Types of Funding Sources for Startups

Starting your own business or building a startup, there are certainly challenges that await. Maybe you already have a brilliant idea that can be a solution for many people. However, the processing of these ideas requires no small amount of capital.

In fact, there are many places you can rely on as a source of funding for startups. One of them, of course, must come from a personal pocket. Then, which other types of funding can be used to run a startup? Check out the types below!

1. Bootstrapping

Bootstrapping is another term for using personal funds as capital for starting a business. The main advantage of bootstrapping is that you don't have to go into debt to other parties so that it becomes a burden in the future.

Using personal funds will make business owners more disciplined with the funds used. You certainly don't want that money to be wasted. In other words, you will fight for every penny that goes out to return in the form of profit.

There are also things to keep in mind when using personal funds. You must ensure that the funds or assets used are sufficient to run the business. Separate professional needs funds and personal needs funds to avoid mixed expenses. You also have to be well acquainted with the risks that will occur during business so that you understand the profits and losses that will be obtained later.

2. Love Capital

In addition to spending from your personal pocket, you can also get aid funds from family or friends. It is better to explain in advance about the type of business that is being carried out as transparency to potential financiers. Even if these family or friends are your closest people, it is important to treat them as professional business associates. You can make a black and white agreement regarding future refunds. Also, keep in mind that families don't have as much money as banks or other investors. So, adjust it to the value that will be borrowed later.

Personal relationships are often involved in this process of borrowing capital. It is also possible that this family or friend may want to be involved with your business by holding a certain position in the company.

3. Angel Investors

Angel investor is a term for parties or individuals who invest in small companies. In addition to providing large amounts of funds, angel investors also share their experiences in the field of business they have and their network of other entrepreneurs they know.

Of course, the money invested is not given for free. In return for the money given, these angel investors will ask to be involved in the business they are running. They will oversee financial management, be on the board of directors, and guarantee the transparency of the company.

According to the allBusiness page, there are important points that Angel investors pay attention to before investing with your company. Some of them are the commitment of the business owner, the scope of the market to be worked on, the potential possessed by the company in the future, and intellectual property.

4. Venture Capital

Venture capital or venture capital companies provide financial assistance to startup companies that are considered potential. In addition to providing capital, this company also provides business strategies, introduction to potential customers, business partners, employees, and other things that make it easier for you to start a business.

The financier of venture capital is known as a venture capitalist. Venture capitalists can help your business undertake many high-risk projects. However, the potential return could be many times. They also want a healthy return on their investment.

Venture capitalists have their own criteria in providing capital to start-up companies. Starting from the specific industry sector, current stage of the company, and geography. Always make sure that the business you have is in line with the vision and mission of venture capital and that you are aware of the developments they provide.

Those are some sources of funding for startups that you can get. Funding is one of the important aspects of a financial report. Its function can help you in making the right business decisions within the company. Through the Financial Analysis program, you will be able to analyze financial reports to develop business potential.