Sometimes to get the things that we want, creative methods need to be adopted. The same goes for finding capital for your startup. Sure, traditional methods like angel investments or venture capital are viable, but what if those options don’t work for you for a number of reasons.
What to do then? Today’s entrepreneurs are exploring innovative funding avenues such as crowdfunding, revenue-based financing, and even cryptocurrency fundraising. These alternative approaches often provide more flexibility, faster access to capital, and the opportunity to maintain greater control over your business while building a community of supporters who believe in your vision.
We have made a list of 9 traditional and modern sources of startup capital. Using a mix of these methods can help you raise sufficient funds to research and keep your startup running.
1. Bootstrapping without quitting your job
The first on the list is a traditional seed funding method of financing your startup. Here, entrepreneurs invest their savings or credit card money into their startup. It is a common practice when the startup is in the ideation stage. If you have a job or a work-related income source, it is advised not to quit and secure sufficient funds to help you last for a few months.
It is a safer option if you want to protect your equity rights. However, the risk of losing your money should be considered when choosing this funding option.
2. Ask friends and family for seed funding
Your first startup investors don’t have to be big-shots. They can be your family and friends who trust your vision. More often than not, investors raise the initial or seed funding from their close friends and family members, either with or without interest.
If you raise funds from 2 – 4 people, you can have sufficient funds to do initial research and create an MVP. It helps entrepreneurs to kickstart their business and slowly return this investment. However, you must understand that some people might ask you for an equity share.
3. Take a startup loan
Taking a startup loan is a traditional form of startup funding method. Many low-interest loans for startups can help you build a credible history and credit score for future funding. Debt-based funding can help you retain your equity ownership. However, you must understand that with loans, you get the responsibility to pay it back every month or the decided period whether your
startup succeeds, doesn’t make a profit, or shuts down.
4. Enroll with a startup incubator
Incubators, as the name suggests, nurture startups in the earliest stage. First-generation entrepreneurs often choose incubators to learn how startups and the industry work. The startup incubators undertake the startups in the early stages, such as ideation or seed, and help them in learning the basics of the startup ecosystem and how to manage the startup. These incubators are often government-backed and offer some startup funding to help the entrepreneurs kickstart their startups.
5. Work with a startup accelerator
Entrepreneurs often confuse incubators and accelerators as the same. However, they have peculiar differences. Startup accelerators support startups that need funds to expand and grow, unlike incubators, which help startups develop their ideas into business models. These accelerator programs are often government-backed. They offer funds and guidance for the startups to grow and gain traction.
6. Opt for crowdfunding
Crowdfunding for startups is a popular way of raising funds without losing equity. Startups need to find government-approved crowdfunding sites and promote their startup to raise funds from the public. It helps them raise awareness for their brand, raise funds, and gain traction. Often, startups can attract more investors from crowdfunding platforms if they want to consider equity dilution.
The startups can choose from donation, reward, or debt-based crowdfunding. Entrepreneurs must be careful when selecting a crowdfunding platform. Avoid those who are shady with their policies or aren’t government-authorized.
7. Participate in a startup/pitching competition
Startup or pitching competitions are your golden chance to rise and shine. These competitions provide an opportunity to promote your presence and also win the reward, often a monetary reward. You can gain traction by attending and ranking higher in such competitions.
8. Apply for startup grants
The government plays a vital role in boosting the startup ecosystem, especially seed-stage startups. Therefore, they provide startup grants in specific industries to support innovation and society’s growth. If you fall under sectors promoted by the government, apply for the startup grants.
A few popular startup grants in India are Pradhan Mantri Mudra Yojna, the SISF scheme, the NIDHI program, the Seed Funding Scheme, and more. You can also find startup grants that don’t require any special industry.
9. Consider a corporate partnership
Corporate partnership refers to when large corporations join hands with innovative startups in the relevant industry. The corporation provides funds, expertise, and support to the startups with the intention to use the startup’s product/service to enhance their company. Startups also gain exposure to large target segments and grow.
Why is Networking the Key to Finding Investors?
All the above-mentioned startup funding ideas help you kickstart your startup and grow without risking your equity. However, finding the right people and platform is essential for the startup’s success. Therefore, you need to connect with people and build your network. It allows you to find reliable sources to raise startup funds.
Networking events such as 21BY72’s Global Startup Summit help you connect with entrepreneurs, investors, and industry experts. The pitching event at our startup event provides an excellent opportunity to gain market exposure and find investors. Explore our website for an early bird discount on our season 4 of Global Startup Summit!
Conclusion
If you don’t want to risk your equity when raising funds, you must choose some popular alternatives. Bootstrapping, asking family & friends, startup loans, incubator & accelerator programs, and startup grants are a few traditional options for raising startup funding.
Crowdfunding, startup competitions, and corporate partnerships are some popular alternatives for raising startup funds. Networking can help you find reliable sources and platforms for non-equity startup fundraising. Visit our Global Startup Summit Season 4 to build your network and gain knowledge from panel discussions and guest speeches.
FAQs
1. How do I secure funding for my startup idea?
The first step is to bootstrap or raise funds from your family and friends to do research and build MVP. You can enroll in an incubator program to learn how to manage your startup and raise funds. Once you have an MVP or a business model, you can raise funds through crowdfunding, corporate partnerships, startup competitions, and startup loans & grants.
2. What are the different types of startup funding sources?
● There are many types of startup funding sources, as mentioned below:
● Equity capital raised by dilution of equity control
● Debt capital raised by taking loans from finance firms
● Retained earnings from their revenue to reinvest in the startup
● Crowdfunding to raise funds from the public
● Startup grants offered by the government to support startups
3. Can I raise seed funding without giving equity?
Yes, you can raise seed funding without diluting equity. You can raise funds from your family and friends, use crowdfunding platforms, take a loan, or create a corporate partnership. Each of these methods has its pros and cons that you must consider before raising funds.
4. What are the startup grants offered by the Indian government?
The government of India offers many generic and industry-specific grants. A few startup grants are SISFS, MSME innovation scheme, Biotechnology ignition grant, NIDHI Prayas, Rashtriya Krishi Vikas Yojana (RAFTAAR) for agritech startups, TIDE 2.0 Scheme, TDB Grants, and more.
