If you are willing to start and own your own business, you may have already had a great idea for a new company or startup. But, after this great idea, what to do to get it off the ground?
You will probably need a website, a technology team, some office space, etc. That is, you will need money – like most companies and entrepreneurs to finance a startup and get your business off the ground. After all, whoever has the idea or a project to be put into practice does not always have the financial resources to undertake or manage that idea in the long run.
The lack of initial capital, however, need not be the biggest obstacle that will prevent you from realizing your dream. If you want to start your own business, but don’t have your resources, you can still get it off the ground in several ways.
The good news is that there are many different ways to get financing to start your business. And that is exactly what we will cover in this article. Check out!
5 alternatives to finance a startup
So, what do you do when you have a great business idea, but don’t have the money to finance it? While some entrepreneurs use small business loans or crowdfunding, others look for angel investors, etc.
However, there are many alternatives to finance a startup and get your business off the ground.
How about starting with Bootstrapping?
When they start, many entrepreneurs use bootstrapping, which means financing your company by pooling all the personal funds you can find.
This usually includes your savings account, credit cards, and any lines of loans you may have, such as home equity, for example.
In many cases, using the money you have instead of borrowing or withdrawing is a great approach. It is also a way to keep going until your business is profitable.
But, if you are looking to scale your business quickly, it can be advantageous to bring in external sources of finance. For that reason, we have listed five other forms of investments to boost your innovative idea.
Meet each one of them below!
1 – Money Love – consider friends and family
Does asking your friends and family for money and money seem a little daunting prospect? But how about taking a look at the people closest to you?
Know that this can be an important first step to get started and has been used quite often by beginning entrepreneurs.
Increasingly, it is common to find entrepreneurs with a good idea, but without capital. And what do they do? They resort to family or friends to obtain an initial capital contribution.
This type of investment is called Love Money because, in most situations, family and friends invest more for the affinity factor with the entrepreneur than for the business itself.
But before asking your friends and family for money, you must have a business plan ready. That way, you can explain exactly what you are selling, what you plan to do, how you will make money, and how you want to reimburse them.
It is worth mentioning that the advantages of Love Money, in addition to being a starting point for the owner of the idea, can also generate more confidence in the investment market, since your startup will have already won some points in the question of credibility.
2 – Angel Investors
Generally speaking, angel investors are high net worth individuals who generally contribute more than capital. They generally have the knowledge and many contacts related to the sector they are investing in.
This type of investor can help your company by contributing business information and advice and generally make their choices based on their interests and less on market analysis.
So, if your idea is good, start to expand your networking and prepare a good presentation about your business and attract angel investors.
3 – Crowdfunding
Crowdfunding or crowd funding has stood out as a driving force for having a project, but it does not always have the resources to put it into practice. This type of financing allows raising capital to create new companies or to take innovative ideas from paper.
This type of investment offers individuals the opportunity to invest capital in a new company in exchange for equity interest or convertible debt securities.
Worldwide, crowdfunding has expressive participation in the launch of Startups through platforms designed exactly to facilitate the entrepreneur’s access to investors.
4 – Venture Capital
This capital is known as venture capital and investors, of course, are called venture capitalists. This investor profile likes to invest its capital in innovative businesses with a long-term growth perspective.
While these investments are often risky, they are also capable of generating impressive returns as the company grows.
It is important to emphasize that, in this type of financing, investors tend to influence the main decisions of the companies in which they are investing, because it is their money that is at stake.
The characteristic feature of these investors’ profiles is to turn to businesses that are already in a development phase, that is, that have already shown that they can provide some return.
5 – Accelerators
Accelerators started to appear around 2011 and, since then, they have offered a promising environment for the development of startups.
The main objective of these organizations is to offer tools for companies to develop themselves to their point of sustainability.
For this reason, they offer advice, guidance, and various forms of support for companies in the startup phase, acting as a kind of training ground.
Simply put, accelerators’ primary role is to identify, support, and invest in the rapid growth of startups.
Bonus – Create a detailed business plan before seeking financing
Before you go looking for investors, you need to have a clear understanding of how you plan to operate your company.
Without a doubt, it will be difficult for you to raise money from someone without a business plan. The different types of investors, which we mentioned above, will need to see financial projections before even thinking about opening their portfolios.
Therefore, a business plan will increase your chances of obtaining funds. On the other hand, companies that have a business plan also have higher growth rates and are better prepared for setbacks.
Finally, to make an appropriate choice, you need to analyze what you want for your company and consider how much the potential investor can add to your business, not only to get your idea off the ground but for your success in the long term.