If you are like most entrepreneurs, you probably find yourself full of great ideas and fantastic plans for making them come to fruition. However, if you are an informed business innovator, you are probably aware that dreams and ideas aren’t enough — you need to have some cash on hand, too. And therein lies the rub — in order to truly pursue and develop a great business idea, you must be able to bridge the divide between ideation and the cold hard cash that it takes to build it.
Of course, even while small businesses are widely recognized as the backbone and lifeblood of the U.S. economy, gone are the days when startup business funding was easily available through investors who were simply looking for the next hot idea, with their checkbooks at the ready. Instead, even while support for small business and startup ventures remains high, business owners have increasingly found themselves hearing “no” or “not approved” by traditional investors — especially in a still-recovering economy. It’s worth asking: What are the best ways for an entrepreneur to get startup funding? Where can they go to receive funding that allows them to strategically launch a company under financing terms that helps them move toward a bright and successful future?
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Insider Startup Funding Tips: What the Pros Know
Quite frankly, there are many startup funding options for entrepreneurs. The challenge, though, is trying to figure out which method is the best for your situation. If the business is a “Main Street” venture, a bank may still be your best option. While an SBA-backed loan remains a potential source of startup business funding, getting their approval depends on your personal credit, collateral, and other factors. However, if your business idea is disruptive or operates “outside the box,” you can easily run into a roadblock when trying to get the nod from a loan officer at a commercial bank.
If you have been contemplating startup business funding options, then you need to know what the pros know. Consider the following tactics when determining what funding option could make your business idea a reality:
- Define your niche. It’s quite likely that there is something incredibly unique, exciting, and one-of-a-kind about your idea. If there is, then you may be in luck. Often, you can do a bit of research to identify investors who are interested in niche markets or business models. This could help you connect with someone who is quite literally looking for an idea like yours — and it could be a perfect fit. Additionally, even if there is not an investor who is specifically seeking out your venture, there are benefits to really hashing out what makes you unique. You will be able to effectively summarize why you are an outlier and what makes your business concept different from anything that is currently operating. This is a valuable exercise as you develop your elevator pitch.
- Research grant opportunities. Let’s talk about free money for a second. Grants are a fantastic way to get funding for your startup business venture. Doing some online research may uncover many types of grants tailored to various technologies, markets, and owner demographics. For example, a number of federal agencies offer SBIR and STTR grants to fund R&D and commercialization efforts for specific technical solutions. Yes, this does require work, and the grant application process can be daunting, but being strategic in your efforts here might allow you to receive startup funding that can benefit both your short- and long-term objectives and goals.
- Look for startup business plan competitions. This is a startup funding option that is growing in popularity — and there are some major businesses and institutions that back these endeavors with some significant financing. For instance, Amazon Web Services — a division of the Seattle-based goliath — has launched a startup challenge that awards $50,000 annually plus an additional $50,000 in credits to be used on AWS to multiple businesses each year. FedEx is another company that has launched contests that award business innovation in an effort to help winners enter new markets, hire staff, acquire materials, and initiate or increase production. Additionally, universities such as MIT, Harvard, and Northwestern regularly sponsor contests specifically geared to helping startups.
- There is always crowdfunding. This is an avenue that has gained immense popularity among business founders searching for startup funding as well as investors on the lookout for their next opportunity. Check out sites like Kickstarter and Indiegogo and figure out if their platforms could help you get the attention of investors.
Another Point to Consider: Approaching Small Business Startup Funding Logically
There is another important point to raise when it comes to raising startup funding for your small business. It’s one thing to have a great idea and a strategy for implementing it. And it may seem that the path to getting funding for your business should be straight and direct. However, that is not the case. To make sure you are an attractive investment for a financial backer, your business idea must solve a real problem. An investor does not want to back a wacky gadget or invention unless it truly solves a problem for a large group of people who will be willing to buy it. Your concept must fulfill an active and current demand amongst the consumers — or it must be intuitive enough to solve a problem that a consumer didn’t even know they had… and in turn, create a demand!
Know What You Are Going to Do with the Startup Funding
Finally, you need to approach any investor with a clear and solid plan for what you will do with their money. No one wants to see their cash spent unwisely or squandered — investors want to know that you have a solid business plan for how you are going to parlay their funding into a successful venture. And remember that there must be a firm connection between how you describe this plan and how you put it into action. Once you successfully raise your startup funding, you will remain accountable for your strategy and operational approach and will need to be able to prove and justify your spending, outcomes, and results.