In the United States, the venture capital and principal trading industry generates over $69 billion every single year. More than 87,000 people work at over 42,000 businesses around the country to keep up with venture capital and principal trading demand. That is only one indicator of how important raising business startup funding is for so many companies.
But what is the best way to raise business startup funding? With so much competition out there, it can be difficult for entrepreneurs to figure out where they should be looking for funding. As certain strategies become more popular, competition also gets stiffer.
But what is the best way for your business to raise startup funding? Read on to learn all about the most vital information to understand to help you make this decision!
How to Raise Capital the Best Way
Of course, there is no one best way for all companies to raise startup funding. Even if there was, so many people would try to use the same strategy that they would start to encounter diminishing marginal returns. That means that the best way to raise startup funding is a moving target.
To make things even more complicated, the right target for one company to aim at is not always the right target for another. We will discuss several different ways you can raise startup funding. Compare each of them to your own business needs and think about which ones would be better or worse options for your unique situation.
Raising Startup Funding With Angel Investors
There is a reason that receiving funding from angel investors is so popular. Angel investors are wealthy individuals who want to help startups grow bigger. In many cases, they will be people who made their own wealth through personal business success.
That means that they often possess technical expertise and can understand the details of various startups. That can make angel investment somewhat more meritocratic than some other options.
If you have a stellar business plan that will really work, you can explain it to an angel investor who can understand for themselves what is so great about your model.
If you receive investment from an angel investor, you will often receive additional benefits on the side. They may be able to share their expertise with you to help you overcome business obstacles. There is also a good chance that they can put you in touch with people they know to help you grow your business even faster.
Equity Capital and Debt Capital
Companies often raise capital using tools called equity capital and debt capital. So what is debt capital?
If you use a debt capital strategy, you will sell the right to prioritized interest payments to specific investors who will receive what is called senior debt.
That means that they will receive their money back before everyone else. You can also sell priority claims on your company assets if the company goes under.
And what is equity capital? There are three kinds of equity capital. They are common equity, preferred equity, and retained earnings.
One of the great things about these strategies for raising funding is that almost any company can use them. After all, every company can sell these rights, no matter how much it is struggling in other ways.
Venture Capital Options
If you pursue venture capital money, then you will receive startup funding in various stages. Each time your company needs money to accomplish a business goal, you can make a pitch to receive that money through venture capital funding.
VC money comes from groups of investors that provide funding in exchange for partial ownership of companies. This is another great funding option that is available to almost any company. Even if your company does not have an amazing credit score or a lot of resources, you can always sell part of your company.
You may also be able to receive mentorship and other help just as you would from angel investors.
Raising Capital Through Government Incentives
As the economy struggles, the government is providing incentives to help people start new businesses. Consider looking into government incentives at both the federal level and state levels.
In some cases, you might only be able to find some tax credits or rebates. However, even that can help you meet your funding goals.
Receiving Loans From Banks
Both public and private banks may offer you a loan if you can make a convincing case for your business model. However, banks are much less likely to be able to understand how successful your business model is likely to be.
For that reason, they are often less willing to provide loans unless you can provide collateral or have excellent credit. On the other hand, if your business has succeeded for a few years, then you may be able to receive large amounts of funding from banks.
Work With a Startup Incubator
Incubators look for the best startups in the world and try to make them even better. They provide funding, advice, connections, and more.
Consider applying to incubation centers as well as startup accelerators. Competition is stiff to qualify, but if you can get in, your funding problems will likely be solved!
Understand the Best Ways to Raise Business Startup Funding
With so many different ways to raise business startup funding, it is important to consider your options to find the best choice for your business. Ignoring some of the options on your list might mean that you leave value on the table without it ever knowing it. The more options you consider, the better the chance that you will find the best choice for your unique situation.
To learn more about the latest information in venture capital, finance, and more, take a look at our other articles!