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Getting a business idea off the ground and bringing it to fruition takes time, money and resources that many early-career entrepreneurs may not have the access to. This is where the different funding options for startups come into play: whether you bootstrap your funding or you apply for a startup accelerator, there are countless ways to raise startup capital.
1. Bootstrapping
The first tried and true method to startup financing is bootstrapping, or using your personal funds.
However, it’s important to note that although this method helps avoid debt, it might make your startup grow much slower since you won’t have space in your budget for things like marketing and advertising.
2. Accept donations
Obtaining funding for your startup from close friends and family is an excellent method to finance the beginnings of your business debt-free. Be sure to have safeguards in place to prevent conflict from mixing business and personal matters.
3. Personal Assets
Much like bootstrapping, using personal assets that you already own is an easy way to cut startup costs for a business. It can help you save money on fees and interest rates that come with taking out loans.
4. Angel investors
Startups are known for being a great opportunity for angel investors to invest their capital in to see a new business grow. Angel investors are private investors with a high income or net worth, which allows them to make large investments in early stage companies.
One disadvantage of using angel investors to fund your startup is that they have a say in business operations and ultimately give you the business owner less control over the business.
5. Venture capitalists
Similar to angel investors, venture capitalists are also investors. But the difference is that they work at private equity investment firms which provide funding to a variety of businesses. While venture capital funding can help cover the cost of business assets, management fees and carried interest, they do keep the carried interest as their share of the profits.
6. Business incubator
A business incubator is a rather new phenomenon where the incubator organization helps startups or entrepreneurs build their business, especially those in software development and other knowledge-based fields. These organizations can be at academic institutions, nonprofits, for-profit organizations or even venture capital firms. To get into a business incubator program, you must apply, be interviewed and receive an offer of acceptance into the program.
7. Startup accelerator
A startup accelerator is similar to the business incubator in that they provide mentorship to new businesses. They are also referred to as seed accelerators since they cater to startups that are in the very early stages of development.
Startup accelerator programs are also more competitive than business incubators, which is something to keep in mind when considering this business funding option.
While there are many startup fundraising options for entrepreneurs, it’s always a good idea to consult with professionals in your field or industry who can advise you on their success. It’s always a good idea to keep debt low and ultimately focus on the return on investment.
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