Startups are built over time, coming to life in a very slow and gradual manner. They rarely happen overnight, but more of evolutions upon the ideas. That person has in their mind- not just an idea though says Peter DeCaprio.
The spark has got to be able to catch fire for it to grow into something much bigger. Than expected at the onset. Taking into account that many startups never even see the light of day. What separates these two types is how they are funded. Those who are able to get the proper financial backing before ever getting started. Tend to have much better chances at reaching sustainable heights once operation begins.
There are many ways through which entrepreneurs can seek financing. When starting up or doing so when already established companies looking for expansion.
What are some of the common ways through which new startups can finance their operations?
- Startups usually start at home before they look for external sources of funding to launch their business, save for few cases where investors already see potential in the idea and will directly invest says Peter DeCaprio. Personal savings are one of the most accessible forms of financing that new entrepreneurs can resort to while bootstrapping their ventures, but only if they have enough set aside. This ask may not always be possible, depending on whether an entrepreneur is able to save up enough money or not over time- so many people turn to personal loans from financial institutions who allow them to get this type of loan easily . They are given a fixed amount of time in which they are expected to repay the loan and interest rate; failing which may lead to penalty charges.
- IPO (Initial Public Offerings) or equity financing is another option through which startups can get money to finance their operations, though it is only available after a certain period of time when venture has grown significantly. For these cases, investors look for potential in the company while considering its market size and growth projections. Most often than not, investors tend to have unrealistic expectations from new companies because they base their forecasts on previous similar successful ventures that have achieved sustainable heights in a short period of time. This leads to failure of many startups who cannot meet up with such high levels of demand- given that they are still small scale companies starting out with each passing day.
- Selling equity is one way through which a venture can finance its operations, but this method requires a lot of experience and expertise in the area. It also demands extensive research from those who intend to invest money in new startups- not just any company will do as those who have big pockets are very selective about their investment choices.
- Aside from these options for financing a startup, there are other means too- some more unique than others that have been into good use with success by certain companies previously. Crowdfunding is one such option that has been in use by many people all over the world with decent results depending on each individual case. In most cases, entrepreneurs require a specific amount of money to finance part of their operations. Crowdfunding helps them reach this target and more. By making use of many small donations from people who have been convincing to contribute.
- This type of financing is perfect for those who have a strong following whether in social media or offline. But it requires much convincing on the side of the entrepreneur to actually get things moving in this direction. In most cases, people are either unaware about such opportunities. Or simply do not care enough to invest their time and money into something. That will not provide any return anytime soon. This goes especially for startups which still have a long way to go before even thinking about sustainable growth.
- Various other ways through which new entrepreneurs can finance their startup includes exhaustive planning. That goes into each step in order to arrive at feasible options from which one can choose from. Peter DeCaprio says, if one is able to manage their cash flow properly, then there are many less worrying things. That can happen with startups- even if they fail to raise money through other means.
- Startups have for being a magical solution to all of society’s problems. But only when given the chance and taken out from the black hole where they seem to disappear into. In order for this scenario to change. More effort must be put in by those who want it enough including entrepreneurs themselves. This is something that should start from within because without proper conviction and commitment towards a cause. No amount of funding will help you achieve your set goals.
Conclusion:
The main points covered in this article are the different ways through which startups can finance their operations says Peter DeCaprio. By far, there is no single method that works best for every company- each case must be assessed individually. Because a one size fits all situation is not practical when it comes to business.
Also, entrepreneurs should work towards creating sustainable relationships with investors. So that they have a big pool from where they can choose during times of need. In most cases, lack of knowledge and awareness. About what venture capitalists may look for turns out to be a bigger problem than anticipated by most people. Who set out to raise capital because they do not understand how much time it would take. To come up with an idea worthy enough for investment.