5 Ways to Fund Your New Startup
Taking the leap of faith and starting a business can be new and exciting, but what happens when you run out of money? Startups can be capital intensive, from costs associated with developing prototypes to legal and professional fees. The good news is that there are avenues that provide entrepreneurs access to capital. In this blog, we’ll cover five different ways you can fund your new startup.
Self Funded
If you’ve been thinking about starting a new business for some time now, you might already have funds saved up. Using these funds to get your business off the ground can be a great way to preserve the equity in your company. However, be sure you aren’t placing your personal financial situation in jeopardy.
There are plenty of other options that can provide funding without you having to put your home up as collateral or take on extensive personal debt. Friends and family members can also be another great source to fund your startup.
Business Loans
Many financial institutions and credit unions offer startup loans. Due to the growing popularity, there are some banks that specialize in startups, like Beehive and PayTabs. A benefit of taking out a business loan is that you aren’t sacrificing any equity in your company. In addition, you can also have clarity into your cash flow with fixed repayment schedules.
Furthermore, you might also be able to qualify for government-backed loans. The U.S.-Middle East Partnership Initiative (MEPI) provides numerous grants and loan options for startups looking for funding.
Venture Capital
Venture capital might also be a solution for your funding needs. Venture capital in the Middle East is excelling, with a 20% increase in funds given to startups in the last year alone. Venture capitalists are firms comprised of dozens of private investors. In exchange for capital, venture capitalists will receive an ownership percentage in your startup.
Since venture capital houses dozens, sometimes even hundreds, of investors, the contribution amounts can be greater compared to self-funding and bank loans. This might be the right avenue if your business is capital-intensive, such as needing extensive research and development.
Crowdfunding
Crowdfunding is the process of raising small amounts of money from a large group of people. For example, if 10,000 people gave you $5 each, you would have $50,000. Crowdfunding is different from venture capital and bank loans in that the amounts generally don’t need to be repaid.
This form of funding is popular among entrepreneurs that have a specific initiative that appeals to people, such as creating a new device for the deaf community or helping solve the housing crisis in lower-class communities.
Angel Investors
Angel investors are individual investors that infuse money into your startup in exchange for equity. Unlike venture capital firms that have hundreds of investors, angel investors are generally single individuals. It’s not uncommon for a startup to seek out multiple angel investors to gather the necessary capital.
Angel investors are most commonly found through networking and direct connections. Attending a networking event or talking with other entrepreneurs are great places to start. Finding the right angel investors depends on who you know.
Choosing the Right Avenue
Which funding avenue is right for your startup? There are a lot of considerations that go into choosing the right funding avenue, such as the maturity stage of your business, how much capital you need, and whether you are willing to give up equity. For more startup tips, tricks, and best practices, check out our other blog posts.
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