How to Find Funding for Your Startup

The cycle of poverty is draining and hard to escape. This is especially true when dealing with the big banking system (and its payday loan competitor), as poverty is punished with higher fees and unequal access to capital.

Then there is mindset inequality, a reality closely linked to income inequality. Entrepreneurs working from a poverty starting point, as they lack a financial safety net, do not necessarily have the ability to take the same risks and time that wealthy entrepreneurs do. In the business field and especially in the startup field this can be a game-ending factor.

How do we level the playing field? That’s what we’ll be looking at here.

For lower-income entrepreneurs, the big banking system is not your friend. Rigged against the poor, we are already in a situation where millions of people in poverty are denied bank accounts from these heavyweights (or charged punishing fees if they manage to open accounts) and developing and maintaining a healthy credit rating is a steep uphill battle.

It gets worse: according to the Federal Reserve, 60% of small business applicants do not receive the level of financing they need.

The truth is that big isn’t always better and the big banking system is definitely not better for the modern small business. Thanks to FinTech, you don’t have to grovel for scraps from institutions that are going to limit your growth.

The modern business world provides entrepreneurs with multiple ways to fund your business. This does not mean, however, that securing funding is now a breeze. Every road has complications. Know this and prepare for this and you will be in a better position to find funding.

Let’s look at crowdfunding.

The good news is that, thanks to technology, crowdfunding has grown by leaps and bounds. The bad news is you now face way more competition. Yes, you have (what you think is) an idea that is going to revolutionize the world. If you don’t know how to sell it and who to sell it to, you’ll never get off the ground.

First things first: Are you using the right crowdfunding platform? Kickstarter and GoFundMe have name recognition, but these and other consumer-use platforms will not necessarily get you financial backing from established players in the business world. If you believe you can raise the needed funds from your personal circle it may suit your needs; in reality, however, your attention and energy should be directed to equity crowdfunding, as this is how you access backers with established financing.

It’s also important to not over-reach. As tempting as it may be to assume you can raise all the needed funds from one crowdfunding campaign, asking for too much leaves you at a much bigger risk of failure.

The hardest part may be getting the ball rolling. If your project languishes without any backers, potential funders will be much more hesitant to provide financing. Use your connections to limit this issue.

Crowdfunding is dramatically increasing in popularity and (through equity crowdfunding) is revolutionizing the investment field. If you do it well you can use it to launch your business. Do it poorly, of course, and your campaign will not be the source of funds you need it to be.

Although big banking may not be the ideal funding route, financial loans are still very much an option. Of course, this is an option that needs research and analysis before you enter an agreement.

First off, obviously, do not take on a payday loan. Yes, they may seem quick and easy, but the punishing interest rates will seriously hamper your future business plans.

Thanks to FinTech and the opening up of the financial industry there are more options for business loans and many of these are designed for small businesses. These funding bodies can provide your startup with the capital and support you need to grow your business.

Lendified is a great example of a modern lending company. Founded by bank executives who saw the problems facing small businesses, the company offers entrepreneurs access to needed financing with the benefits that FinTech brings with it. After a simple online application, entrepreneurs can get quick access to needed funds.

Finally we have private investors. This is a very important field and should not be overlooked or misunderstood.

The two major players (angel investors and venture capitalists) have distinct characteristics and incorrectly pitching them could cost you needed funding.

First off, know when to pitch your company as each of these players work with startups at different points. Angel investors work with early-stage startups, providing the seed funding needed to get the ball rolling. If you’re hoping to access their services, don’t wait until your later stages or after you’ve secured funding from other services. These investors are (often) great mentors as well, so don’t ignore the other assistance they can provide.

Given its important presence in the funding realm, we need to talk about venture capitalism. This is an area that is definitely surging, with investment in 2017 hitting a record high (US$155 billion). This incredible growth does not mean funding will be easy to access. Before reaching out to venture capitalists make sure you do your research and are pitching to a VC that invests in startups. Developing (and enacting) pitches for investors with no intentions of providing funding is a waste of everyone’s time. If you approach the proper investors with the right pitch, well, a perfect partnership could be formed.

Does the thought of accessing outside funding stress you out? There is a better way to finance your startup, though it is not for the faint of heart. You can choose to take the bootstrapping route.

Although this may seem like a treacherous and impossible route to take, some of the biggest names in technology (Apple, Facebook, etc.) started out by bootstrapping.

If you are the type of person who needs to maintain a large degree of control over a situation then bootstrapping is likely an environment in which you’d excel. That being said, this route requires you to take on a lot of stress and responsibility. If you are not fully prepared for the myriad problems that are bound to emerge as you work on your startup you may find yourself over your head.

Exploring the bootstrapping route? We at Leadervest can help you make the most out of the process. Contact us today to find out more.