Having a great idea for a product or service is one thing - taking that and using it as the foundation for a successful startup is something else entirely. Before you start building your product, thinking about a marketplace or even hiring key personnel, the major factor that you need to concern yourself with is funding. If you're looking for new and innovative ways to get initial funding for your startup, there are a few key things you'll need to keep in mind.
Startup Funding: By the Numbers
According to one study, roughly 82% of initial startup funds typically come either directly from the entrepreneur or from their friends or family members. Indeed, approximately 77% rely on personal savings to help get their company off the ground.
However, it's important to realize that 82% of startups that fail typically have cash flow issues as a contributing factor. In another survey, 27% of businesses say they had to close their doors because they weren't able to receive the funding they needed in the first place. All of this goes to underline the point that if you're working on building a startup, initial funding is a factor you need to address as quickly and as thoroughly as you can.
The Many Ways of Funding a Startup
According to Inc.com, one straightforward way to get initial funding for your startup involves finding the right private lender. You can take out a small business loan to cover the funds you need to get started, paying back what you can along the way in a relatively low-stakes situation.
Another popular way to get initial funding for a startup these days is crowd funding. Sites like Indiegogo, Kickstarter and others exist largely to help people just like you. In many ways, this is a perfect "practice" opportunity for the later stages of your company's lifecycle. You essentially not only need to market your product or service, outlining your vision and your goals for success, but you have to make this pitch at a time where you have literally nothing to show for it. If you're able to sell your idea in a way that entices people to give you money at this stage of the game, you can use a lot of those same tips when it comes time to actually take your offerings to market.
When it comes to startup funding, another important step to take involves stretching the value of every dollar that you DO have as much as possible. Say you need $20,000 to get your company off the ground but to date you've only raised $15,000. You may not actually need to raise the other $5,000 if you can "bootstrap" your way towards making up the difference.
Sometimes this means co-locating with other offices - just because you're a startup doesn't mean you need an entire office all to yourself. Oftentimes it can mean re-appropriating equipment. Do you have a personal desktop computer at home? Congratulations - you've got a desktop for your office at work, too. Things like striking a mutually beneficial deal with suppliers, eliminating travel expenses by teleconferencing and even deferring capital purchases for as long as you can can all be a great way to help close the gap between "what you need" and "what you have."
You will also likely want to consider bringing on a co-founder, even if the initial idea was all your own. Studies have shown that this doesn't just allow you to raise an average of 30% more money, but you'll also have three times the user growth AND you'll eventually be almost 20% less likely to scale prematurely.