A startup is a business entity that has come into existence because of an idea that sparked an entrepreneur’s creative genius. A startup is a small company that provides products or solutions for its target customers in a market.
A startup is often initiated by a sole businessman or a group of businessmen who are partners. The biggest challenges, even for the most brilliant of startups today, are the unavailability of funds and the limited options to raise funds in the market.
Many banks and lending agencies are skeptical of small-time entrepreneurs or lending money to a new startup as they consider them risky investments that have a chance of becoming bad debts. In such a scenario, startups face considerable difficulties in taking off due to financial hurdles.
Fundraising for Startups
A startup usually starts small and therefore has limited scope for funding. Many people who take up a startup invest and put in all the money they have and can borrow. But beyond the initial point, a startup requires more funding to go into the business to keep it afloat. Funding is needed at every step of the way, infact such as:
- Market Study and Survey
- Research and Product Development
- Marketing and Advertising
- Product Manufacturing
- Logistics and Transportation
- Product Launch
- Ecommerce launch and Vendor Tie-ups
When there is a need for further capital or working capital at every stage mentioned above, a startup entrepreneur may need to venture outside to acquire and raise funds for their business. Thankfully there are many ways that a business can acquire additional funds without excessive risks.
Types of Online Funding
Apart from funding that can be acquired from banks, P2P lending (money lenders) and other such microfinancing that can be contacted for funds in the market, a businessman can easily raise funds online using many techniques and with the right platform. Below is a list of online fundraising options available to businessmen today:
1. Venture Capitalists
Venture Capitalists are major industrialists and top businessmen worldwide constantly looking for new and upcoming businesses to invest in. They help entrepreneurs by providing the required funding for shares or stakes in the company.
The terms of the capital funding can be negotiated and discussed as per the two parties but in general, Venture Capitalists usually need a stake in the equity of the growing startup. The benefit for the startup is manifold as it has good support from the VC, who usually is part of a bigger VC board and helps the startup to reach a higher potential.
2. Angel Investors
Angel Investors are a concept much familiar to people after watching the television hit Shark Tank. Angel Investors function individually and are big time businessmen who are keep on investing in small startups to help them with funding for some kind of monetary arrangement be it shares, equity investment or just as loans as a part of larger fundraising for non-profits arrangement.
An idea popularized everywhere thanks to the internet, Crowdfunding is fueled by internet investors who are willing to invest in a potential company via equity financing. Through major crowdfunding portals, startups can call for investments on a large scale to achieve all kinds of capital funding, even from strangers, in exchange for shares.