Startups face many challenges and the biggest one every business faces is cash flow. In fact, cash flow is often cited as the number one reason that companies fail. Running a startup is hard, especially without the financial and intellectual support required to succeed.
Funding is perhaps the hardest challenge for many businesses to overcome. While it sounds easy, balancing the needs of your business against long and short-term contracts can be quite exhausting and debilitating.
Fortunately, there are startup options out there for businesses who are struggling to receive the financing and support they need to be successful.
Eight Different Types of Startup Funding
Savings and Personal Investments
This type of funding is not generated through credit or a loan, meaning that you exert full control over your company. But the amount you pour into your own company needs to be balanced out with the needs of your personal life, and while it may help you start the business, it is rarely a smart long-term decision.
Small Business Administration (SBA) Loans
SBA loans are small government-backed loans designed to strengthen the relationship between lenders and creditors. Acceptance of an SBA loan can help guarantee funding, although qualifications are strict. Again, it may help you get going, but it is likely not a long-term solution.
Acquiring a loan from friends, family, or relevant investors can help your startup get the capital it needs to get off of the ground. However, that’s all a personal loan can guarantee. It doesn’t provide any additional services, and you will rarely be able to tap the same well over and over.
Venture resources and venture capital firms are two types of institutional investors that provide funding in exchange for equity. While both can be beneficial in early and late stages, the difference is that venture resources will always offer services plus capital. The services provided are a value-add that goes beyond the capital to help ensure startups succeed.
Angel investors are much like VC’s; only they are comprised of individuals and not institutions. As such, they may provide more flexibility in contracts, but also often demand a greater share of equity.
Traditional small business loans can help provide you with capital to hire and acquire some office space. But, this will come with high interest rates and long commitments.
This strategy is unique in that it doesn’t tie your business to any particular interest. Of course, it’s not guaranteed to work.
IPOs or ICOs (Cryptocurrency)
Finally, this late stage form of funding is a strategy for businesses to attract more significant investment in their company by selling off shares or debt to investors. The better the business does, the higher the return on the proceeding shares. Unfortunately, this leaves your company beholden to a lot more regulatory scrutiny, as well as stakeholder interests.
Apply For Startup Funding with Cloudshadow
Cloudshadow will review business plans for digital software products as part of our venture resources model. We’ve helped plenty of startups in the digital space achieve success and offer a wide range from software development to design and much more. Submit your plan for a chance to be funded!