So, you have a great idea and you think it’ll be a big hit. But if you haven’t seen it yet, soon you will realize that it takes cash for your ideas to come to fruition. The biggest obstacle you may face is finding the money needed for all the development, branding, marketing and everything else that comes with starting a business. The truth is that 90% of all startups fail, and 29% of those failures are because they ran out of money. Don’t let this become the reason your product never gets off the ground and consider these 5 ways to source your funds.
It seems like the obvious first step to look inside your own wallet for needed capital. In fact, 82% of startups are funded from personal accounts. Using your own savings and personal credit cards can be especially useful in the idea and development stages, as you begin to test the waters of your product’s potential. And while these dollars are very valuable, not everyone has access to unlimited amounts of savings. Make sure you’re spending this precious money in the most effective way possible, and prioritize things on your budget.
Eventually your product may outgrow the limits of your own accounts. Your next source of funding may be to ask your friends and family to invest in your ideas. 24% of startups get most their money from this pool. Many times, these friends and family members are investing in you and not in your product or service. They may be more willing to take the risk of investing without getting their money back. Your friends and family are your biggest fans, so why not extend the chance to get involved?
Billions of dollars are being traded through crowdfunding, so why not try and grab a piece of that? Platforms like Kickstarter or Indiegogo can be a great resource to engage audiences and get them invested in your idea. Before launching your campaign, be sure to do the necessary research to hit it out of the park. Create a great video pitch, offer rewards to backers, and make sure you really connect with your potential audience. With a successful crowdfunding campaign, you’ll end up with the funds needed to advance your ideas as well as a built-in fan base.
Once your idea has gotten off the ground thanks to money from either yourself, friends, family, or crowdfunding, you may be in a place to start looking towards more sophisticated investors. “Angel investors” are either individuals or groups of individuals who invest in business startups for a share of equity or convertible debt. While hard to come by and even harder to bring on as a partner, these angel investors can bring a lot to the table in terms of experience and cash flow.
If you’ve exhausted all your options in terms of asking for money, your next step will be to start a relationship with a bank. Don’t expect a loan right away- banks will require at least a couple years of positive financial information on the business and you as an entrepreneur. Start off by opening a checking account, credit cards, and a merchant account. Eventually the financial institution will become familiar with your business and you will be in a better position to apply for and receive loans.
If money grew on trees, all our great ideas would be able to come alive. However, we know this isn’t the case. Finding money can be difficult, but with the right product or service, you may find the funds you need to create the best new invention. While these five sources aren’t the only way to find capital, hopefully it gets you started on the journey to success.