Securing Financial Backing for Your Emerging Startup

Every year, thousands of startups are launched with the aim of solving various problems. Entrepreneurs come up with a myriad of brilliant ideas, leading to the emergence of numerous startups daily. However, how many of these startups actually succeed? Unfortunately, statistics show that at least 50% of businesses fail within their first four years. For instance, a survey of businesses founded in 2011 revealed that only 3 percent made it to 2016. That’s quite a daunting figure!

So, how can startups increase their chances of success? By securing outside funding! If you’re exploring funding options for your startup, here are some of the best choices.

Venture capitalists are like professional investors. They have funds ready to invest in promising startups. If your idea stands out, VCs might be interested in working with you, although they typically focus on short-term gains rather than long-term success. You’ll need a polished pitch deck and a solid presentation to attract them, as they’re looking for ventures with the highest potential for profit.

Angel investors are wealthy individuals seeking investment opportunities. They can invest substantial amounts of money in startups with high potential. These investors usually take a long-term view and are willing to support you for several years in exchange for higher returns on their investment.

The Small Business Administration (SBA) offers another route for securing funds. You can apply for a business loan or line of credit, but you’ll need a good credit history and may have to use your assets as collateral.

Crowdfunding platforms like Kickstarter allow you to raise money from the general public. While crowdfunding can be unpredictable, it offers the chance to secure more funds than you initially sought if your product generates significant interest. It relies more on public appeal than business acumen, but there are strategies to boost your chances of success.

Many startups begin with personal savings. Entrepreneurs either save up over the years or maintain a day job to fund their startup. This gives you full control over your business, but limits you to your personal financial capacity.

Friends and family are another common source of startup funds, typically contributing around $15,000 on average. This initial funding is crucial, as it can demonstrate to larger investors (like angels and VCs) that your close ones believe in your idea.

The U.S. Government offers business grants for small businesses in specific industries such as education, social services, and medicine. You can check the federal grants available on grants.gov. Note that the application process is lengthy, so don’t expect immediate funds.

Several organizations are set up to support new startups. Y Combinator is a well-known incubator, but there are many others nationwide that can provide resources, investors, facilities, consulting, and possibly seed funding. It’s important to research these organizations to understand what they offer before joining.

Lastly, if your product or service can significantly benefit a major customer, they might provide you with an advance, knowing they’ll profit greatly in the long run. Although this funding source is less common, it’s worth pursuing if you have a promising customer relationship.