Finding the right funding for your startup is one of the key challenges for (young) entrepreneurs. Faced with a range of different types and models of funding, it can be challenging to know what's right for your business. This is why a solid understanding of how to finance a start-up wherever you're located is key for any (small) business owner. Here is Futrli's guide to different ways of successful start-up funding in Australia:
Bootstrapping means investing your own capital funds into your start-up business in the early stages. Not every business idea is eligible for the right start-up funding. You can do little things, like keeping your overheads to a minimum and focusing on growth and your own capital might be sufficient funding.
Friends and family
Also, turning to those close to you can be useful. Many small businesses have started with support from personal connections. Friends and family might be more than willing to raise capital for your business venture. Getting financial support from private investors in your personal circles is a good way to start off - friends and family are less likely to scrutinize your business plan than seasoned investors or support programs. Of course, there is risks associated with this strategy for (Australian) startups - mixing personal life with your new business can be tricky.
Start-up loans, whether government grants government or private, may be another possibility if you're looking for fast cash. Grants can help you get investment money without having to give up any equity. There is a lot of different routes to getting grant support - you could be in a potentially lucrative market or your company could just be located in the right place (there are plenty of local grants available for applicants).
Equity might be the most well-known way to fund your start-up. The way it works is that you receive capital investment to help finance eg payroll, marketing, and more for a percentage of your company's shares. While giving up a percentage of shares is not always the most appealing, different types of equity finance (such as angel investors will provide you with connections, mentoring, and networking opportunities on top of financial support.
Venture capital funds are a form of private equity that provides initial funding for start-ups with high growth potential. There are two main downsides to venture capital firms - you'll often lose a substantial portion of your business's equity and even have to cede majority ownership. Having said this, venture capitalists are typically enthusiastic and involved in the company and can help you on your path.
Crowdfunding is becoming increasingly popular as a result of sites like Kickstarter, Indiegogo, and Patreon, which are allowing individuals to fund their creative projects. While crowdfunding can be beneficial for early-stage start-up funding, raising significant amounts of investment cash on these types of platforms might be tough. As a result, crowdfunding may be best used as part of a mixed funding model.
The standard bank loan is still one of the most popular ways for start-up companies seeking funding in Australia. While you may need to accept some collateral (unsecured commercial loans typically have high interest rates, so putting your assets behind the loan is frequently a good idea), bank loans do not require you to give up any ownership in your firm.
Finally, there's accelerator funding, which is a less conventional yet still useful start-up funding option. While accelerators (or incubators, which are the same thing except focused on even earlier-stage businesses) may provide equity finance in some cases, the main advantages of these funding types are the networking and coaching opportunities they offer.