6 Easy Way To Get Funding For Startup
In this article, we will talk about how you can get funding for startup. But, before we do that, you need to know first about what a startup is. According to Ries (2011), startup means to refer to start-up companies designed to create products or services amid extreme uncertainty.
How to Get Funding For Your Startup
In this article, we will also be going to tell you about how to get funding for startup legally. There are a few ways that you can choose to get funding for your startup and we are going to tell you six of them.
1. Equity or Shares
Selling or transferring equity or shares is one way to get venture capital that is most widely applied in the business world, both for large companies and startups. This method is used by companies to obtain funds from investors, and in return, investors will own shares in the company.
As shareholders, investors are considered “owners” of the company and are entitled to benefits in the form of dividends, as well as voting rights which can determine company policy in the future. Funding through shares can only be done if your business is in the form of a limited liability company.
2. Loans
Apart from stocks, the most common way you can get venture capital is by applying for a loan. In this way, you can lend money to creditors in the form of an amount that must be returned, regardless of whether the company has made a profit or not. You can get loans from financial institutions such as banks or non-financial, such as individual creditors.
3. Convertible Debt or Conversion of Debt
This method is generally applied to initial startup funding where investors will lend a certain amount of funds to startups, then if the specified period has passed and the startup fails to pay the amount owed along with interest, the debt will be converted into shares at the startup. In other words, investors here have the option of converting their receivables into shares or equity.
4. Bootstrapping
This term is used when a company tries to run its business operations without the need for external funding assistance. Bootstrapping is often done by start-up businesses because it’s easier to choose. Then where did the funds come from? One of them is by utilizing the source of funds owned by the founder, for example through savings.
5. Incubator or Accelerator
An incubator is a place for startups to grow from scratch. In an incubator, generally, stages are starting from team formation, brainstorming ideas to becoming an MVP, hackathon sessions, demo days, to graduation, namely launching a startup to the market.
Meanwhile, accelerators usually help startups in terms of acceleration so that they develop better than before. In general, the period in accelerators is shorter than in incubators, namely in months (3 months, 6 months, and so on).
6. Venture Capital
Venture capital (VC) or commonly referred to as venture capital is a type of financing for startups and is provided by investors. In general, capital using VC is given to small to medium-class startups.
Finding A Way To Fund Your Start-Up?
Those are 6 ways to get funding for startup. Hopefully, this could be helpful for you. Make sure to check examples of successful start up in Nigeria to know more!
