There are few people who can afford the cost of their business ideas on their own. Although starting a business is costly, this is not a reason for people who have business ideas to forget and not pursue them just because they do not have enough budget and do not have enough proper information about the right investment models.
Many of the brands and ideas that we know and use today have belonged to those who initially did not have enough budget to launch them. But by becoming familiar with the principles of investment and funding, they were able to find their own way in business and succeed.
Selecting the right source for obtaining funding for your business would be a crucial and determining factor. In this article, we want to explore some sources of funding for businesses.
Bootstrapping
Bootstrapping is a type of funding in which the individual uses his or her own funds for the business. In this way, the business owner usually allows the business to become profitable with his own capital and then adds the earned revenue to the company’s capital to create more profitability, and thereby the company can move forward.
Pre-Seeding
But sometimes a person who has an idea does not have the capital on his own to start a business, but his friends and family are in a situation where they can help him financially, or lend him money. Some people use this funding model. Of course, it should be noted that in order for the work-personal relationship not to interfere with each other, it is better to record this financial money transfer somewhere. For example, a person who provides our capital may want to make a return or get his investment back. All these details should be talked about seriously and preferably written somewhere.
Seed Funding
The most common funding model for starting a business is the one in which the investor invests a certain amount but in return wants to own a portion of the startup or business equity. This type of investment helps the company to reach the next stages of profitability.
Series Funding
Series Funding is one of the other types of financing that is used to provide a wider range of products. This type of financing requires long-term investments and depending on the model of investors and companies, it is divided into several types, which are: Series A funding, Series B funding, Series C funding, Series D funding, and more.
Crowdfunding
Another way of raising money to finance projects and businesses is crowdfunding. It falls into four different types: rewards, donation, debt, and equity. The way that this funding model works is that people can collect money and fund from a large number of people via online platforms. There have been prosperous companies that have raised funding this way. With this funding model, the company can both assess market needs and attract significant capital to expand its production process. Some examples of these kinds of websites are as follows: Wefunder, MicroVentures (equity-based); and Indiegogo, Kickstarter (reward-based).
Angel Investors
Hearing the angel investor reminded me of Silicon Valley and Naval Ravikant as an angel investor. In fact, angel investors are those who help people in the initial stage of launching a startup or business in the financing process. Of course, a startup or business may receive funding from several angel investors so that they can get the amount of capital they need. This is a risky task for the angel investors; because those businesses may not be profitable for a long time. In fact, an angel investor must have a good knowledge of business and be able to guess which business can be profitable to invest in.
Venture Capital
Venture capital is another way of financing that business owners usually use. This type of financing can be used when the business owners plan to expand the startup and the need for much more capital is felt so that the company can make higher profits more quickly and grow faster. Of course, the riskiness of this type of investment for investors is much higher than the risk of angel investment. However, it is not used for any kind of financing and is usually invested in companies that have passed the initial stages of their startup and only intend to scale up.
Conclusion
Indeed, finding an investor to start a business is not easy, but this difficulty should not cause us to be indifferent to our business idea and forget about it. Therefore, succeeding and implementing that idea and turning it into a successful business is worth the time and energy spent. So, go and find your proper funding model to make the impossible possible.
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