TLDR:
A lack of funding or investors is a major reason why startups fail, according to a survey of 500 founders. While venture capital is an option, it only funds a small percentage of startups. To overcome this funding gap, startups must explore alternative sources of funding. This article discusses seven creative ways to fund a startup beyond venture capital:
- Bootstrapping: Founders rely on personal funds and revenue from the business to finance operations. For example, cybersecurity technology provider Cybervergent won a contract but didn’t have enough money to execute the project, so they asked for installment payments.
- Crowdfunding: External parties contribute funds to the startup through platforms like Kickstarter and Indiegogo.
- Grants: Non-refundable financing provided by governments, NGOs, and corporations, which do not accrue interest or require equity.
- Angel Investors: Provide equity-based financing for startups, often investing at the early stage and leveraging their expertise and networks to help startups grow.
- Revenue-based financing: Businesses give up a percentage of their revenues in exchange for invested money. Payment is determined by the startup’s revenues, providing flexibility.
- Incubators: Nurtures early-stage startups by providing mentorship, tools, and networks. Incubators often provide early financing after startups achieve milestones.
- Venture Debt: A loan to companies that have raised venture capital, providing non-dilutive capital and extending their runway.
These alternative funding sources can provide startups with the necessary capital to continue operations, grow, and overcome financial challenges.
