Businesses go through predictable life cycles. Before they can reach important phases like growth and maturity, every business needs to pass through the startup phase. It's a rite of passage.
Of course, just because it's a required step doesn't mean launching a startup is easy. You need to make plans, gather resources, build a team—and get startup business funding. Lots of funding.
If you're in the startup phase and looking for ways to fuel your new business monetarily, here are a few things to keep in mind and some suggestions for raising funds.
What Does Your Fledgling Business Need?
Before considering where you get your funds, you need to figure out how much money you need in the first place. This can be an estimate, but funding for small businesses isn’t easy to come by, and you should be able to explain how you intend to allocate each dollar.
Figuring out what your business needs starts with a solid business plan. As you consider objectives, market factors, products, services, and competitive analysis, you can create a more detailed forecast for your financial needs. Typical startup costs include things like:
- Creating your business plan and conducting initial research
- Fees for incorporating your new business entity
- Office space, furniture, and other overhead considerations.
- Initial inventory investments
You’ll also need to set up a solid tech stack. Startups can use a hassle-free, no-code development platform like Bubble to launch their websites, web apps, and other tech products. These types of platforms make initial tech needs accessible and affordable to those lacking software developer experience.
Once you’ve added up all your startup expenses, it’s time to look for the funds to cover them.
8 Best Options for Business Funding for Startups
1. Tap Immediate Sources
The most common funding sources for a new business start at your doorstep. In many cases, you can bootstrap your company with your own money. If you don't have enough available, you may be able to borrow reasonable quantities of cash from family and friends who want to help support your venture.
2. Look for a Startup Incubator
Startup incubators—also called "business incubators"—are organizations that jumpstart new businesses. They are designed to accelerate growth by providing resources typically needed early in a business's life cycle.
3. Consider a Small Business Loan
Borrowing money is a classic way to find funding for small business startups. There are many different lenders out there. The Small Business Administration (SBA) has created its Lender Match tool to help connect new small business owners with financing options to provide money to new startups.
4. Court a Venture Capitalist
Venture capitalists, or "VCs," are private equity investors. They can provide substantial cash upfront in exchange for a stake in your new company.
Be aware, though, that most VCs tend to gravitate toward companies with clear high growth potential. If you want to take the venture capitalist route, it’s important to do your homework first.
For instance, you’ll want to find investors that are interested in your industry. In your pitches, you’ll want to have solid numbers in place. Also, emphasize things like your market rather than spending all of your time talking about the product.
5. Go to Your Peers
Peer-to-peer lending is a growing phenomenon that can be perfect for covering basic startup costs. In effect, it crowdsources various investors' money into a pool of resources, creating larger loans that you can borrow and pay back with interest.
6. Crowdfund Your Business Into Existence
Similar to peer-to-peer lending, if you’re unable to get a loan or your financial needs are small, you may be able to crowdfund your finances.
To do this, you often need to have a business idea that resonates with consumers quickly and easily. For instance, the popular card game Exploding Kittens remains one of the most successful crowdsourced business ideas in history.
The game raised $8.7 million from over 219,000 backers due to a creative, inviting, and innovative Kickstarter campaign. This included special tiers with collector decks that appealed to the fun-loving nature of the game’s audience.
As an additional note, going the crowdsourcing route can open up the doors to plenty of customer feedback. This can inform your business processes and goals as you get your new company off the ground.
7. Apply for a Small Business Grant
The SBA doesn’t just back small startup business loans from other lenders. They also have a grant program that helps eligible community organizations get on their feet. The program isn't just open to any entrepreneur, however. You'll need to apply and prove that your business is a worthy enough cause to receive a grant.
8. Trade Equity for Services
Finally, if you're looking for small business startup funding with a dollar sign attached, you may need to shift your mindset. At times, you may be able to leverage the services of others in exchange for equity in your company. Trading equity for services can be a great way to get things going, even if you don't have the liquidity to pay for items in cash at the moment.
Which Startup Funding Option Should You Choose?
There are many different ways to go about procuring funding for a startup. Keep in mind as you make your choices, multiple factors can impact finding funding for startups, including:
- The size and scope of your goals
- The industry you’ll be operating in
- The quantity and quality of current competition
- The amount of time you will be in business
- Projected revenue and growth speed
- Credit scores, history of repaying loans, and similar qualifying factors
As an example, if you're launching a giant tech firm, you'll be looking at enormous costs, stiff competition, and likely sizable overhead. That means you'll need to tap some serious financial sources, like a venture capitalist or a small business loan.
In comparison, if you're a solopreneur setting up an online shop, your funding will be significantly smaller. You may be able to crowdfund, try peer-to-peer lending, or even borrow from your savings.
Funding Your Startup With Confidence
Business startup funding can be intimidating. But it doesn’t have to be.
Take things one step at a time. Make your plans and gain your vision. Then assess your initial costs. From there, consider your options and pursue the funding that makes the most sense for your circumstances.
Remember, starting a business doesn’t happen overnight. It requires grit, tenacity, and the willingness to stay the course, no matter what challenges, financial or otherwise, come your way.
Bubble is a leader in the no-code movement. Bubble offers a powerful point-and-click web editor and cloud hosting platform that allows users to build fully customizable web applications and workflows, ranging from simple prototypes to complex marketplaces, SaaS products, and more.
Over 2 million users are building and launching businesses on Bubble — many have gone on to participate in top accelerator programs, such as Y Combinator, and even raised $365M in venture funding. Bubble is more than just a product. We are a strong community of builders and entrepreneurs that are united by the belief that everyone should be able to create technology.