If you are an entrepreneur with a business idea that solves a need through a product or service, the first problem you will probably face is not having enough money to finalize your business plan. If your goal is to grow, and even more to do it quickly, surely you need some type of financing.
In Latin America, for example, 65% of ventures fail because they do not have enough income to survive. However, there are several options that you can consider as a source of financing when starting your startup.
But who is going to finance you? Convincing someone to contribute to a project that is just beginning, with all the risks that this implies, is not an easy task. However there are several possibilities to get the capital. We share some of the most used modalities to achieve it:
Bootstrapping
This type of investment is based on using the founders’ own capital and that generated by the business to finance a startup. As there is a high possibility of failure, investing all your own capital is not always the best option, because when the savings run out, you will begin to incur debts, which at the end of the day will be completely yours. There are certain startups that require a very high initial investment volume and the Bootstrapping mode may not be the most appropriate.
The 3 F’s: “Friends, Family and Fools”
“Friends, family and fools” are one of the first sources of financing. With this financing you will not be able to raise high amounts of capital, but the little you get will be quickly. It is important to make everything clear from the beginning, because the terms can be long and also, if you are not willing to lose everything, it is best to discard these funds and look for other ways to start.
Bank Loans
It is the “traditional” method of financing but it is not the most recommended. It has high interests and there are too many requirements that these institutions request.
Anyway, they are an option when the amounts are small and you need the money for a very concrete and tangible reason (for example, to compare computer equipment for our company). Also, they can be settled quickly once we get the money back.
Equity or Shares
Equity Funding or equity financing is a method of raising capital by selling shares of the company to investors. In exchange for this investment, shareholders receive ownership interests in the company.
The main advantage is being able to access much higher capital to finance your venture and as a general recommendation you should look for investors with extensive experience in the sector in which your startup operates. That way you not only get the money, but also mentoring and potential connection with relevant players in the industry.
Business Angels
The “Angel Investor” is usually an entrepreneur or group of entrepreneurs or independent persons who seek companies with a high innovative content or significant growth potential in exchange for future benefits or participation in decisions.
Crowdfunding:
Crowfunding is one of the newest financing options for a startup. It is a collective financing, where the entrepreneur, through an online platform, obtains the resources for the development of the project. Sometimes the funds are delivered as a donation, in others as an investment in exchange for a return on the Investment.
Non-refundable funds
Some countries such as Canada, Chile or Estonia directly support entrepreneurship through financial aid. To access them, it is necessary to present a well-detailed work plan and team, and an economic flow of the funds you need. If the project is approved, you will receive in return a reimbursement in stages for a percentage of the expenses incurred.
Incubators and accelerators
Finally we can find accelerators and incubators such as Impulsa Ventures. Incubators can not only support you with financing, but they are also a hotbed of information and wisdom. The advantages of joining one of them are several, but among the most important we highlight:
⦁ Wide network of contacts
⦁ High-quality mentors
⦁ Physical spaces to work comfortably
⦁ Ongoing consultancies in technical, legal, administrative and advertising services.
⦁ They teach you to design or update your strategic plan.
That is, they allow projects to be brought from paper to reality.
A report by the Aspen Network of Development Entrepreneurs (ANDE) and Emory University determined that startups that join these types of groups tend to grow at significantly higher rates than those projects that do not.
Accelerators, for their part, focus on those ventures that are already underway. Its objective is to inject the necessary capital to boost the growth of your Startup. Along with financing, they provide workspaces with access to mentors and networks of contacts, giving you the opportunity to present yourself to investors and venture capital.
As you will see, there are various investment options. That is why it is necessary to know each one of them to use the appropriate ones at the correct moment in the development of your company.
Go ahead and take a leap in quality by joining Impulsa Ventures, where you will learn to develop and accelerate the growth of your Startup!
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