How Do You Secure Funding For Your Startup Business?

The resources and capital needed in startup projects can be provided in many ways. There are various methods of utilizing the sources for startups. The venture capital method, which has been applied in its modern sense in the USA since the 1970s and in Western countries since the 1980s, began to be examined in our country in the 1990s.

Venture capital is one of the most important financing models in terms of supporting entrepreneurial activities in recent times. The healthy functioning of this model depends on the availability of qualified entrepreneurs with new ideas and venture capital funds to support these ideas.

Various definitions of the concept of venture capital can be made. Accordingly, venture capital means the meeting of entrepreneurs seeking financing or having new ideas with capitalists who are ready to take risks.

All stages of a project can be financed with venture capital funds. The most common method here is to finance the project while it is still in the R&D phase. This first phase is known as the riskiest phase due to high uncertainty and the absence of a concrete product.

The second phase is the initial capital financing needed to develop the product and bring it to market. The third is the financing provided to companies that want to reach full capacity. The fourth is the financing provided for the development and growth of operating companies, known as the advanced stage financing technique.

What Are The Different Sources Of Startup Funding For Entrepreneurs?

Startup projects can obtain the funding they need through different sources. The most common are usually own capital, family support, and venture capital firms. Venture capital helps entrepreneurs raise additional funds by validating the startup feature, as well as auditing and other support services.

Venture capital has many benefits for entrepreneurial companies. Of course, these benefits are not cost-free for entrepreneurs. Venture capital financing is associated with a significant reduction in the decision and control rights of the entrepreneur. Additionally, venture capital investments tend to demand higher rates of return than other private equity investments.

Since the 2000s, some studies have been carried out to eliminate the problems caused by poverty in places where the per capita national income is very low. In this context, microfinance institutions established to support people and institutions with low-income levels who cannot obtain financing from banks have gained importance in finding a solution to extreme poverty and further empowering women.

In this context, microfinance is a financing method provided to poor and low-income people, families, and micro businesses with 1 to 9 employees. In this method, businesses that have a business idea but do not have capital are given initial capital, called microcredit, to help them escape poverty.

How Can Entrepreneurs Create A Compelling Business Pitch For Investors?

Entrepreneurs need to create an interesting business proposition and prepare a good promotion to attract investors’ attention. For example, venture capital and angel investments are methods that provide resources to entrepreneurs even at the initial stage.

In addition, venture capital provides resources not only at the beginning but at every stage. In addition to providing resources, these two methods also guide entrepreneurs with various consultancy services. The microfinance method also helps reduce poverty by supporting entrepreneurs who do not have start-up capital.

Because each type of leasing has many benefits for our country’s entrepreneurs. One of the important issues for businesses today is the management of receivables. With factoring, businesses can transfer their receivables and obtain cash before maturity, and they can focus more on their core business by not spending time on the collection of receivables.

Barter is an important financing tool, especially for businesses experiencing cash difficulties.

What Role Do Angel Investors And Venture Capitalists Play In Startup Funding?

Angel investors support startup projects in the early stages. Angel Investment has become an important financing method both in the world and in Turkey. The USA is known as the country where Angel Investing is most developed.

Angel Investment is being tried to be popularized in our country by providing certain incentives with the passage of the Individual Participation Capital Law. There are two basic elements in the concept of angel investment.

The first of these is the entrepreneur, and the other is the Angel Investor, known as the Individual Participation Investor according to the legislation in our country, who undertakes the risk to a large extent. The concept of angel for investors was first used in England.

Angel investors are high-value individuals who invest their capital in a small group of companies. In other words, angel investors have an important role in providing funding at the initial stage, which requires small capital.

In addition, angel investors act as a bridge in providing financing until companies obtain venture capital financing. In this method, the entrepreneur applies to people and institutions that provide angel finance to meet his financing needs.

Are Government Grants And Small Business Loans Viable Options For Funding?

For some startup projects, government grants can be quite lifesaving. Nowadays, businesses face some problems in accessing financial resources. This situation causes businesses to experience serious difficulties in business functions. Because human resources, R&D, marketing, etc.

Financing resources are extremely important at every stage. However, alternative financing sources are not used much. One of the most important issues here is that entrepreneurs do not have sufficient information about alternative financing sources.

For this reason, most of the businesses in our country choose to obtain their resources from banks. However, traditional methods such as bank loans, equity, and vendor loans involve many risks.

For example, bank loans are not a suitable financing method for new entrepreneurs due to conditions such as guarantees and mortgages and high costs. Another method, the equity method, is not a preferred method because SMEs, which constitute a large part of our country’s businesses, face the problem of insufficient equity.

Auto-financing method, which is an equity financing method, is not suitable for businesses with low equity and period profit. Vendor loans can also be a risk factor in terms of maturity.

What Are Alternative Funding Models For Bootstrapping Entrepreneurs?

Bootstrapping entrepreneurs are generally initiatives in which resources and funds are provided by the founders of the initiative. They wait for the project to progress a little further with the venture capitalists.

Venture capital is a financing model that helps businesses that are dynamic and have the potential to produce significant economic value, but do not have sufficient financial strength, to realize their investment ideas. Venture capital is an equity investment and is based on newly established or small companies.

In this system, the capitalist becomes a partner in the company instead of lending money to it. The risk present in this system is the risk of producing a new product and keeping the product on the market.

However, this model is based on the idea that high risk will provide high returns. Venture capital is a type of partnership. One of the partners is the entrepreneur who provides technological innovation and development and believes that goods and services can be produced. The other is the venture capitalist, who cares about the entrepreneur’s ideas and supports him with capital.

See you in the next post,

Anil UZUN