One of the realities of life as a business owner is that at some point you need money to establish your venture, or to grow it. There are plenty of advantages to bootstrapping your business, but at some point it makes sense to start raising funds for your startup.
Before you dive into the world of fundraising, here are a few things to think about:
Can You Attract “Traditional” Funding?
In the past, it was common for businesses to raise funds through venture capital or from angel investors. It can be difficult to attract that type of investment, however. It’s a lot of money to try to raise, and not everyone has success with it.
Another issue to consider is that you might not have as much control over your startup as you would like if you opt for these “traditional” funding methods. Many angel investors are willing to be hands-off, or act as low-key advisors, but the same is not true of venture capitalists. If you want to raise venture capital, you might discover that your backer wants a seat on your company’s board and might be interested in requiring a commitment from you about the direction you take your business.
Getting the money you need and the control to spend it how you want isn’t always possible when you seek money this way.
Equity Crowdfunding: A New Way to Raise Funds
Another way of raising funds for your startup is using equity crowdfunding. This method of raising money is new, and follows along the lines of recent changes to the financial landscape. The idea is that you can raise money through crowds, and offer them a portion of your profits.
This is different from the crowdfunding we’ve seen in the past. In the past, crowdfunding for businesses was more about offering perks. You couldn’t offer shares in a company, or offer to pay money out of your profits. Now that equity crowdfunding is legal, almost anyone can fancy him or herself a venture capitalist. You just have to be willing to offer a relatively high return on the investment, offering payment to your backers out of the proceeds from your business as it becomes successful.
If you don’t like the idea of repaying backers in this way, you can use the old standbys, like Kickstarter and Indiegogo, to raise funds. This way, you only have to offer perks or offer a first run item to those who back you.
Turn to Friends and Family
In some cases, it might make sense to turn to friends and family. Rather than trying to raise funds from other sources, you might be able to ask your friends and family to help out. Websites like Go Fund Me can help you better organize your friends and family in a way that allows you to collect money from them (and maybe even tap into their networks).
When you get help from friends and family, you don’t necessarily need to rely on money. They might be willing to help you by contributing their time and talents to your efforts. This can be just as helpful as raising funds for your startup without the need for money.
Explore the options. You might be surprised at the different options you have for raising funds for your startup.