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Startup Funding:The Vital Spark of Any Business
Startup 101

Startup Funding:The Vital Spark of Any Business 

W
hen an entrepreneur steps forward to build up a successful business, the main obstacle that comes up first in his/her mind is capital. Funding is one of the essential components of any business.

Because every startup needs a stimulus like capital to begin their exciting journey from an idea to profit. From a recent study, statistics say that 94% of new businesses ended their journey within the very first year of their campaign for lack of funding.

So, one big step to raise funds for your company may lead you to fulfill your dream as a successful entrepreneur. Luckily, there is some amazing range of startup funding stages that will help you to decide the perfect funding idea.

Why Is Startup Fundraising Necessary?

Without a decent capital, it is very tough to construct your company in an initial stage. However, the financial investment is very essential for a business to maintain its growth.

For an entrepreneur, it is necessary to know why fundraising is important. So, there are a few purposes that will help you to know why funding is required.

  • Headhunting: Hire worthy applicants for making a great team.
  • To keep up the initial operating cost.
  • For getting licenses and certifications for the company.
  • To gather exploitable raw materials, goods, and equipment.
  • Manufacturing.
  • Product development.
  • Rent a suitable workspace and purchase office furniture.
  • For creating competitive marketing strategies.

Best Startup Funding Sources

We know there are numerous ways to boost your fund, but it’s tough to settle on the right one. So, here we are with some convenient ideas which will boost you.

Bootstrapping: The Best Policy for Small Business

Bootstrapping is known as using your hard-earned savings to build your business. Getting funding from an outside investor is more complicated than you think. If you have personal savings, it’s a massive opportunity for you to start your company.

 The best thing about bootstrapping is that you can keep control of your startup. Since you don’t have any financial investors and any outsider parties, you don’t need to share your profit or feel any extra pressure.

 After taking any loan or financial support from third parties, there is a constant headache that you have to maintain your stakeholder’s or investor’s expectations. But self-financing helps you for not getting any outside influences. When you have self-funding, you are tied to the business. On a further stage, that would be a great point that investors will consider. 

However, this idea is appropriate when you are going to start a small business or a micro-enterprise. Many businesses need heavy financing from stage one. For such a case, bootstrapping is not a good solution. 

Alongside this, the investors and stakeholders will bring knowledge that can help you to grow your business. And they will also help you to succeed with their experiences and connections. Moreover, you get to share your workloads, stresses, and pressures with the people who invested in you.

Friends And Family: A Convenient Way To Raise Your Fund

Raising funds from friends and family can be an effective solution for starting your startup business. The best startup advice always comes from your family and close friends. 

Furthermore, the people who are close to you are always ready to believe in you and more likely to take a chance on you. They can easily lend you money for your business with a low interest or maybe without any interest rate or maybe ask you for a little amount of equity.

 When the financial help comes from the close one that drives you to the exact path of success, that makes you more committed. And your friends will not pressurize you desperately for money or profit as other third party investors do.

It also will be a perfect sign for your future investors, that you have a proper connection with friends and family who have already supported you with your startup idea.

Finally, that is a very personal decision, so you need to take it seriously. Many successful startups in the world resulted from friendship. So, all you need is a strong idea and a vision that your friends and family have faith in.

Crowdfunding as a Funding Policy

Crowdfunding is now one of the popular strategies to raise your funds. The concept is seeking a little amount of money from a large number of investors.

It is best for small business startup funding. More specifically, it is like taking pre-orders, financial loans, the workforce from many investors, or more than a person.

In this policy, the entrepreneur should describe to their audience about his business goal, business idea, vision, the idea for making profits, how much money is needed in the crowdfunding platform.

After seeing the details about the business, consumers will show interest and give them a pre-order, donation, or any type of financial help. Anyone can contribute money to any company that they fully trust.

Also, crowdfunding is considered as a competitive place to earn funding for your company. Unless your company is not that much rock-solid, it will be a tough choice for your startup business.

Startup funding sources infographic

Find Angel Investor for your Startup

A group of people or wealthy individuals who specialize in investing money into different startups and demand for equity are known as angel investors. Usually, an angel investor focuses on an early-stage startup and contributes their cash in exchange for equal partnership.

Before investing, A group of angels does teamwork on how they will offer the proposal. Sometimes they also provide mentoring and advice besides money from their side. Angel investors also helped many well-known companies like Google, Yahoo, and Alibaba to grow. 

However, this type of alternative investment occurs typically at the beginning of any startup. And these investors are always ready to take more risks in the contribution to make a higher profit in return. Generally, Angels required more than 30% of equity from the startup companies. 

So if you manage to get these types of investment, that would be a significant turning point for your company. But convincing these investors is a difficult task because they invest the companies in a short amount. You need to have high convincing power and faith to make them agree with your startup idea.

Venture Capital: Amazing Opportunity For Startup Companies

Venture capital could be a tremendous opportunity for startup companies. They are professionally managed and create funds that invest in companies with the most effective potential.

They invest in a company and don’t want to urge for reimbursement but the equity of the corporate. They also offer mentorship and act as a litmus paper to check how the business is growing profitably.

For a little business, it will be an excellent chance to get venture capitalists for their farm. Because they need financial care to start out their revenue. First, growing companies like Flipkart, Uber, etc are within the place where they gained 10 million dollars of the profit money, which they can invest in the small companies to grow and also get payback.

At the same time, venture capitalists are unlikely to invest in small companies sometimes. From a study, we get to know that less than 1% of new business firms are able to get capitalists at their back. In Asia New Enterprise Associate,

“Khosla Ventures, Sequoia Capital are three samples of venture capitalists who invest Asian startups heavily”. 

However, getting a capitalist for your startup business is very challenging because they typically find an outsized opportunity that is very much stable.

Bank Loan

The first thought about business startup fundings that comes up in the mind of an entrepreneur is the bank loan. In the past, getting a bank loan for a business was a very tough job for the generation.

But now, the bank encompasses a range of small business loans available to assist you together with your startup concept.

Usually, the banks out there are willing to give you two types of loans. One is that the working capital loan and the other one is funding. The primary one is that loan which is required for running one complete cycle of the revenue-generating process.

However, the other one is borrowing capital for getting your startup idea off to the ground. In Bangladesh, some banks are providing IDLC Startup loan facilities for the beginner entrepreneur without any prior history of financing. Also, the government is very willing to give you a loan via a bank.

But you should always be sincere about the cut-off date to payout the bank loan with an interest rate. There is also an installment process in the borrowing system of the bank. So before taking a loan, you ought to customize your business idea. 

Grow Your Fund By Winning Contest

Participating in a contest can be a great advantage for raising your fund. It also maximizes the opportunity of getting recognized with your business idea. And these programs always encourage entrepreneurs and their concepts.

After winning these contests, you can also achieve media coverage, which is a huge opportunity to attract venture capitalists. Startup Bangladesh is one of the big platforms for Bangladeshi entrepreneurs to present their startup idea.

Moreover, there are also some Bangladeshi platforms where you can submit the concept of your startup. Such as GP Accelerator, Urban Innovation Challenge, Tiger Cage, Toru Impactors, Idea Accelerator. All those platforms can help you to achieve your vision and goal.

Conditions On The Perspective Of Bangladesh

In Bangladesh, the startup ecosystem slightly stepped into a mature level in terms of investment. The overall flow has unbelievably increased in seed-stage investment and the activity of the angel investor is expanding. And therefore, Bangladesh Angels, which is the country’s first angel investment network was launched in October 2018.

The angel investors of Bangladesh prefer to invest in several companies directly and wish to play an influential role. In the past, the rate of investment by venture capitalists was inferior. But now we are seeing the light at the end of the tunnel.

BD venture is the first VC firm that has made several investments in 2019. IFC also tried to appreciate and invested a good amount of money into the local startups. Startup Bangladesh, which is a great platform, has given the purpose to many young entrepreneurs to go for their ideas. 

Normally, they are providing Funding, Mentorship, Academic Program, Networking, Legal and IP support, coworking spaces, which can be an excellent opportunity. And the ICT division of Bangladesh declared that they had secured 100 crores for startups.

So, you just simply need a proper idea, which can be a great startup example for others. Who knows your company can be the next Pathao or 10 Minute School.

Final Thought

The startup ecosystem or culture may have been dramatized or romanticized by the movie and tv shows. But in real life, it takes a lot of dedication, perseverance, hard work, mental strength, failure, and passion for witnessing a dream flourish.

The entire process of turning an idea into a successful business can certainly appear intimidating. But you have to fix your mind and decide to approach outside investors, loved ones, or even use your own hard-earned money. Remember, help is out there in many forms for startup funding, and understanding the startup terms make your dream a reality.

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