What are the best sources of startup funding? While much more frequently hear about angel investment when it comes to startup funding, in truth it’s really only one of the six major sources of startup funding. Of the six major sources of startup funding, nearly half (nearly $52 billion) is provided by friends and family. Only the third source, venture capital, comes from institutional investors. And the final, credit, provides less than one percent of total funding.
It seems strange, but almost no one ever tells you that the final sources of startup funding are your friends and relatives. The reason for this is that most entrepreneurs don’t think about seeking venture capitalists or personal savings when they’re planning to start their businesses. You should be careful to find personal savings or other lines of credit when you are planning to start a business as there are many risks to this kind of financing. But if you’re willing to do this, then you can get a small line of credit and use that money to help you finance your business.
Now that we’ve established that angel investors aren’t the most reliable source of startup funding sources, what are some other options? One of the best places to look for startup funding is a program administered by the Small Business Administration (SBA). These programs are not the only ones that are reliable, but they are definitely worth looking into as they often provide you with some really good information about startup funding. For example, there is Startup Campus, which administers a national Startup Campus Program and it’s designed to help entrepreneurs in small cities develop a business plan that will draw investors and help them obtain small business loans.
Another source of potential startup funding is venture capitalists. A venture capitalist is someone who has their own money that they are putting into startups. In order for a venture capitalist to believe in an entrepreneur, he or she needs to see that the company has a good chance of turning a profit. However, the amount of money a venture capitalist invests in an individual startup is very limited. This limits the amount of money that you can expect to receive, but on the flip side, if you have solid business plans and you’ve already done the work needed to prepare your company for startup, then this is a great place to look.
Finally, another potentially excellent source of startup funding is through pre-seed funding. This is not something that happens with many businesses, but it can happen with yours if you work with an experienced investor. Typically, pre-seed funding occurs when entrepreneurs present their businesses to private investors without having built up any equity. This allows the investor to provide the startup owner with a smaller initial seed investment. While this isn’t usually a large amount, it can prove to be enough to get the business going and to provide it with a realistic business plan.
There are several ways to find startup funding. Many entrepreneurs choose to look for venture capitalists, but pre-seed and hard money funding may be some of the best ways to get started. By using these methods, entrepreneurs can ensure that their small business loans are able to provide them with the resources that they need in order to make their businesses successful.