Startup businesses are growing nowadays. So, do you want to start a startup? Managing a startup is a great experience but it requires quite a lot of sacrifices, especially in terms of business funds.
To get your business off the ground, consider the various startup funding options around you. Let’s explore some funding options that can be considered to manage startups.
About Startup Funding
Usually, startups have to go through an initial funding phase first. Funds for startups can be obtained from various sources and each source has certain conditions. The number of funding options can support the smooth development of startups.
Although various sources of funding can be considered, the best management is needed. Each funding system usually has investors and investors want a return on their investment. Investment arrangements are usually made so that investors can have ownership rights to the company.
So after the startup grows and can generate a certain profit, then the investor can get a reward according to their investment. For a business or company to get funding, there are usually certain valuation requirements. There are quite a few aspects that are considered in the valuation of startup investments.
Startup funding usually considers market size, business risk, track record, and more. Valuations can also be modified as the business grows. Many startups consider angel investors or venture capital for their funding needs.
But these are not the only two sources of funding to consider, startups can also consider grant funds as another alternative option.
See also : How to Qualify for Grant Funding
What are the Startup Funding Options?
To find out what startup funding options you can consider, take a look at the following points:
– Grant
The main point of a grant is that you don’t have to pay it back while other funding has to be paid back. Grants can be made available to non-profit organizations, or small businesses. This is different from other funding that requires interest payments, guarantees, and other responsibilities.
We can call grants free money so grants can be a promising solution to get startup management funds. Although grants can be very helpful for startups, there is strict competition and restrictions for grant programs. The restrictions in question are how the money from the grant is used and the detailed specifications of the related business.
So, getting a grant can have many benefits but it may be quite difficult for you to get one. Grants usually have specific areas in mind so you need to learn the details so you can apply for the right grant.
– Venture Capital
Many startups consider VC or Venture Capital as their source of funding. Several parties are involved in the venture capital system including financial institutions and investors. Although it can be a source of funding for businesses, getting venture capital funding for startups can be quite difficult.
So, venture capital is more promising for businesses with sufficient growth or track record. However, startups still have the opportunity to get funding from venture capital. From an investor’s point of view, they will have quite a lot of risk if they invest in startups. But it’s different with investors who think a startup is a “unicorn”.
So what is a unicorn? Unicorn is a company with a business model with such high potential that it can be expected to generate profitable returns to investors.
– Angel Investor
We can say that angel investors are a subset of venture capital. Both fund startups but angel investors consider investing more as a side project, some even consider it a hobby. Many angel investors are new to the world of investing.
Usually, they tend to invest in business sectors that are familiar to them or they know enough about how to succeed in those sectors. What they need before investing is simpler than the venture capital case. Usually, angel investors require optimal startup management with a solid plan. For early-stage startup development, angel investors can be considered as a source of funding.
– Family And Relatives
Help from family may be enough to help with the initial startup costs. In the case of family or relatives’ help, it usually has no return value. It’s just a loan that needs to be repaid.
Although simpler than the previous sources of funding, these loans should not be underestimated. If you are not responsible for your loan to a relative or family, it can ruin your social relationship with each other and have other adverse effects.
Those are some startup funding options that you can consider be it grants, angel investors, venture capital, or family loans.