Young Entrepeneur Blog: Business Advice for Gen Y Students

How to raise money for a start-up?

Lack of funding is the major reason why several start-ups fail. Many promising start-ups had to shut shop because they could not sustain their activities long enough to be successful. So, even if you have a great idea, and excellent execution, if the money runs out, it is time to go home.

Getting funding is not a onetime activity. You have to constantly raise money for your startup. The idea is to have at least a few plans in place in case you need to raise money quickly without giving too much in return.

If you are in a Start-up or planning to start one soon, here are a few ideas to help you raise money to stay afloat.

1.Bootstrapping

For hundreds of years, dynamic entrepreneurs have been starting businesses using this good old method. Typically, it is very hard for first-time entrepreneurs to get funding from outside. So if you have an idea that you believe in, start by funding it on your own. You can even involve your close family and friends in this initiative. This method also reduces the amount of paperwork and regulatory requirements that come with external funding. But this kind of funding is ideal only when it is not a capital heavy start-up.

2.Crowdfund an idea

 If your idea is a viable one, you can create a crowdfund to get the attention and a low commitment investment from the public. If you are making some kind of product, crowdfunding could be a great way to get funds and your first set of customers. The early funders will get your first production. In this kind of funding, you do not have to give a piece of your company to such contributors. One great example of this is Oculus.

3.Loans and grants

If you are working in a domain that has a good impact on people’s living condition, like a not-for-profit start-up, you can even apply for grants and loans from multiple organisations. These loans carry low interests rates. But they may not give you enough money to fulfil your objectives. So instead of approaching wealthy charitable individuals as angel investors, take the grant path. Ask them to give you a grant. If you approach people who have shown concern towards a specific issue that your start-up is trying to resolve, getting a grant will be easier.

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