How Startups Can Secure Capital Funding
Capital funding is the money that equity-holding investors, lenders, and (oftentimes) other entities give to a start-up business, and getting enough of it is one of the top problems many entrepreneurs face as they try to get their businesses up and running.
If you’re getting ready to start the capital funding process on your own startup, here’s what you need to know about securing the money you need.
Before you approach a single investor, get comfortable with rejection
Let’s face it — if you’re approaching investors for capital, you’ll likely get rejected at one point or another. Because getting rejected can be so emotionally charged it’s something that can sidetrack and/or derail entrepreneurs if they aren’t ready for it.
That’s why you need to spend some time learning and thinking about how you can move past funding rejections.
Do this, and you’ll feel confident enough to continue pitching investors and seeking out sources of capital funding. You can also do some research on making your business plan stand out to investors, which will help increase your chances of receiving funding.
Determine how much capital funding you need
How much cash will you really need to get your startup going? Spend some time crunching numbers and running through several scenarios to arrive at your number. You’ll also want to get a handle on interest rates, payment plans, different loan options and sources, and more.
This post will help you determine your startup’s loan size and needs, and it also covers some non-venture capital sources of funding. It’s important to be aware of all your possible sources of capital funding. You might not even realize all of the options that are available to you.
Understand all of your potential sources of capital funding
Approaching investors is a common goal of many startup entrepreneurs, but they’re hardly the only source of funds that you can seek out. Have you considered these other options?
Business loans from your local bank or credit union.
- A business line of credit.
A Small Business Administration Loan. (To learn more about utilizing the SBA, don’t miss this whitepaper on leveraging it for entrepreneurial success.)
Some incubators/accelerators offer access to investors (and potentially their funding) as part of the program. It can be a great way to gain an “in” into these communities.
Get creative! You can try a crowdfunding campaign or make your product available for pre-order, for starters.
Seek out grants in your industry.
Consider starting at home
If your other efforts aren’t proving fruitful, you do have another tool in your toolbox: your personal network.
Some entrepreneurs have found success offering “early investor” perks to their network when they invest. This could range from equity in the company, to products/services, or any other enticing option you can think of.
Note that this can get tricky — if your startup never takes off it could alienate and upset friends, family, and other personal contacts who have invested in your ideas. If that idea makes you uncomfortable, crowdlending could be another frontier to explore.