10 Ways to Raise Money for Startups: 10 FREE TIPS to raise Capitals for your Company / Startup
10 Best Ways to raise Money for Startups:
Discover 10 Best Ways to raise
Money for your Company / Project
Index Contents
1) Bootstrapping
Bootstrapping (also known as self-funding), is certainly the best way to raise money (almost immediately), especially when you are starting your business, with a new Product or Service, or in a New Market.
It’s also the best way to show some traction and some metrics to Professional Investors.
Especially in the beginning, It’s not important how many revenues you are generating with your business, it could be just 100$ or 10.000$ doesn’t matter.
It’s necessary just to demonstrate to anyone, that your business is already working, and it is just starting to generate some revenues.
Imagine for one second to be an Investor: would you give 100$ to someone, that is not able to generate any money yet?
First-time entrepreneurs often have trouble getting funding without first showing some traction and metrics, simply because it’s difficult to understand how the business can generate money.
So bootstrapping should be considered as the first and best funding way, simply because it generates a lot of different advantages during all the process.
When you are generating your own money, you are first of all sure that:
- 1. Your business is working.
- 2. You are resolving a real Problem for someone
- 3. There are some Clients ready to pay for your solution
Every investor, especially in the early stages, considers this like a first necessary starting point.
(sometimes even before considering all the rest of the business).
Naturally there are some businesses that need money from day-1, (for example think about the Medical Sector or Energy Sector): in these specific cases, maybe bootstrapping could be not a good option, but in every other common case, bootstrapping is the first step to get as soon as you can.
2) Family, Friends and Fools
Around 40% of startup ventures receive capital from Family and Friends.
This group is commonly called Family, Friends and Fools.
The reason fools are grouped into this category, is related to the risk associated with lending or investing in a seed venture.
Generally, these individuals are not sophisticated investors;
They invest principally in the Person, more than in Product or Business that you are creating.
Generally, family and friends financing process does not involve the formal review process or “due diligence” normally involved in “commercial loan” or “angel investment”.
They simply believe in you, and that you will be able to create something in some way.
That’s why they normally don’t require your “credit history” or extensive collateral to secure the loan, like for example the Banks.
Simply they know you, they believe in you, and they want to give you the first money that you need, to create something from zero to MVP.
Friends and Family relationships, generally are also flexible regarding repayment options and applicable interest rates.
Pay attention: it could generate some contrasts with the relationships, so be sure to choose someone that you completely believe in, and be sure that they completely believe in you;
The last but not the least: do really your best, to guarantee “at least” the money that they invested in you.
3) Incubators & Accelerators:
Early stage businesses can consider Incubators and Accelerators Programs as a funding option.
It’s correct, but money is not the only way that they have to increase your business.
They are based in almost every principal cities in the world, and these programs are really useful to assist hundreds of Entrepreneurs and different startup businesses every year, so they can certainly help your business too.
There are few fundamental differences between the two terms.
Incubators (pre-seed stage) from Idea to basic MVP: they are like a “parent to a child”, who nurture the business providing shelter tools and training and network to create a “real business”.
Accelerators (late stage) do more or less the same thing, but they help you to run fastly, when the “basic business model” is already validated.
These programs normally run for 4-8 months and require time commitment from the business owners.
You will also be able to make good connections with mentors, investors and other startups in the same Ecosystem, using the same Network and the same Platforms.
For example in the USA, companies like Dropbox and Airbnb and many others, started with an accelerator called “Y Combinator”. (Considered like one of the best accelerators in the world).
There are some Professional Investors that don’t completely understand the Business Model or the MVP of the Startup, so they invest simply because they completely believe in the reputation and Accelerator Methods / Selections.
That’s why it’s not so easy to be selected, and you need to have at least an MVP and some little natural metrics and traction to show during the selection process.
Here is a list of top incubators & accelerators that we collected in the World.
4) Startup Contests & Competitions
An increase of the number of contests, has incredibily helped to maximize the opportunities for fundraising.
It encourages entrepreneurs with business ideas to set up their own businesses.
In every competition, you can have the opportunity to build your product, prepare a business plan and any other materials requested to participate.
So our suggestion is to partecipate (especially if they are organized in your specific Vertical / Sector), not only to win, but with the goal to learn as much as you can, during all the process, especially because you will have the opportunity to learn a lot about your business, and to prepare all materials that you will use probably in the next future too.
Winning these competitions can also get you some interesting media coverage.
You need to make your project stand out, in order to improve your success in these contests.
You can either present your idea in person or pitch it through a business plan.
It should be comprehensive enough to convince anyone that your business is a good idea to invest in.
So it could be a very good exercise for you and your team, to start to enter in the “clothes” of the professional investors and what they are generally looking for.
5) Public Money & Public Contests:
Any Government, Public Entities and Local Public Offices, organize regularly some Startup Competitions, to innovate the area where they are based in, or to promote a specific social needs.
Especially if you are creating something for “social utility”, you should consider this option, even if it could take a lot of time to prepare materials to participate.
The reason is really simple: Public Entities are completely different from Private Investors, their goal is the Social Utility, not the profit, so maybe you are solving a specific problem for some specific persons or for an entire community.
Normally the general goals are promoted from Politics, so if your Company is working in this specific Sector, or if your Startup matches these specific needs, you should contact them as soon and as directly as you can.
Maybe on the website there are direct contacts of the office that is organizing the contest, or probabily there is the direct form application for this specific contest / competition…
In any case, the suggestion is just to let them know that you simply “exist”, and your solution is specific for this contest or competition that they are organizing.
Naturally they can’t give you any kind of “specific benefit or advantage”, but normally someone will answer you, with the right instructions or with the correct steps to apply.
Consider that only the thing that they know that you exist, generally coud give you more opportunities than some others one completely unknown…
Maybe the specific competition is not perfect matching for your specific startup, but you can get some direct connection with the office, and the next time you will be informed in time…
Remember that they are Public Offices, so they are motivated principally from the Social Utility, not from the Profit like private investors…
6) Business Angels Networks:
Angel investors are individuals with surplus cash or a professional interest to invest in upcoming startups.
They often work in groups of networks, to collectively screen the proposals before investing.
They can also offer mentoring and very useful advices alongside capital.
Angel investors have helped to start many prominent companies, including Google, Yahoo and Alibaba.
This alternative form of investing generally occurs in a company’s early stages of growth, with investors expecting a up to 20-30% equity.
They prefer to take more risks in investment, for higher returns.
Angel investors invest lesser amounts than venture capitalists (covered in next points).
They can really help your business to grow fastly, not only because of the money, but also with connections, introductions, and experience.
Consider that once they invest in your startup, you are both in the “same boat”, so their goal is to protect the startups where they invested in, and they help them as much as they can to grow up.
7) Crowdfunding Platforms:
Crowdfunding is one of the newer ways of funding a startup.
It’s like taking founds, pre-order, contribution or investments from more than one person at the same time.
This is how crowdfunding works – An entrepreneur will put up a detailed description of his business on a crowdfunding platform.
He will mention the goals of his business, plans for making a profit, how much funding he needs and for what reasons, etc. and then consumers can read about the business and give money if they like the idea.
Those giving money will make online pledges with the promise of pre-buying the product or giving a donation, and / or (in the most professional Platforms), the Entrepreneur will give a part of Equity, in change of money collected.
Anyone can contribute to a business that they really want or believe in.
Why should you consider Crowdfunding as a funding option for your business?
The best thing about crowdfunding is that it can also generate a lot of interest and media coverage during the financing process.
It could also be a “boomerang” if you are not sure if there will be any demand for the realistic product you are working on.
This process can involve the professional investors and common people.
It also might attract venture-capital, serial Entrepreuners and professional investors to pay attention to the company with particularly successful campaigns.
Also keep in mind that crowdfunding is a competitive place to earn funding, so consider to submit your materials and application when your business is enough solid to get the attention of the “average consumers”
Consider that just a simple description and some images online, are not enough to have a successful campaign for your company.
On the other side, it could be a very big opportunity to run and boost your business very fastly.
8) Bank Loans:
Normally, banks are the first place where entrepreneurs go when they think about funding.
The bank provides two kinds of financing for businesses.
One is working capital loan, and other is funding.
Working Capital loan is the loan required to run one complete cycle of revenue generating operations, and the limit is usually decided by hypothecating stocks and debtors.
Funding from the bank would involve the usual process of sharing the business plan and the valuation details, along with the project report, based on which the loan is based.
Almost every bank offers various kinds of programs, depending on the business.
The only things in common with everyone, is that:
- The Banks give you the money, only when they are sure that you can payback the trances of the Loan
- Capital is not “for free” (I mean, there will include some interest for sure, and some expenses already included in the payback plan)
Consider that it’s exactly their principal work: loan money, and receive back capital and interests.
Interests and expenses are only the second option to consider (they are just “operation details”, when you are asking the loan), instead the possibility to payback the trances is certainly the first necessary pre-requirement to consider.
The concept is really easy (imagine for one second to be the Bank): would you loan the money to someone, if you are not sure that he is able to pay back? That’s why generally they ask for some personal guarantees too.
9) Industrial Partners:
One of the best ways to raise money and experience for your Startup, is certainly involving an Industrial Partner vertical for your specific Sector.
Your business can get multiple benefits from these kinds of Partnership, and also Industrial Partners can get big advantages working with your Startup.
For big companies, it’s not so easy to make internal development, it could take really a lot of money, time and energy without any sense.
For this kind of Company, it’s really easier and faster just to buy or to invest a Company, that already solves a specific problem that they want to solve.
There are so many real examples about this simple concept, think about, for example, when Google in 2006, just bought Youtube for 1,65 Billion dollars.
Now it produces around 15 Billions in annual revenues.
Or when Facebook just bought Instagram or Whatsapp.
Naturally they are big success examples, just to explain better the concept: for an Industrial Partner, it’s really easier and faster, just to buy or to invest in the Company, and inglobe it in their network, instead of creating a New Youtube from zero, or a new Instagram / Whatsapp.
The same concept happens every day in every sector, practically everywhere in the world.
If you are creating something really useful, or that solves some specific needs or problems, be sure that some Industrial Partner could be really interested in you, especially if you are working in the same specific sector.
For example in Travels, Fintech, Medical, Energy and every other Sector….
So our suggestion is just to contact directly your favourite Industrial Partners in your specific Sector, as soon as you can.
It could be a very big boost for your startup!
10) Venture Capital:
Venture capitals are professionally managing funds who invests in companies with huge potential.
They usually invest in a business against equity and exit when there is an IPO or an acquisition.
VCs provide expertise, mentorship and acts, correct and exact evaluation of the business, especialy from the scalability and potentiality point of view.
A venture capital investment may be appropriate for businesses that are already generating enough revenues, to be interesting for their funds.
There are some Funds really focused and specialized in different Sectors, for example in Medical, Energy, Fintech and so on, and others that are focused in General Business.
Fast-growth companies like Flipkart, Uber, etc with an exit strategy already in place, can gain up to a hundred millions that can be used to hire new technical and professional employers, investments, network and grow their company quickly.
However, there are a few downsides to Venture Capitalists as a funding option.
VCs have a short leash when it comes to company loyalty and often look to recover their investment within a 5 to 7 years period.
If you have a product that is taking longer than that to “market fit“, then venture-capital investors may not be very interested in you.
They typically look for larger opportunities that are a more stable, companies having a strong team of people, and a very good traction and regular revenues based.
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