a longer period for return on investment.

Bootstrapping

It would be ideal for startup founders to be able to begin their venture with a lump of investor capital. Unfortunately for most startup founders, that isn’t realistic. For centuries, the majority of entrepreneurs have funding for startups with their own capital through bootstrapping.

Bootstrapping often entails using personal savings, credit cards, promising stock for sweat equity, or borrowing from friends and family. Borrowing from friends and family can be difficult to ask for, and even more difficult to orchestrate. However, many entrepreneurs have turned to crowdfund on sites like Fundable or Kickstarter to streamline the friends and family round. There are many other crowdfunding sites to raise money for your idea.

Funding for startups is available in all sorts of forms, and an entrepreneur would be wise to consider and evaluate all forms of capital available for each stage of the business. Startup funding can have different forms of capital that will make more sense and be available for that stage. Moving from simple credit card debt and personal savings to more complicated sources like angel investors and commercial loans.