Methods of Raising Capital For A Startup
Money, or lack of it, can make or break a startup. Period.
As a startup founder raising capital is about to become an important part of your efforts. A survey by the Kauffman Firm estimates that it takes, on average, a minimum of $80K to get your startup through its first year alone. Moreover, depending on the industry, it may take more than that just to get your startup off the ground — as you can see from this pricing simulator.
Most companies fail to procure startup funding. Partly because it’s extremely difficult, but also because they fail to follow some basic steps. Fundraising requires understanding and a rock-solid approach to succeed. Here I will be taking you through the first steps of your funding journey. Starting with the basic preparation, to working out your funding roadmap and finally, how building your network may be the most valuable tool available to you.
Methods of Raising Capital For A Startup
There are a plethora of sources of funding available. Giving startup founders many ways to raise capital for a company:
- Bank Loans — In 2015 startup business loans from banks totalled around $600B
- Angel Investors — In 2016 64,380 ventures were funded by Angels — totalling a staggering $21.3B
- Venture Capitalists — In 2017 7,783 companies benefitted from VC investments — to the sum of $84B
- Family Offices — Completed more than twice the number of deals than traditional VC firms in 2017.
- Equity Crowdfunding for Startups — raised $569.5M, while revenue/profit sharing raised 28.5M (2016)
- ICOs — Worldwide, in 2017, companies raised $5.6B through Initial Coin Offerings
Fundable tells us that in 2014 less than 1% of startups received funding from Angels- while a mere 0.05% were funded by a Venture Capital company. While banks provided 1.43% of startup funding. Regardless of who you go to for capital, there are three things you need to give yourself the best chance to get that all-important cash injection.