One of the challenges faced by startups and business actors is about capital. Capital is one of the important foundations that can help you build and develop a business. In the stage after they build the MVP, startups usually require more costs in operations or product development. For this reason, startups must continue to strive to gain access to capital. Here are 5 ways to get startup capital or funding.
Venture capital (VC) or also known as venture capital is a type of financing for startups and is provided by investors. In general, capital using VC is given to small to medium class startups.
VCs do not provide conditions in the form of collateral and cashflow for startups, so the payment scheme is calculated not on a monthly basis like taking credit at a bank. Giving capital by a VC is usually like investing in a company. If the startup loses, then the VC also loses. If you get a profit, then the profit will be divided based on the agreement at the beginning.
Bootstrapping is often done by startups because it is easier to choose. So where did the funds come from? One of them is by utilizing the source of funds owned by the founder, for example through savings. However, running a business has its risks. If you use bootstrapping as an alternative to funding, then you must be prepared to lose personal funds if you experience problems or failures. However, if viewed from the other side, bootstrapping does not provide a debt burden to other parties if the business being carried out fails.
As the startup grows, there are funds that come in as income and replace the initial capital. Before using bootstrapping, it’s a good idea to calculate when you will reach BEP (Break Event Point) and how to get regular income.
Business loans to banks or cooperatives
Applying for loans to banks or cooperatives can be an alternative for those of you who are in need of capital for a startup. For business credit applications, usually the bank will ask for your detailed business profile in the form of a proposal or show the company’s financial statement data.
This is intended for feasibility study or to review whether your business is worthy of funding or not. In addition, the bank will assess your credit score to check your ability to pay the loan. Ask in detail about what requirements you have to fulfill, what is the payment mechanism, interest rates, and the risk in the event of a default.
Your immediate environment and internal network can be used to increase your injection of funds when you are starting a startup. The closest environment includes family, friends, and friends. Assistance in the form of funding from family is a motivation in itself that you have extraordinary support. For that, try as much as possible so that the family who supports you also feel the benefits and positive impacts of the startup that you build.
Incubators and accelerators
The incubator is a place where startups can develop from scratch. In incubators, in general, there are stages ranging from team formation, brewing ideas to becoming MVP, hackathon sessions, demo days, to graduation, namely launching startup to the market. Incubators are usually driven by business entities such as private companies, governments, or educational institutions. Through the incubator, more startup capital is provided in the form of non-cash, for example in the form of materials, training or workshops, mentor consultations, workspace access, and funding.
While accelerators usually help startups in terms of acceleration so that they develop better than before. In general, the period in the accelerator is shorter than in the incubator, namely in months (3 months, 6 months, and so on). Programs provided through accelerators are also different and more specific, such as initial capital investment.
Not only that, several accelerators also offer capital in the form of networking to a network of mentors, such as venture capitalists, business practitioners, investors, to startup executives. The purpose of the accelerator is more likely to help startups so they can shorten the time when building a business. For example, from what should be a success in a matter of years, then it can accelerate its development in a matter of months after joining an accelerator.