7 Ways to Fund Your Startup

WAYS TO FUND YOUR I STARTUP $. BOOTSTRAPPING PERSONAL SAVINGS CREDIT CARDS Use credit cards to buy initial equipment and cover setup costs. Tap into personal savings, borrow from your 401 (K), or keep your day job and use part of your paycheck to bankroll your startup until you can secure outside funding. You can buy some time & avoid interest charges by transferring the balance to other cards while you either wait for your first customers to pay, or secure additional funding. • WARNING • • WARNING • Don't take it all. Keep an emergency fund in case a client doesn't pay on time, a pipe bursts and destroys equipment, etc. If you fail to get funding and can't pay off the debt in full, you're personally responsible for the balance - and the interest payments. CROWDFUNDING TRADITIONAL CROWDFUNDING EQUITY CROWDFUNDING Raise money without giving up equity. Instead of contributing for products or T-shirts, backers donate in exchange for a stake in your company. Crowdfunding is a great way to practice your pitch, get to know your audience, & tweak your product. XXX Pitch to a large pool of potential investors, actively looking for new companies to back. Plus, platform posting requirements force you to have a viable business plan in place. And when it to comes convincing potential future investors, you'll already have proof yours is market solution. viable • WARNING • • WARNING• Don't get swept up in success stories. Unlike the Pebble Watch, most campaigns do not make 500x their fundraising goal. And because preparing & executing a campaign takes months, it can slow your timeline. You'll need a lawyer. There are a lot of regulation & legalities, and you'll need a private placement memorandum (PPM) for offering you make. any SEED FUNDING FIGURE OUT YOUR PRODUCT AND TARGET MARKET. This early investment help fledgling companies develop products, research target markets, & start building a user base. Funding options include bootstrapping, friends and family, angel investors, and crowdfunding. FRIENDS AND FAMILY • 38% 0.05% of startups get funds from friends & family, of startups get money from venture capitalists. 20 • WARNING• WITHOUT IT, MOST VCs ARE WARY: If friends & family aren't confident enough in your idea to pony up cash, why should they? DONT ask anyone to lend you money they can't afford to lose. And make it legal, so everyone knows exactly what they're in for. (Will you owe interest? Do they want equity? When do they expect to be repaid?) TRADITIONAL LENDERS • BANK LOANS BRIDGE LOAN You're ready to scale up but haven't been able to secure additional capital. This short-term loan can Come prepared with a thorough understanding of your company's risks, a working business model, & a high credit score. give your bank account a boost while you secure more funding, or if there's a set period of time - say 90 days funding deal closes. to the bank until your IPll help cover the gap between when you'll run out of cash and your new funding kicks in. • WARNING • Banks are lenders, not investors. • WARNING • Your business needs to established enough to show a track record they can be confident in your ability to make payments. be Be prepared for hefty fees & interest rates to compensate for the high-risk nature of the loan. steady revenue, so SERIES A FUNDING SCALE YOUR PRODUCT & DEFINE YOUR IDEAL BUSINESS MODEL. Your company has momentum & may be generating revenue, but isn't yet profitable. Series A funds growth, helping businesses extend their user base, scale geographically, or hire more staff. ANGEL INVESTORS • • WARNING• Since they stand to lose their entire investment, Angels like a "sure thing," opting opportunities that will net a major quickly. Possible IPO or acquisition within 5 years attractive These accredited investors back often for companies in exchange for convertible bonds or ownership equity. return very They often band together in angel networks, pooling resources and providing advice to the companies they invest in. IS most to Angels. INCUBATORS Many also offer investment capital & support staff to help with finance, marketing, sales, & strategy, plus established networks of experts to help guide major decisions. INCUBATORS PROVIDE • WARNING• office space mailboxes Because they have a vested interest in your success, Incubator staff want to be involved in decisions. And there's always the possibility they'll be at odds with your vision. phones conference rooms, etc. SERIES B FUNDING SCALE YOUR BUSINESS. You have a good product/market fit & solid business model. Series B funds business growth to hire marketing & sales people, further scale your customer base (e.g. move internationally), or buy out a competitor. VENTURE CAPITALISTS VCs invest initial or growth capital for equity. • WARNING • If they have a stake, they'll want a say. VCs may want to add a member of their own team to your Many VC firms also have specialists on staff to provide expert guidance & ensure their investment pays off, which can be helpful if you don't have much experience running a business and want help. upper management, or approve any major business decisions you make. WANT TO LEARN MORE? FIND OUT HOW SOME OF THE MOST SUCCESSFUL STARTUPS IN HISTORY GOT FUNDED: bit.ly/StartupFundingSuccess BROUGHT TO YOU BY SOURCES: Wrike Businessweek.com, Blog.eladgil.com, Dashes.com, Entrepreneur.com, Entrerev.com, Forbes.com, Fundable.com, Mergersandinquisitions.com, Mytopbusinessideas.com, Inc.com, Investopedia.com, Startupdonut.co.uk, Wikipedia.org. Award-winning collaboration and project management software Wrike.com