Startup Financing Option and How To Get It?
Funding is perhaps the most important requirement to build a business. Funding can come from various sources and can be used for any purpose that helps the startup go from an idea to an actual business. But many people are confused about where to get startup financing and how to get it?
Before plunging into funding startups, you must build careful planning. Your planning must set precisely how much money is required to build your startup. Then we have a reasonable estimate. Not lacking, not too much. Consider the setup costs, the investment needed, working capital, growth, and development. So that all needs have been covered and calculated into the estimated funds. If all is done, you should consider these funding source options.
Examples of Financing sources for Startup
1. Personal Investment
The first type of startup funding is personal investment. This funding can come with several benefits. First, you can control your own risk. In addition, pouring personal investment into your business will invite others to invest in your business. People will hesitate to give you money if you don’t contribute and own some degree of risk in running the business. Not investing in your own business will demonstrate your lack of commitment or even confidence in the venture. Personal investment is also the most accessible form of startup financing, as you don’t have to rely on anyone but yourself to acquire it.
2. Venture Capital
One of the most popular sources that can provide large amounts of funding. Venture Capital investment generally comes from wealthy investors, investment banks, and other financial institutions. However, it is not always monetary; it can also be provided through technical or managerial expertise. VC (Venture Capital) are very selective in choosing the companies they want to help. Only those with tremendous corporate growth potential. Most of the company’s holdings are created and sold to several investors through independent limited partnerships established by VC companies. Venture Capital expects a high investment return once the business is properly established. So, be careful. The first step for any business seeking venture capital is to submit a business pitch deck. Checkout our article about how to build a successful pitch deck here. If interested in the proposal, the investor will conduct due diligence, thoroughly investigating the business model, management, product, and other operating histories.
3. Angel Investor
Another startup financing we can take is from Business Angel or Angel Investors. Angel investors are generally high-net-worth individuals who look to put relatively small amounts of money into startups. The source of funds for these angels comes from their own money. This contrasts with a venture capital company that pools some investors to finance a project. Furthermore, such people can be found as entrepreneurs and business tycoons who know how well they can use their connections in business ventures. In 2012 in Indonesia, angel investors were still not heard much compared to venture capital or sources from official financial institutions. Angel investors in Indonesia began to be gathered in a program called Angel Investment Network Indonesia (ANGIN) which was designed by the non-governmental organization Global Entrepreneurship Program Indonesia (GEPI).
Currently, names such as Shinta Dhanurwardoyo, Victor Fungkong, Danny Oei Wirianto, Sugiono Wiyono, Amir Sambodo, and Elisa Lumbantoruan are angel investors in Indonesia.
Crowdfunding is a resource from many people to provide capital to a business. This approach leverages the collective efforts of a large group of individuals, primarily online via social media and crowdfunding platforms, and leverages their network for greater reach and exposure. There is also a crowdfunding platform that can make fundraising easier. There are several categories of crowdfunding, Reward-based crowdfunding, Donation-based crowdfunding, Equity crowdfunding, and Debt crowdfunding. You can learn deeper about how to raise crowdfunding from our previous article.
4. Business Loans
Banks and other financial institutions offer business loans for regular interest payments. They will need you to have a solid business plan in place. Your goal should show potential and have numbers to back it up. On the contrary, the process is cumbersome. In addition, It becomes complicated to exercise the paperwork and related collaterals as the loan applications take a few months somehow to get approved.
Are you Looking for Investment from Venture Capital? Send Your Pitch Deck to Kolibra Capital.
Kolibra Capital is a trusted partner for startups in Indonesia. They offer sector agnostic investment, open to startups from all industries. Kolibra uses a collaborative approach and has been trusted by reputable partners. By collaborating with expert panels and working with reputable investment partners, we bring beneficial insights to the investments.
How to get startup funding?
After knowing the funding sources above, how to get it?
Firstly, calculate how much money you need before you start submitting applications or reaching out to your network. Write a business plan. Many lenders and potential investors will require a business plan. Compile key documents. These can include business and personal tax returns, business financial statements and any legal documents relating to your business. Decide which type of funding is right for you. Do your research to understand which type is best for your business, so, target your applications accordingly.
Secondly, Get to know more about what is needed about your startup; all choices are a process. Then, choose the right startup fund to lead you to success. Thorough preparation is the key.
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