Startups need funding to keep the lights on and fuel growth until they’re profitable. But investors don’t just hand over cash — they want a stake in your company and the ability to reap the rewards of your hard work. They also want a clear, scalable business model, strong financial projections and a plan to manage growth effectively.
Investors come in many forms, including angels, venture capital firms and private equity funds. Investors make a series of investments in startups in exchange for shares of the company, which are usually structured as convertible notes with a fixed or variable interest rate. They can also take on a management role or provide expertise in the form of mentorship and strategic advice to help you grow your business.
Friends and family are often a popular source of startup funding, especially in pre-seed funding rounds. They’re able to fund your business for a relatively low amount, and can be a great way to build relationships with potential investors. However, this method can be fraught with pitfalls as you have to be careful not to mix personal and business matters. Moreover, it can be challenging to determine exactly how much money you need from friends and family.
While grant funding is a great way to kickstart your startup, the competition for these funds can be fierce and lengthy. Plus, many grant programs have strict requirements that you need to adhere to. The best way to increase your odds of securing grant funding is to start networking with investors long before you’re ready to raise capital. Networking online and at industry events is a good way to connect with potential investors and build trust over time.