Typically, when a startup is founded they have little funding founders usually inject some money to help get their business off the ground when they don’t have savings to invest in their company, there are a variety of ways they can source funding, which we have detailed below
Running Funding Rounds
Companies looking to source funding can do so through running funding rounds the preseed funding round is the first funding round, and this is followed by the seed funding round and then series A, B, C, and so on.
When founders establish companies, sometimes friends and family will offer to invest sometimes to help with the company’s progression.
A key benefit of accepting investments from family and friends is that they will usually not expect a share in the business. This differs from the expectations of alternative investors who will expect shares in the business in return for the money they inject.
Business loans are available in many forms, although you typically need to have at least 2 years of trading accounts. These can be both unsecured or secured loans, allowing you to leverage value assets or property to borrow money if you have them. (Source: Proper Finance)
Other forms of business loans can be invoice finance (based on the projected invoice of future sales), business lines of credit (via a credit card), or even overdraft facilities, although these can be expensive.
Accepting Investments From Venture Capitalists or Angel Investors
Angel investors and venture capitalists often provide funding for startups. Both types of investor will be searching for startups which they believe have a high potential to generate a large revenue, and therefore large returns for them in exchange for what they have invested.
What are Venture Capitalists and Angel Investors?
Venture capitalists are private equity firms that invest capital on behalf of the shareholders. Angel investors are individuals with a high net worth who invest their own capital into startups that they believe have potential.
The key difference between the two is that venture capitalists will have access to any liquidated assets if a company they hold shares in does go bankrupt, whereas angel investors will not expect to receive any returns.
Applying To Government Schemes
There are some government schemes in place in the UK which can help startups to source funding startups can apply for funding via the government website, where they will be required to undertake an eligibility check. This will only require basic information and can be beneficial for a company if they are approved.
The government will then make judgments based on credit and an evaluation of the business plan. Businesses will also be asked to present a cash flow and personal survival budget before being assigned a Delivery Partner. They will then go through the process of finalizing all documents before funding can finally be approved. There is also some post-loan support in place from the government for businesses who wish to use it in the 12 months immediately after receiving the loan, which can be reassuring for founders looking for advice.
Running Crowdfunding Campaigns
Crowdfunding campaigns take place online and therefore can be easily shared and accessed by potential investors and potential customers. People can donate money to a business online, sometimes receiving a small stake or perks from being a part investor (free trials, t-shirts, etc) and a huge upside financially if the business takes off.