Fund your Startup
You’ve got an idea.
You’ve got the dedication needed to push the idea into a reality.
Heck, you’ve also got your mother’s blessings.
But ask yourself this. Is that all one needs to run a successful startup? Will just having an idea suffice?
Well, I hope that you haven’t got it wrong but your mother’s goodwill will only get you to a certain place, after that you’re gonna need money. Loads of it. And where do you plan to get it from?
Well, that’s exactly what I’m here to talk to you about.
Here are 5 ways to fund your startup:
1: Family and Friends
Now as I said before your mother’s blessings will only get you to a certain point in your venture to be a multi-billionaire (or millionaire, if that’s what you’re really aiming for) but her money? Now that’s something that’ll go a long way. Don’t get me wrong. Do not pester your mother for money.
What I’m trying to say is something along the same lines as Startup Investor Murray Newlands says “The first people that you should look to for investments in your startup are none other than your friends and family. They can help you secure your first round of funding and give you enough leeway to create value around your idea and hopefully catch the eye of the people in your industry.”
Be wary of the fact that startups do fail. And hence you are in a way putting the money of your loved ones at risk here. So make sure they’re alright with the fact that this might fail.
There are quite a few great Incubation programs out there that you can look out at if you’re looking for this sort of thing. Y Combinator or 500 Startup just to name a few.
What’s an incubator? Well. not only does and incubator program provides you with the money that you need to fund your startup but they also provide top notch advice and guidance from some of the best in the business.
So if money is not the only thing on your mind ( Why isn’t it? :P) and you’re looking for some quality guidance then an incubation program is what you should go for.
3: Personal Loans
Now, this is something you should only opt for if you’re pretty sure of at least getting some returns from your start up.
A personal loan is not too different from a home loan or a car loan or whatever loans they’re giving out these days. You put in a collateral, set a repayment date and get the money you need. Now, of course, this turns incredibly risky if your startup fails and you’ve got a personal loan to repay. Which is why you shouldn’t be messing about with these unless you’re pretty confident about your startup. Now there are a number of places you can get your personal loan from. N number of banks provide services for the same. Prosper loans are one such company.
4: Convertible Debt
One method that has proven to be immensely popular in the recent years is that of convertible debt. Incubators like Y Combinator are known to secure at least $150,000 in convertible debts for every startup that qualifies for them.
In simpler terms, a convertible debt can be turned into liquid equity in the future, subject to certain goals and milestones that your startup achieves. That’s like having another round of funding waiting for you.
5: Preferred Stock
A lot of people believe in securing common stock for founders during the course of funding. These shares come with beneficial provisions such as liquidation preference and rights.
Having some preferred stock for yourself as a founder’s privilege (and for investors) is going to make your venture a lot more attractive to invest in. Investors believe that you are serious enough to pay them the returns ASAP, so that way it’s all quid pro quo for both parties.
Now those were 5 methods you can use to fund your startup initially. Got any more methods you think I missed out on? Hit me up in the comments section down below.