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Focus – How to raise capital for a startup: 10 sources of capital to consider

  • Published December 20, 2022 4:00AM UTC
  • Publisher Callum Melrose
  • Categories Capital Raising Tips

How to raise capital for a startup: 10 sources of capital to consider

1. Traditional bank loans: Startups can work with banks to get loans for their business. Banks will usually require some form of collateral, such as personal assets, before approving a loan.

2. Venture capital: Venture capital firms are investors that provide funding for startups, typically in their growth phase. Due to the due diligence processes involved, it can be a time consuming process for a founder, however, their support can be invaluable if you secure it.

3. Crowdfunding: crowdfunding is a popular way to raise capital for startups. Websites like Kickstarter and Indiegogo allow people to donate money to help fund new projects. More recently, you can see equity crowdfunding as an option too.

4. Sales funnel financing: Sales funnel financing is a type of financing that is used to help businesses build and expand their sales funnel. This type of financing can be used to purchase products, services, programs.

5. Debt financing: Startup companies may also seek debt financing in order to grow their business quickly. Debt financing can be obtained from a variety of lenders, including banks, credit unions, and private financiers.

6. Angel investors: Angel investors are individual investors who provide funding to early stage startups. angel investors can be helpful in getting a startup off the ground, as they are generally the first you will see investing in an early stage businesses.

7. Specialty lenders: Many startups opt for specialty lenders when seeking debt financing. These lenders specialize in lending to specific types of businesses, such as technology companies or start-ups that focus on a specific market niche.

8. Corporate venture capitalists: Corporate venture capitalists are investment firms that invest money in companies that are owned or controlled by a company. This type of investment is more expensive than other types of financing, but it can offer a higher return on investment.

9. High Net Worth Investors (HNWIs): HNWIs are wealthy individuals who invest money in startup companies. HNWIs can provide a significant boost to a startup’s finances, and they are often interested in investing in early stage businesses. This route is becoming much more popular. Angels and HNWIs are now making up the backbone of early stage businesses as they scale and grow.

10. Friends and family: This is generally the first step for founders that are looking to get their business off the ground. Investors will often check to see if you have completed a friends and family round as part of their due diligence.

It is important for founders of a startup to have a clear understanding of the various types of capital that are available to them. Startup founders who are able to build a broad pipeline of potential investors and look to secure financing from a variety of sources will be in a better position to grow their business.

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