How to Raise Capital for Your Startup

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One of the reasons most startups fail is due to a lack of funds. Without money, starting a business and running it on a day-to-day basis may be tall because cash is the bloodline of any venture. From the idea stage to revenue generation, a company needs money for expenses such as paying rent, utility bills, salaries, and buy inputs, among other costs.

Below are some of the ways you can raise capital for your new business:

Crowdfunding

Crowdfunding is a relatively new business financing method that is getting popular massively. It involves receiving loans, contributions, pre-order or investments from many people at the same time. To get funds through this method, you need to post a detailed description of your business on a platform for crowdfunding. You have to state the goals of your business, how you expect to make profits, the total funds you need, and the use, among other things.

The consumers read the business description and contribute funds if they buy into the idea. The people contributing will pledge online with promises to pre-buying the firm’s offerings or giving donations. Any person can give money towards supporting a business they have faith in. The good thing with this method is that you raise funds and market your goods, and even produce them when already ordered. However, your business must be captivating to win people’s confidence. Examples of crowdfunding platforms in the US are GoFundMe, Kickstarter, and DreamFunded.

Bootstrapping

botstrappingMany entrepreneurs choose to fund their startups by putting together personal savings, liquidating their assets, and using their funds and other methods. Some of the other means include credit cards, the available home equity lines the business founders may have, etc.

Most of the time, bootstrapping is a good way of financing startups because there are no loans and creditors to give you headaches. And this is more crucial if the business doesn’t take off immediately hence lacks profits to pay loans and other credit facilities. However, if you wish to expand your venture, seeking other funding methods would be a better idea.

Funds from Family and Friends

You may fund your startup by sourcing money from your closest people, who are family and friends. This may be a good idea before going for external sources like bank loans. But it would help if you had a comprehensive business plan before requesting the friends and relatives for funding. The plan will help you explain your business idea, how you expect to generate revenue and profits, and how much you need. Also, ensure you clarify if you are requesting loans, donations, or investment.