One of the main hurdles when launching a new company or product is capital. Your business idea might be feasible, but you may not progress from the conceptualization stage without proper funding. You need money for product development, marketing, distribution, and operating expenses. So, how do you raise startup seed capital? Explore the six options below:
1. SAFE Notes
SAFE stands for Simple Agreement for Future Equity. As its name implies, it’s a simple concept. You offer your business’ future equity to potential investors in exchange for funding, and that’s it.
People interested in your company may offer you cash with the hope of turning into shareholders in the future. Offering your business’ future equity is an excellent workaround to get the cash if you don’t have other options or sources left to consider. After all, when you’re just getting started, it’s a bit difficult to perform a valuation for your business, so creating an initial public offering (IPO) is out of the question for now.
Aside from SAFE notes being a simple concept, the typical legal agreement needed for you to go through this method fits into a standard five-page document. It doesn’t involve lots of negotiations between you, the founder, and the investors. Also, you won’t have that undue pressure to repay the investors’ money with it. The agreement doesn’t require to have a maturity date since the money you’ll receive is considered as an injection of capital instead of debt.
2. Get A Loan
Another common way of funding a startup is to get a loan from a bank or other financial institutions. Many banks and lending companies are eager to provide entrepreneurs with initial funding. All they usually need is a workable business plan, sizeable collateral, and an excellent credit report.
If you opt for this method, note that you’ll need to be somewhat sure of immediate returns. The lender will come knocking at your premises the moment the first installment is due.
3. Ask For Help From Friends And Family
Perhaps this should’ve been the first on this list, but understandably, some entrepreneurs feel uncomfortable when it comes to borrowing money from relatives and close friends. However, if you’re out of options and you know your startup will be a success, you should consider this method.
Never forget that your close friends and immediate family members understand your entrepreneurial intentions more than any other outsider. Accordingly, they might be in a better position to give you monetary aid. But don’t forget to pay them back; otherwise, your once-solid relationships may turn sour.
4. Acquire Government Grants
Time after time, both federal and local governments roll out programs to sponsor underfunded entrepreneurs. In this sense, it’s in your best interest to always be on the lookout for such schemes. When they do show up in your locality, gather your guts and apply for funding in good time. Although the competition may be high, you still stand a chance to be selected from among the hundreds or thousands of applicants.
5. Find Angel Investors
Angel investors are wealthy individuals who are willing to pump money into promising startups. The good thing with them is that they may not be in so much a hurry to recoup their investment, unlike mainstream financial institutions and other entrepreneurs. Therefore, taking this route gives you ample time to sail through the seed stage of your business.
As is the case with most other lenders, you must prove that they have a good shot at turning a profit with your business venture. Therefore, before approaching them, do in-depth research to evaluate the feasibility of your forthcoming project.
6. Try Crowdfunding
There is power in numbers. Thanks to technological advancement, you can now present your business idea to millions of people via the internet. There are several crowdfunding websites and social media sites where you can post your thoughts and attract millions of dollars for your seed-stage startup.
A dollar here and a dollar there can amount to significant sums of money. But take note that you have to approach the masses strategically to secure your startup funding. You see, anybody can claim to have a bright idea, but only a few can make their idea a reality.
There are several viable approaches to raise startup seed capital, provided you have a concrete plan. And that’s in the form of your business plan. As you probably know, a well-written business plan can mean the difference between success and failure. So, take your time to do intensive and extensive market research for your product or service and then craft a sound plan. Finally, go ahead and seek funding. And once you get the money, follow your proposal to the letter.