A study confirms that roughly 50 percent of the startups survive their first year of operation. The rest of them die due to various reasons – like running out of money, vision issues, and lack of product-market-fit. Launching a successful enterprise requires a whole bunch of resources – before launch and after launch. You need money to hire people, build products, acquire assets, and subscribe to required tools.  In the absence of desired startup funding sources, no business will be able to survive.

In the following, we are sharing a list of the top ten startup funding sources to help you plan your venture’s future and success.

1. Angel Investment

If you have a solid business idea and a proven product-market fit, angel investors can be your go-to funding option. These investors examine business applications on an individual basis and then select the best ideas to invest in exchange of equity.

Since most of these investors are founders themselves and have stock of experience and knowledge, they also provide guidance.

Their network can also open the doors for you in the industry. However, finding and contacting the right investor can be a very challenge – and you have to find them via a network.

Generally, an angel investor meets 10 to 20 potential candidates and selects 1 to 5 for their investments per year. These investments are in small numbers – ranging from $10,000 to $100,000. If you have an interesting pitch, a proven product-market fit, and the right team, then the sky is the limit.

There are potentially two challenges with Angel investment. First, the amount of money committed is often little and you may not find it sufficient to cover everything for you. Second, these folks have little patience when it comes to returning. While they offer little money than VCs, they expect a higher ROI.

2. VC Firms

Venture capital firms are another great source of funding and business support. A startup can reach out for funding in exchange for a share/stake in the company. While it is comparatively easy to find VC firms, they are very hard to sell given the number of applications on their desk as well as their appetite for profits.

VC firms are keener towards investments where profitability and sustainability are somewhat certain. They also demand some level of managerial control to ensure their interests are being taken care of and funds utilization is optimized.

While getting a VC’s attention is very hard given the number of proposals, they receive each day and year, the amount is promising. You can get anything from $250,000 to millions if the potential is proven. Moreover, the potential networking opportunities also open doors for more funding.

If you look around, a great number of successful startups like Uber are backed by venture capital firms.

3. Incubators and Accelerators

Business incubators and accelerators specialize in business growth. They provide co-working spaces, services, mentorship, and networking opportunities to select businesses under their roof. Most of the incubators are backed by venture capitalists, so access to more capital is easy.

Incubators are not only one of the popular startup funding sources but also a great platform for learning and exposure. However, entry into an accelerator/incubator is not easy as it involves a lengthy application process. Once approved, the startup undergoes 4 to 6 months of rigorous growth hacking program.

4. Grants

Funding comes in different forms and grant is one of them. There are various public and private bodies that offer several support grants to new businesses. However, the process is quite lengthy and these grants have a very high bar for eligibility criteria. If you are a social enterprise or non-profit entry, getting a grant becomes easy.

4. Business Bank Loans

This should have been the straight number one option – but we didn’t put it there as most of the startups ignore bank loans. Traditional bank loans have a very strict lending procedure and criteria, where most of the startups get out. They look for assets, cash flows, and collateral – which are rare with startups.

Business loans can be a good source of funding for small businesses, but not for new ventures. However, we would advise you to consult your financial advisor and check the interest rate, amount, and repayment conditions that banks put forward.

This insight can help you when dealing with alternative lenders and close a funding deal at better terms.

5. Personal Loans

Before we explain this further – let us remind you that personal loans are high-interest loans, but they still make to the top list of startup funding sources. The process is very simple and straightforward.

A borrower can go to the bank and apply for loans (showing their paycheck or slips) and use the same funding for their business. The loan amount may vary – from $10,000 to $100,000, but can be a very good option to keep the ship sailing. Contrary to this, if you are looking for a bigger amount, this might not be a suitable option.

6. Credit Cards

Credit card loans are pretty common but mostly taken or used in a personal capacity. Using a banking instrument, we use borrowed money (within defined limit) and then pay back the bank as per terms.

While this is a personal banking instrument, a lot of entrepreneurs use business credit cards as a funding source. Depending upon your credit limit, you can use $10,000 or less through your credit card and then pay it back with or without interest in a given time period.

The bottleneck here is the payback period, which is between 30 to 45 days and if you ever default on your card, the credit history/score takes a big hit.

7. Asset-Based Lending

There are a number of other funding options that may be considered somewhat bootstrapping methods, but we are listing them separately for ease of understanding and clarity.

Asset-based lending involves using your property, vehicles, jewelry, or other assets as collateral to secure funding or business loans. The amount of the loan is determined by the value of your asset.

8. Self-funding

Starting and building your business from your own saving is the sexiest option of all. It does not cost you any interest, collateral, or equity – rather you retain everything and every asset of your business.

Another key bootstrapping method is to raise funding through your personal network of family and friends. They can give you a decent amount of money, and at very friendly terms compared to traditional financial institutions.

An entrepreneur needs to pitch the business idea to a family member or friend and seek their help in funding. To make the transaction a win-win for both sides, you can offer them some form of equity or share.

Bootstrapping is among the ideal startup funding sources where bureaucratic hurdles and interest rates are not your key worry. And your personal network is typically more prone to trust you, as compared to the financial institutions.

9. Crowdfunding Platforms

Crowdfunding is a relatively new concept in the startup funding domain and generally involves a large number of people to support your idea. There are a lot of crowdfunding platforms that enable founders to approach these platforms and seek funding in exchange for equity or just debt.

You can seek funding from individuals as well as groups – and the best part is that you can raise funding for different ventures and steps of your business. One caveat here is that not all such campaigns are successful, you have to work hard here.

The biggest selling point here is your story and drive to make an impact. Your presentation to the audience should highlight the mission, vision, personal commitment, future projections, and emotional appeal of the brand. There are many platforms but Kickstarter, SeedInvest, and SeedUps are among the top.

While working on the platforms might look similar, we strongly recommend going through each with their specific value proposition, offers, and success stories. This would help you use the platform in a more effective way.

10. P2P Lending Platforms

Like the rest of the industries, innovation is also disrupting the startup funding domains too. P2P or Peer-to-Peer is one such technology-powered funding solution that helps a founder borrow funds from another individual on the platform.

Consider it like an interactive social network where a founder posts their funding needs, story, and projections. Potential investors take a look at the post and then make a proposal – to fully or partially fund the project. The process stays there until the request of the borrower is finished.

The repayment is also fun – as the platform requires an agreed fixed amount as monthly payments back from the founders to the lender. This way, both, the founder and the financer remain safe and continue to work on their venture without worries.

Conclusion

We hope that the listed startup funding sources will provide you with more clarity – and you’ll be able to see through the options and pick the one best for you. At Numberly, we are committed to helping founders with their startups’ financial health and decision-making.

If you are looking for funding and need advice, feel free to reach out and schedule your free consultancy call. Our team of experts shall be in touch and provide you with specific business advice in no time.