One of the most challenging areas of fundraising is the idea stage. You have yet to show, and you clearly won't have a product for a year or more. This is different from where most investors are interested in being. And honestly, this is why many companies never reach the product/Seed round. So how do you get started?
How to raise funding for your startup at the idea stage?
Bootstrap Your Way Up with Co-Founders
There is nothing more dependable than your savings. Bank savings, personal loans, credit card loans, and friends and family are all legitimate sources of funds when you're just starting. If you want to get your startup off the ground but need more cash to spare, feel free to ask for help.
Starting a new business can be daunting, so find someone you trust to share the burden while you focus on executing your grand vision. Find a co-founder who will complement your strengths and weaknesses. Research funding options and find a partner who can provide the capital you need to start your business while you simultaneously build it.
Crowdfunding Campaign
For startups with no resources, crowdfunding can be a great way to get their ideas. Even though most crowdfunding campaigns go unnoticed and unfunded, the right pitch can make your dream startup seem viable. Crowdfunding platforms charge a service fee from the project owner and a transaction fee from the payment processor. This means you can be assured of sufficient funds to get your dream off the ground.
There are many different crowdfunding models to choose from. Kickstarter, the largest crowdfunding platform in the world, is an all-or-nothing venture. Indiegogo offers flexible funding and fixed funding options, so you can keep the money if you still need to reach your target amount. App-specific crowdfunding platforms like AppsFunder and AppSplit may be worth considering.
Approaching individual investors who may have an interest in your space.
The best way to find investors is to look for people who are already interested in your space.
If you're in the market for an investor, consider who might be interested in your business. First, write down a list of all the people who have expressed an interest in your business or the industry. Second, look at the kinds of investors that those people have worked with before. Third, consider which types of investors would be a good fit for your business—are they likely to invest in similar industries? Or do they tend to invest in companies that are very different from one another?
Once you've done this research and narrowed down your list of potential investors, start reaching out! It's always wise to ensure that someone is interested in what you're doing; if they don't, there's no point in taking their time or money because they will stay engaged. The best way to get someone's attention is by showing them how much you know about their business and industry. If they see that you've done your homework and understand what makes them tick, they'll be much more likely to respond positively when you approach them about investing.
Participate in Funding Contests
If you're looking for funding for your business or want to seek support from other entrepreneurs, participating in a funding contest can be a great way to get started.
Funding contests allow entrepreneurs to submit their business plans for consideration by panelists and judges, who will then decide whether or not they should receive money. There are many different funding contests, but they all have one thing in common: they're designed to help entrepreneurs get the funds they need to start or grow their businesses.
The types of funding contests include:
-Accelerators/Incubators/Co-working Spaces - These programs offer support services and mentorship opportunities so that you can build your business quickly and efficiently. They also provide workspace, which is helpful if you still need office space! Examples include Techstars and Y Combinator.
-Loan Programs - If you want financing from an investor but don't want to give them equity in your company (which would mean giving up some control), then these loan programs may be a good fit for you! Some examples include AngelList Syndicates, Kabbage, and Lending Club.
Angel Investors and Strategic Partners
In their drive to bring a product to market, many startups are tempted to approach Venture Capitalists for seed funding. The fact stands that less than 3% of seed funding comes from venture capitalists. Instead, angel investors or strategic investors may be wise choices for beginning your startup.
Not all startups have to look for funding from large corporations or institutions. Some individuals and successful entrepreneurs invest in new startups too. Angel investors can provide a grant of $25,000 to a few million dollars, depending on the nature of the idea and how far along you are in the development process. Currently, angel investments make up a $20 billion market annually. While an angel investor might be easier to convince than a VC at the seed stage of your company, you still need to be prepared to give that personal details about your business model.
You may quickly find investors if you've already got a track record of success and some impressive partners on board. But don't be disheartened if you haven't got those things. It can take a lot of hard work to put together the right combination of startup elements, so there's no reason why you can't be out and exploring all your funding options right now!
