Jason Miller helps influential brands and celebrities create generational wealth with their businesses | CEO, Strategic Advisor Board.
It’s 2024, and maybe you have a new idea for a startup. The problem is that you’ll need to raise capital. Take a look at the different options you have, ranging from bootstrapping to government funding.
Did you know that, according to CBInsights data compiled by World Population Review, the United States has the highest number of unicorn startups in the world? We’re arguably in the best country to get a startup going. There are various ways to raise capital for your startup, and there’s no one right way to do it, as each strategy has its pros and cons.
1. Bootstrapping
Bootstrapping is all about keeping costs low and is usually a method that involves self-funding from your savings. First, you want to start with a small product that solves a need. From there, you want to test out the different ways to produce your product so you can keep the costs low. It’s also important to make sure you’re prioritizing revenue generation through methods like pre-sales, subscriptions or special pricing so you can get some cash flowing. If you’re bootstrapping your startup, jumping all in might not be the best approach. I would suggest doing it part-time while maintaining another job if you can so that you can add more of your personal funds if you need to. If you value independence and don’t mind growing your business more slowly than you would if you had access to more capital and resources, bootstrapping may be for you.
2. Angel Investors
If you’re looking for angel investors, then you need to attract the right people to your startup. And to do that, you want to make sure you have a clear pitch about what your business does. There have been so many times on my investment journey when I’ve heard pitches, either directly or indirectly, that were hard to understand. You want to focus on these three things: Define the problem, describe your solution and give your unique selling proposition (USP). Angel investors will appreciate you being clear and valuing their time. You may find the investors you’re looking for at industry-related networking events. They usually like to keep an eye on what’s current and new, so you’ll most likely have an opportunity to share your story. Investors want to see how you’ll use their money, so make sure you have a business plan and a roadmap that also includes market research that shows the demand for your product. Getting angel investors on board provides credibility for your startup—but keep in mind that while it provides expertise and guidance, it can also lead to conflicts between different investors’ expectations.
3. Crowdfunding
Crowdfunding is when you raise small amounts of money from a large group of people; they are usually part of the general public. Start by looking at the different options for funding platforms. You want to make sure your target audience is using the platform and that the platform itself aligns with your business values. You need interesting visuals to make your campaign stand out, so make sure to include a video that tells the story of your product and company. Next, set funding goals and tell your backers what you’ll be using the money for. Make your funding goals align with immediate needs and offer value to your supporters with different incentives for different levels of investment. Next, market your campaign everywhere by getting it out to a wider audience; include landing pages, industry-appropriate newsletters and targeted social media ads. I recommend keeping your backers in the loop so they can be at the forefront of what’s new with your product or business; one of the best things that comes with crowdfunding is the community you build with it. Your backers are usually a group of people who are passionate about your project and are willing to share it with others. I’ve found that the two biggest cons of this funding method are that crowdfunding projects are highly competitive, and a lot of the platforms will take fees for themselves, so make sure to research any hidden costs.
4. Government Grants
Although obtaining grants may not be the easiest way to gain capital, once you get them, they’re essentially free money. This method of funding requires a lot more research than the other options, and you’ll need to look closely at the eligibility criteria each grant has for its applicants. Make sure you look for grants that are relevant to your business or industry. And keep an organized calendar of all the different application deadlines. Instead of creating a business plan, as with some of the other funding options, you’re going to create a grant proposal. Each proposal should be customized to every grant you’ll be applying for. The proposal should include your project’s goals and projected outcomes, as well as how your project meets each objective of the grant program. Also, include a detailed financial plan to demonstrate how the grant will be used. One of the best things about getting a grant (besides the money) is that there’s no equity dilution, but keep in mind that there is plenty of competition, and the application process can get complex.
There are many different ways you can obtain funding for your startup, and each one has its nuances, pros and cons. Bootstrapping is no easy feat and requires discipline and patience, but it’s rewarding because of the independence it allows the entrepreneur to maintain. To attract angel investors, you need clear objectives and goals, but it can come at the cost of many opinions. Crowdfunding, although it tends to build interactive communities, can come at a hefty cost if you’re using certain platforms. Government grants are fantastic once you get them, but they require a lot of time, research and thought put into proposals.
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