6 Ways to Secure Funding for Your Startup
7 min read

6 Ways to Secure Funding for Your Startup

June 14, 2022
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7 min read
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A list of pre-seed funding amounts written on paper alongside red and yellow folders and a blue sticky note stating "A big business starts small" on a wooden desk background.

Funding remains the sole driver of any startup business. It is the oxygen that sustains every business idea and breathes life into it. Every business needs funding to run its activities; whether to secure a workspace, acquire necessary machines and instruments, or pay its employees. However, securing funds for your startup business can be an exhaustive task due to its state as a startup. Why? Several investors are likely to invest in existing businesses with proofs of concept than risk their funds in test-running a perceived viable business idea. But before we probe into the six most reliable ways to secure funding for your startup business, let’s briskly examine the impacts of funding on a startup business. 

The Impacts of Funding on Startup Business 

The impacts of funding on startup businesses can never be overemphasized. Robert A. Rice, one of the leading authorities in business finance, describes a startup business owner without proper funding as “a musician without an instrument.” While he may proceed to entertain his audience with his sonorous voice, he can simply achieve more with the aid of an instrument. Also, funding determines the quality and standard of production elements such as workforce and the eventual standard of the product or service itself. Certain products can take a different shape should there be enough funds to invest in getting the right materials. This then leads us to consider the several misconceptions about funding and startup businesses that are prevalent in our society today. Should you not be well guided, you might eventually fall victim to these misconceptions and endanger your startup business even before it sees the light of the day. 

Popular Misconceptions about Funding and Startup Business

Before we proceed to discover the 5 most reliable ways to secure funding for your startup business, we must ensure to deal wisely with the prevalent misconceptions about funding and startup business you may be holding on to. Nothing affects the quality of human lives as much as holding on to falsehood. Hence, in your anticipation to learn of reliable ways to secure funding, you must tread cautiously and wisely. 

One of those popular misconceptions is that the first step in business planning is funding. That is such a dangerous mindset capable of stopping you from ever starting out at all. Why? Though funding is important, it is never the first step any potential entrepreneur must take. So, where does discovering and researching the best business ideas stand if all the entrepreneur thinks of at inception is funding? How will he even be able to project the expected funds to run? Believe it or not, there is no business without a business idea. Get it straight! 

Another of such limiting popular misconception of funding in a startup business is that nothing can be achieved without funding. That is an outright lie you've been made to believe! Of course, something can be achieved. Actually, funding comes later in business planning. Research into the life cycle of a business has validated the belief that business operations start right from the planning stage; from the discovery of business ideas to market research, down to the outright rendering or sales of the first service and product respectively. 

What are the 5 Reliable Ways to Secure Funding for Your Startup Business? 

Now, let’s take a brief look at the 5 most reliable ways to secure funding for your startup business with no stress.

1. Funds from Personal Savings 

The best and most reliable way of securing funding for your business is from funds from personal savings. Every aspiring entrepreneur must be a savings specialist. Your business idea should keep you awake at night and cause you to cut down on his daily expenses; deny yourself of the luxuries you can obviously afford just to save money for your anticipated business. You may find it necessary to take up employment in other firms just so you will be able to save up part of the capital of the business you have planned out. As an aspiring entrepreneur, you may need to get employed in another firm so has to divert your earnings to your business 

2. Grants from Family and Friends 

Next is grants from family and friends. This is also a great way of securing funding for your startup business. However, you may need to have built a reputation capable of making them dip their hands in their pockets to hand you a cut of the bar.

Certainly, all humans are born into families. No one came into existence on planet earth through a sudden fall from the sky. Also, as we grow and interact in our societies, we develop bonds with some humans who just seem to have captivated us enough with their generosity, care and humanity. Then, as we progress in this bond, trust is built. Share your great business idea with a trusted friend. However, make sure to be a bit discreet in providing full details so as to avoid idea theft. As you do this, chances are that your friends might develop interest and eventually let go of a few resources to help you get started. 

3. Angel Investors  

An angel investor is a high-net-worth individual who provides financial backing for a startup in its early stages. They can be an individual or a group of people, and they typically invest their own money rather than using borrowed funds. Angel investors can provide much-needed capital for a startup, which can help it get off the ground and grow. In exchange for their investment, angel investors often receive a stake in the company or some other form of compensation.

4. Venture Capital (VC)

Venture Capital (VC) is a form of private equity and typically provides capital to promising early-stage startups in exchange for a portion of the company's ownership. The hope is that the company will experience rapid growth and be able to eventually sell its shares at a much higher price, allowing the venture capitalist to make a significant return on their investment. In order to qualify for venture capital funding, a startup business must typically have an innovative product or service, huge growth potential, and a well-defined business plan.

The process of obtaining venture capital funding can be difficult, but it can be worthwhile to partner with a reputable VC firm. They usually have extensive networks and resources that can help a startup grow quickly. In addition, they often have experience in helping young companies achieve profitability and scale.

However, there are also some risks associated with receiving venture capital. For example, if a startup does not perform well, the venture capitalist may be able to take back their investment or even sell their ownership stake at a loss. Additionally, since venture capitalists usually want a large return on their investment, they may pressure the company to make decisions that may not be in its best interests long-term.

See also what is the difference between a venture builder and a venture capitalist 

5. Loans from Commercial and Microfinance Banks 

Obtaining a loan from commercial and microfinance banks is another reliable way to secure funding for your startup business. Sometimes, as an aspiring startup business owner, you may have to consider funding your business through loans from some of the several commercial and microfinance banks around you. However, it is highly advisable to have a form of existing funds before approaching any of these banks for financial support. Most of these banks are usually skeptical when granting business loan requests without a log of visible financial stability, collateral, and a well-structured business plan. Nevertheless, startup business owners who are able to meet the set requirements and obligations will find this a reliable way to secure funding for their startup business. 

6. Grants from Non-governmental Organizations and Corporate Organizations

Another of the most reliable ways to secure funding for your startup business are grants from Non-governmental organizations and corporate organizations. Several businesses today were able to start business operations through the grants acquired from non-governmental and corporate organizations across the globe. Often, such aspiring entrepreneurs are required to submit a business plan. This is then evaluated by industry experts to check the viability and proficiency of such business ideas. 

Hence, you need to prepare a well-structured business plan capable of catching the attention of anyone who examines it.

FAQs: 6 Ways to Secure Funding for Your Startup

What are the most reliable ways to secure funding for a startup?

Six reliable ways to secure funding for your startup include: - **Personal savings**: Using your own financial resources to fund your business. - **Grants from family and friends**: Seeking support from your personal network. - **Angel investors**: High-net-worth individuals who invest in exchange for equity. - **Venture capital (VC)**: Professional investors funding startups with high growth potential. - **Loans from banks**: Borrowing funds from commercial or microfinance banks. - **Grants from NGOs or corporations**: Applying for funding opportunities from organizations that support entrepreneurial ventures.

Is personal savings a realistic option to fund my startup?

Yes, personal savings is one of the most realistic and commonly used ways to fund a startup. According to statistics, more than 75% of startups are initially funded using personal savings. Cutting back on unnecessary expenses or working additional jobs can help you accumulate capital for your business.

How do I convince family and friends to invest in my startup?

To inspire confidence in family and friends, ensure you: - Present a clear and well-researched business plan. - Demonstrate your trustworthiness and dedication. - Set boundaries to avoid mixing personal and professional matters. Consider offering informal agreements or terms to repay them once your business gains traction.

What are angel investors, and how can I attract them to my startup?

Angel investors are wealthy individuals who fund startups in exchange for equity or convertible debt. To attract angel investors: - Research individuals in your industry with investment interests. - Develop a detailed pitch highlighting your business's growth potential. - Showcase your startup's scalability and innovative ideas. Networking through startup events, online platforms, and referrals can also help you connect with angel investors.

What are the risks of seeking venture capital (VC) funding?

Venture capital funding often comes with several risks, including: - Loss of control: Venture capitalists may want significant equity and decision-making power. - Pressure to scale: Investors expect rapid growth and high returns. - Potential misalignment: Decisions may be influenced by short-term financial goals instead of long-term sustainability. While VC funding offers resources and expertise, it's vital to ensure that the alignment between the company and investors is strong.

Can I secure startup funding from banks without collateral or financial history?

It can be challenging to secure loans from banks without collateral or a strong financial history. Banks typically require: - A well-structured business plan. - Proof of an income stream or initial financial stability. - Collateral as security. In the absence of these, consider microfinance institutions or government-backed loan programs designed for startups.

Are there specific organizations that provide grants for startups?

Yes, many Non-Governmental Organizations (NGOs), corporate organizations, and even government bodies offer grants to startups. Examples include: - Small Business Innovation Research (SBIR) programs. - Corporate social responsibility (CSR) initiatives by large corporations. - Industry-specific organizations that support businesses aligned with their goals. Check eligibility, deadlines, and the application criteria to increase your chances of securing a grant.

Why do many startups fail to secure funding?

Startups often fail to secure funding due to common issues such as: - Lack of a clear, viable business plan. - Overestimation of their market potential. - Failure to build trust or rapport with potential investors. - Underprepared pitches or lack of a proof-of-concept. Addressing these concerns through proper research, preparation, and networking can significantly boost your chances.

How does funding impact the success of startups?

Funding is critical as it: - Enables startups to acquire necessary resources, such as equipment and staff. - Allows for product development and marketing activities. - Provides the capital to scale operations and enter new markets. However, it is crucial to manage funding wisely to avoid overspending or misallocation of resources.

Can I start a business with no funding or external support?

Yes, it is possible to start a business with minimal or no funding through strategies such as: - Bootstrapping: Reinventing existing resources or operating on a lean budget. - Pre-selling products or services to raise initial funds. - Bartering skills or services to minimize startup costs. Starting small and scaling incrementally is often a practical approach for entrepreneurs with limited funds.

Alexandros Christidis
Founder & CEO

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