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Whats the Best Way to Fund a Business Startup?

show me the money - whats the best way to fund a start up

Welcome to all aspiring entrepreneurs, dreamers, risk takers, ballers....whatever category you put yourself in that got you here!

Are you ready to turn your business idea into a reality but find yourself stumbling over the first big hurdle – funding? You're not alone. Securing the right funding is like finding the perfect kindling to ignite your startup fire. And while it is my humble opinion that people often put this step in the entrepreneurial journey too far in front of other, more crucial steps, lets embark on a journey to explore the best ways to fund your business startup, ensuring your entrepreneurial dreams don't just flicker, but blaze brightly.

BLUF: These options are in no particular 1 is not better than 5. They are all viable based on your situation.

Option 1: Self-Funding – Investing in Your Dream

  • Bootstrap Your Way: Self-funding, or bootstrapping, is often the first port of call. It involves using your savings or personal assets. It's risky, yes, but it also means retaining full control. If you can get in this way, and are not the type of person that likes to feel saddled with debt, this may be for you. However remember this century old adage, "Scared Money Don't Make No Money"!

  • Pros and Cons: While this method fosters discipline and lean operations, it also limits your runway and can put personal assets at risk. Assess your financial threshold before diving in. Also, and one thing I believe to be most important, be careful leveraging things like your retirement on an endeavor and then being left with nothing should it fail.

Option 2: Friends and Family – The Supportive (And Sometime Unsupportive) Network

  • Tapping into Your Inner Circle: Often overlooked, friends and family can be a vital source of funding. They know you best and may be willing to back your vision.

  • Setting Clear Terms: To maintain healthy relationships, be clear about terms. Treat it as a professional agreement, with expectations and potential risks openly discussed. In these situations I always ask the person who is lending to me, "If this fails, which there is always a chance it could, and our money is lost, are you ok with that"? This airs out the reality of a potential failure and puts the relationship front and center.

Option 3: Angel Investors – The Guardian Angels of Startups

  • Seeking Individual Investors: Angel investors are individuals, usually experienced business professionals, who provide capital for startups, often in exchange for equity. These often work best with a company that has a high upside for growth. In todays world we see a lot of this in the technology space.

  • More Than Money: Look for angels who bring more than just money – valuable insights, mentorship, and industry connections can be just as crucial. However, be warned, asking for insight and opinions means that you may not like what you ask for all the time.

Option 4: Venture Capital – Big Money, Big Expectations

  • Targeting High Growth: Similar to Angel Investors, if your startup has high-growth potential, venture capital could be the way to go. VCs provide significant funding but expect high returns and often a piece of equity.

  • Understand the Deal: Be aware of what you're offering in return. VCs often play a role in business decisions – ensure you're comfortable with the level of involvement.

Option 5: Crowdfunding – Power to the People

  • Harnessing the Crowd: Platforms like Kickstarter and Indiegogo allow you to present your idea to the world. It's a way to raise funds while validating your product in the market. This can be a great way to go and I have seen businesses be very successful with this model. I find this works well with social causes as well as trendy upstarts that a younger audience wants to be a part of.

  • Building a Community: Successful crowdfunding is not just about funds; it's about building a community of supporters who believe in your vision. One thing to keep in mind is that crowdfunding often leaves the business owner owing some debt to the people who donate. It is important to capture that in your financial records and have strong projections to make this work.

Option 6: Loans and Grants – Traditional but Tricky

  • Bank Loans: A traditional route, bank loans can be a reliable funding source. Be prepared with a solid business plan and understand the terms and interest rates.While this is often what people think of first when looking for $, it is not always the best route. A winning strategy looks at one key factor...the cost of borrowing. Make that a part of your analysis.

  • Exploring Grants: Look for grants offered by governments or organizations. These are often sector-specific and can provide non-repayable funding. While grants are great, obtaining them can often be time consuming and unpredictable, delaying your business start. Use these options as a PART of your funding plan and it can be a win.

Option 7: Incubators and Accelerators – Nurturing Your Startup

  • Programs for Growth: These programs offer funding, resources, mentorship, and networking opportunities in exchange for equity. They're designed to accelerate growth. Mentorship and continuous learning as a business owner is imperative and these programs place a focus on that concept.

  • Finding the Right Fit: Research to find a program that aligns with your business stage and industry. Often times each one of these has a specific niche. Make sure to look at them all before deciding which is best for you.

Securing funding is one of the major challenges you'll face on your entrepreneurial journey. Each option comes with its own set of benefits and drawbacks. Weigh them carefully, consider your long-term vision, and choose the path that best suits your business's needs and your personal circumstances. Often times it is a mixture of the above mentioned routes that gets you to your end stage.

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