3 Ways to Secure Funding for Your New Startup

December 14, 2016

Thinking of ways to fund your new mobile startup may seem overwhelming, but there are three tried and true methods to get the investment you need.

Self-financing

If you choose to self-finance, stay on your toes because the only one in control is you. Self-financing, or bootstrapping, requires you to dip into personal savings, use your own credit cards, borrow money or all of the above. You’re essentially growing your own business by using whatever cash you have.

Pros

  • Don’t have to share equity with passive investors
  • Greater share of the profits
  • More control over the direction of the company

Cons

  • High personal risk
  • Slower growth
  • Miss out on networking connections that investors might have offered

Angel Funding

Angel funding is a form of equity financing. Basically you raise the capital you need by selling a percentage of the equity in your business to accredited investors.

Landing an angel investor does take a lot of work, but don’t let that stop you. If you decide to go down this route start shopping around. AngelList and CrunchBase are two great places to start. Once you do find an investor, be prepared to give an amazing pitch.

Pros

  • Lower personal risk
  • Your investors will be incentivized to help grow the business
  • Extra capital can help accelerate growth

Cons

  • Investors will expect a return on their investment within a reasonable timeframe
  • Some loss of control
  • You’ll have to share profits

Family & Friends

Family and friends can be great sources of initial investments. They usually want to help and always want you to succeed. So it’s no surprise that friends and family actually invest the most in early-stage startups, over $60 billion per year.

That being said you have to be careful when raising money from family & friends. Make sure you explain the risk that they might never see any of this money back, but that you’ll be working as hard as you can to ensure the startup is a success. Also be sure to actually make it official with a written letter or contract documenting the transaction. It’s very important to set expectations appropriately, especially when mixing personal relationships with business.

Pros

  • They’re more naturally inclined to lend you money
  • Will likely be more flexible with timeframe for providing a return
  • Often faster to secure than angel funding

Cons

  • Possible broken relationships
  • You may put them at financial risk
  • Might not be as effective at advising the startup as an experienced angel investor would have been.

Other Methods of Funding

Self-financing, Angel funding and raising capital with the help from your friends and family are the three most common ways to raise funds, but there are plenty of other sources that are available! So be sure to conduct extensive research and explore whether or not any of these alternative sources might be a good fit for you.

Government grants: Government funding covers almost every base. There are countless opportunities ranging from tech startups, arts and education, environmental safety and everything in-between. The only catch is that your project must fit the government funder’s exact qualifications. You can apply for federal funding through sites like, Grants.gov, Grantspace and Grantwatch.

Crowdfunding: By using resources like Kickstarter and Indiegogo, you have the ability to reach thousands or millions of people who are interested in your product. Traditionally, entrepreneurs would have to pitch multiple investors, make connections through their personal networks and put out most of the money themselves, but with crowdfunding, you can simply list your product on a website and if people like it, your startup product will go viral! (In the best case scenario)

Incubators: If you’re not familiar with the term, an incubator is an organization that is designed to nurture and accelerate the growth of startups through their early stages of development. Incubators typically provide affordable co-working spaces, hands-on training, support, and usually access to financing.

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