Monday, June 21, 2021

STARTUP FUNDING CHALLENGES AND HOW TO OVERCOME THEM

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Innovative products and business models are the backbones of a promising start-up. However, you will also need a steady flow of funds, especially in the early stages, to make these ideas a reality.

Funding is critical to developing infrastructure, recruiting the right staff, and launching a robust marketing campaign to get a foothold on the market. However, it can be difficult to get enough funding to launch your new company.

From jewelry to dog food to SaaS (software as a service) items, despite the risks, startups are popping up in virtually every sector around the world. As an entrepreneur, you will face a variety of obstacles when looking for capital, partially because you will have to persuade others that your project is a solid investment.

1.CREATING A SCALABLE BUSINESS MODEL

If you’re looking to grow a small business with a loan or a venture capital round, you’re going to need a scalable business model. In particular, investors tend to finance companies that are scalable or ready to scale. Your business model must demonstrate the ability to raise sales with reduced investment over the coming months or years.

  • Your business idea itself needs to be scalable
  • Build a business model that works; don’t rely on using your competitor’s model
  • Try to outsource non-strategic aspects of your business to minimize expenses

2. DETERMINING HOW MUCH MONEY TO ASK FOR

Whether you’re asking angel investors to fund your growth or applying for a bank loan, you need to know how much money you need. Most people will suggest that you should collect as much money as you can. In certain instances, though, more is not necessarily better.

  • Write a business plan
  • Be specific and concrete
  • Demonstrate that your company has a positive cash flow
  • More investment isn’t always better

3. FINDING THE RIGHT FUNDING OPTION

As stated at the beginning, several new start-up funding opportunities are available today. You need to select the most effective funding option to maximize the chances of receiving the funds. You might also need to use more than one option to finance your startup.

Bootstrapping or self-funding: the easiest (and cheapest) way to finance your company is to make use of your own savings or to borrow from your family and friends. Flexible investment conditions and fast availability make it an appealing source of funding.

  • Your own savings and income
  • Family and friends
  • Credit cards
  • Bank loans
  • Angel investors
  • Venture capital
  • Crowdfunding

4. SPENDING WISELY ONCE YOU’RE FUNDED

  • Stick to your plan: once you’ve invested, you’ll be accountable to your backers to do what you said you’d do with their funds and to be open if you’re thinking of changing course. Avoid losing money on the spree. Don’t waste your money on costly furniture, workspace, infrastructure, supplies, business trips, and lunch. Save the splurge when you bring more sales.
  • Spend wisely on technology
  • Keep your investors in the loop: Chances are you’ve chosen to seek out investment, your contract needs you to give investors their reasonable return in due time. However, showing them that their money is being put to good use will help to forge a bond of trust.
  • Parting words: Funding your startup or business plan is a difficult nut to crack. If you’re approaching a venture capital company or trying your luck at a crowdfunding site, you’re going to come across several obstacles when looking for funds.
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