The United States added 700,000 new millionaires in 2017, but that still leaves us a far cry away from being a nation where everyone is fabulously wealthy. But maybe that’s just because we’re all sitting on our million dollar ideas!
Today is the day to change that. If you have a great idea, you need to take steps to find the funding it deserves.
Fortunately, if you haven’t yet obtained your goal, and your startup is finding it challenging to secure investors, you have a lot of different options available. From borrowing off of your personal finances to getting investments from crowdfunding sources on the internet, the possibilities are boundless.
Continue reading to learn more and get the tips you need to get your startup off the ground.
Get Your Credit Under Control First
Your personal credit history will have a considerable impact on the amount and kind of financing that will be available to you. So before you begin sourcing funding for your startup, try to get it under control.
To ensure your credit score is as good as it can be:
- Pay all of your bills on time.
- Don’t have more than thirty percent of your available credit in use.
- Don’t close long-term credit accounts, just pay off the balance.
- Communicate with your creditors if you face hardship.
- Only spend what you can pay off.
However, if your credit is pretty low, it may take a year or two in order to build up the type of credit history that you need to secure good interest rates on loans. And if your idea is worth a million dollars, then you may not want to wait.
In that case, you may want to turn to some of the other lending opportunities on this list that are more concerned with the worth of your idea than your creditworthiness. Of course, you will still need to demonstrate that you have the dedication and talent to put your plan into place.
Ask Friends and Family Members for Financial Support
Friends and family members are a primary source of funding for many startups turned successful businesses. These are the people that know and trust you the most making them the most likely to want to take a risk with you.
You may be hesitant to ask your friends and family for a loan since you don’t want to risk their capital along with yours and create tensions in your relationships. But if you believe in your business and are willing to risk your own money, you should have at least enough confidence in yourself to reach out to friends and family.
There is always the risk of losing their investment, but knowing that money is on the line may, in fact, end up driving you to work harder for success.
Borrowing money from friends and family may also allow you to get money for your startup without you having to pay interest down the line. And if you’re fortunate, they may even give the money to you as a gift, not asking you to pay them back at all.
Consider offering friends and family members equity in your business instead of their investment back. That way, the success of their investment venture is tied to your success.
Visit a Venture Capitalist or Venture Capitalism Firm
A venture capitalist firm is a company that pools the money of regular people who want to invest in entrepreneurs, rather than other more popular investments like commodities, real estate, or the stock market.
Venture capitalists and the firms that they work through make investments in companies that are in their conceptual phase of development and base their investments on how much potential for profit they see in the future of your tech startup.
During these early stages, they trade their capital in exchange for a percentage of the business in hopes that it pays off in dividends down the line.
Venture capitalist firms are also a good option if you are trying to scale your business in the next year. For many companies, getting up and running is just the first of many obstacles. With an investment from a venture capitalist, you could expand into another building, rethink your concept, or add new product lines.
The key to getting a venture capitalist to invest in your startup is demonstrating that there is a need for your product or service. This kind of investment is very focused on the potential for profits. Then you have to show how your product can meet the needs of potential consumers better than anything else that is available on the market already.
Make sure you do your research and find out about any potential competitors you have before you have a meeting with a venture capitalist. Nothing will make your meeting end faster than them finding out that you aren’t aware of the direct competition in your space.
Consider Angel Investors
Like venture capitalists, angel investors are people who will exchange funding for equity in your business. But where they differ is, venture capitalists typically invest other peoples money that has been pooled for investments. Whereas angel investors invest their own money in concepts that they believe in.
Still not sure what an angel investor is? Think of the show Shark Tank on ABC. An angel investor is someone who can provide guidance for you as well as helping you with your finances as you advance through the startup journey.
Typical angel investments begin at around a million dollars, and many businesses have more than one angel investor working with them to make their dreams a reality. So make sure you maintain as much equity as possible in your startup so that when the right investor comes along, they will be able to buy in.
If you’re looking for a little extra direction for your business, then finding the right angel investor may be the perfect option.
Don’t Just Look for Monetary Funding
Many people who are trying to find funding for their startup only look for cash investors. But if you think outside of the box, there may be opportunities for you to barter for what you need to get your startup doors open.
For example, if you need office space and you are running a tech company, you could offer to support the networks of the other businesses in the office space. Other common exchanges are equity for legal or accounting support.
Many professionals are looking for ways to diversify their portfolio and practice new skills. By working with these people, you could potentially cut some of the costs for your startup making it easier to get off the ground. In addition, many people want to invest in the tech space, and this gives them the opportunity to do so without opening their checkbook.
Check Out Crowdfunding Options
In the digital age, there are a lot more crowdfunding sources available than ever before. Depending on what your startup is going to create, you may want to offer rewards or part with some of the equity in your business.
If your tech startup is creating a cool gadget, then you can also consider selling prototype models on crowdfunding websites.
Just make sure that if you agree to fill preorders, you follow through. The last thing you want is to create a reputation for your company of not being able to fill orders. It may make it seem like your idea is impossible and prevent you from securing other investors in the future.
Compete for Startup Funding
While it’s nice to be able to fully fund your business without having to compete for it, if your idea truly has value, then you shouldn’t be afraid to enter yourself into a few competitions.
Not only will this possibly help you secure funding, but it will also give you the opportunity to get your startup some media attention. The publicity you get from sharing your product or idea on a stage will give you a boost in sales as you hit the market.
It is also a very low-risk way to secure financing since it does not typically cost anything to enter a competition. And even if you don’t win the prize, at least you are getting attention for your idea and it may lead elsewhere due to the press.
Use Personal Finances and Small Business Loans
If you are trying to establish a startup, one of the most popular funding options is personal finance and small business loans. To apply for a loan, you will have to provide a personal financial statement if your business doesn’t have its own credit history established.
Lenders may also use your personal credit to evaluate the risk of investing in your business and deciding whether its a smart business decision. But if you can secure financing, then this is a great option.
By funding your own startup, you demonstrate to potential investors down the line that you are confident and serious about your success. By putting your own money into your business, you are also showing how much faith you have in your company.
Approach Business Incubation Programs
Business incubators and accelerators are programs typically located around universities that offer support to startups. They can help you build a business plan and create the pathway for making your dream a reality.
They can also help connect you with other businesses in the local community that can help you transition your startup through the phases of your business plan and catapult your efforts with access to investors and influencers.
Incubation programs generally last for a year or more and offer the startups a lot of benefits. But if you are trying to get a jump start on your business and head on your own way, then you should consider a business acceleration program.
They can help you license your intellectual property and foster the development of your startup through its most fragile phases. Typically an acceleration program has a set time frame, and then you will be given the opportunity to approach a set of investors with your business plans.
To enter an incubation program like one of these, you will need to prepare an application and pitch your idea. You will need to demonstrate that your startup has intellectual property and that you are the only one who can implement your plan. You will also need to show that your business is scalable and can expand rapidly in a matter of months.
Apply for Small Business Grants
One option for funding you might not have considered is applying for a small business grant. These government funds are allocated to businesses that have new and important technology for societal needs.
Stary by checking out grants.gov to search a directory of federal grant programs that are currently available. While the grant application process can be long, you won’t have to pay back the grant or give up any of the equity in your company.
What to Do Once Your Startup is Finding Success
Once your startup is finding success, it can be tempting to take some time off and rest on your laurels. But if you want to be a millionaire, then you are going to have to continue pushing and make the right decisions all along the way.
For more small business advice to ensure your company grows well, check out our blog full of resources today. We will help you decide what your best financing options are and put together a deal that makes sense for where you’re at.