How to raise money for your startup
It’s difficult to successfully grow a business if you haven’t secured enough funding.
After all, you’ll need considerable financial resources to cover the costs of developing a product, promoting it and getting it built. Finding investors will be one of the most critical roles for any new entrepreneur.
Note that you must develop a compelling product or service before seeking funding. If your business idea lacks a solid product-market fit, it’s most likely not worth investing in.
Alex Burkhart, an entrepreneur and adjunct professor at UC. Photo/Alex Burkhart
"Fundraising can become quite a distraction from your everyday efforts to grow your business,” says Alex Burkhart, an entrepreneur and adjunct professor at UC. “You need to be able to navigate both paths in parallel as best as you can.”
Startup founders at the University of Cincinnati’s 1819 Innovation Hub receive expert guidance on funding for early-stage businesses. We’ve compiled a list of six spots to search for startup funding in case you don’t have a similar resource at your disposal.
An option that isn’t ideal but may be necessary for individual entrepreneurs is to raise money on your own. This could come through a personal investment in the business or through an investment from friends or family members.
These events allow early-stage startup founders to compete against their peers for funding from a panel of potential investors. You’ll be up against many other entrepreneurs, so preparing well for these events is best. Students at UC have various opportunities to receive early funding through business-focused pitch events.
3. Startup accelerators
Early-stage entrepreneurs often turn to startup incubators and accelerators for funding. These cohort-based programs mentor small business founders and provide chances to connect with potential investors. UC, for instance, has the Venture Lab pre-accelerator for entrepreneurially minded community members.
Angel investors pour money into small businesses they view as viable. However, you’ll likely need to give up partial control of your company to receive funding from angel investors. Most often, these individuals show up after your startup has received its original funding but before venture capital firms get involved.
Government grants are lucrative but come with fierce competition due to their no-strings-attached investment approach. You’ll likely have an easier time getting an SBA microloan, up to a $50,000 investment from the U.S. Small Business Administration. Private loans are relatively simple to secure but come with high interest rates.
6. Venture capital firms
The highest-growth startups are most likely to receive funding from venture capitalists. These firms make money by investing early in businesses with significant growth potential and then selling their share for a sizable profit down the line.
There’s no way around it: raising money for your startup can be a daunting task. However, the business community is filled with potential investors on the lookout for promising companies. Additionally, the government provides grants and loans to help entrepreneurs as they launch.
CincyTech, Main Street Ventures and Fireroad Ventures offices at UC's 1819 Innovation Hub. First photo/UC Marketing + Communications; Second and third/Stephen Kenney
While not all startup founders have access to UC’s wealth of resources, communities often have multiple investment firms. The 1819 Innovation Hub alone houses CincyTech, Main Street Ventures and Fireroad Ventures as potential places for Cincinnati-based entrepreneurs to seek out funding.
Burkhart offers some additional advice: “As much as it’s important to focus time and energy on your core business you are raising funding for, sometimes having the right side gig to generate income for yourself can help extend your runway to keep investing as much as you can into your business.”
Don’t give up if your investment search drags on. While it’s not always easy to find an initial round of funding, the process is critical to get your business off the ground. And remember: your determination and grit as an entrepreneur are likely to pay off – literally – as time goes on.
Featured image at top: Discussion during a business meeting. Photo/Adobe Stock
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