3 gems on how a startup can get funding – from Brian Dineen on how a startup can get money and capital
It seems that when one peruses the plethora of internet locations offering advice, information, and tips for small business, the subject of funding your business is a very popular one. (For good reason). Among that subset of information, funding for startups appears to grab the lion’s share of the attention.
Interestingly, in an average year only about 75,000 startups get private investment (about 70,000 get angel investors and 5,000 venture capital).
And banks mostly lend to startups via SBA-guaranteed loans, often requiring things like your house as collateral, and lent to just over 50,000 businesses in 2013.
Meanwhile, almost 500,000 new businesses startup every month, according to the Small Business Administration (SBA).
Which proves that the general idea that startups get funding is off base; the vast majority of startups are self funded. So what’s the deal here? Why all this hype about funding for startups?
One reason is obvious. Money is something every business needs to survive and thrive. Naturally it’s always at the forefront of any entrepreneur’s mind early in the game. I think the other reason is that there is a perception that startup founders need the most help in obtaining funding, due to lack of experience, limited resources, and competing with more established firms.
So what can the startup do to increase its chances? There are a few things that founders can do to make their company look more appealing to an investor or lender. This is certainly not a guarantee of obtaining the capital but may give you a leg up on the thousands of other fledgling entrepreneurs approaching the same sources.
First, put as much of your own money into the new venture as you can. Anyone funding your new venture will want to know that you have enough confidence in the idea that you’re willing to put your own capital at risk as well as theirs.
Second, make sure that your business plan is not only realistic, but covers every potential contingency that may arise. A well thought through business plan shows that you’ve considered all the potential opportunities and threats and are prepared to deal with whatever circumstances are thrown at you.
Finally, if you have a business to business service or product try to “pre-sell” to a larger, more established customer. This proves marketability to the funding source. In fact, if you can land a purchase order from a credit worthy customer you can obtain funding based on that purchase order, allowing you to produce and deliver the order without draining your initial resources.
In short, obtaining capital, whether it be equity or debt, for a startup is difficult, but there are things you can do to improve your probability of success.