People have great business ideas every day, but most of those ideas never come to fruition. Why? It comes down to money: startups need it but don’t always know how to get it. Here’s a quick lesson on business funding for startup companies.
What Is Capital?
Capital is the money businesses need to fund their daily operations. Eventually, this capital comes from sales of products and services. Yet, when people are first starting their businesses, capital often comes from their personal savings. While borrowing from one’s savings is fine, it’s not always enough, and this is why entrepreneurs need to raise capital.
How do they do this?
They seek business funding from many sources, such as:
- Borrowing money from family and friends
- Crowdfunding
- Small business loads
- Trade Equity
- Private investors like venture capitalists and angel investors
What Do Investors Expect in Return?
If friends and family are investors, they might not ask for much, if anything, in return. However, professional investors expect to get a decent ROI. For example, angel investors expect a 20-25% return on their investment. Before choosing an investor, one must understand what the investor hopes to gain financially.
How to Choose Investors?
At the beginning stages of funding, companies need supportive platforms to help them understand the process and help them navigate the early stages of the journey. Look for companies that offer guidance, mentorship, tools, and matched funding opportunities. Working with platforms like these makes it easier for startups to become successful and grow into thriving companies that create a diverse generation of founders.
