9 out of 10 start-ups fail without proper investment.
No matter how good your business idea is – you can’t get your own business off the ground without capital. There is now a large selection of different financing options for founders. However, not everyone fits every concept and so the opportunities and risks of every financing must be taken into account. Inadequate financial planning is still one of the most common reasons for a failed start-up. To avoid such failure, let our specialist implement their knowledge and expertise in your business’s investment raise.
How Whales Ventures Could Help?
Bootstrapping is the name of an independently financed company formation without any outside capital. Regardless of whether that is possible for you or not – self-financing has advantages and disadvantages. Use equity, start lean, grow flexibly.
Benefits of bootstrapping
- With financing with a lot of equity, there is above all an increased motivation: Those who invest a lot themselves naturally want to get the best out of it and are of course proud to have managed it with their own resources.
- In addition, the largest part of the company remains with the founder himself and does not become the property of investors, so that young entrepreneurs themselves have the greatest possible freedom of choice.
- Those who manage with little capital usually set up an efficient company that functions in a clearly structured manner.
Disadvantages of bootstrapping
- However, there is often a lot of pressure to make optimal use of scarce resources.
- The high level of entrepreneurial freedom also harbors the risk of wrong decisions, because founders are solely responsible here and work without the know-how of others.
Even if the entire venture cannot be financed with equity, it still provides a certain degree of security in the event of liquidity fluctuations and, moreover, creditworthiness.
- Funding through loans and credits
For larger purchases, a loan from the house bank is a method to raise the necessary capital to start a business.
- Convince the bank
A professional business plan and good preparation for the bank meeting are essential. If the project is well developed, presented according to the business plan, and promises success, there are good chances of being granted a loan. In principle, however, the house bank will not do without private collateral and a corresponding credit rating.
- Startup financing with venture capital
$156.2 billion were invested in US-based startups by venture capitalists in 2020
According to Pitchbook
With venture capital, investors provide founders with the appropriate capital depending on the development phase of their product or service. Investors are often available as advisors for young entrepreneurs and also acquire company shares. The financial leeway increases, but founders are not only responsible for themselves, but also for the investors, who now want to be kept up to date on the state of development and usually expect constant reporting. After all, investors run the risk that the company will fail, especially in the early stages of the development of a business, and want to protect themselves accordingly. As a rule, investors only get involved in the later stages of the formation, when the risk has decreased. The riskier the current status of the startup,
This form of funding works best for computer, pharmaceutical, or biology startups that want to bring a promising product to market that has great prospects for success and growth.
- Funding with Business Angel
Business angels can usually be won for their own company much earlier. They support founders with their know-how, but usually do not invest as much capital as venture capitalists. To this end, they act in an advisory capacity: Young entrepreneurs can share in the wealth of experience of business angels, use their networks and contacts, which can often prove to be much more valuable than pure capital in the early start-up phase. And: Business angels risk significantly more than venture capitalists because they invest during or shortly after the foundation – at a time when success is by no means certain.
- Startup funding from the crowd
Crowdfunding is an increasingly popular form of financing. Since the financial burden is distributed over many shoulders here, it is also referred to as crowd financing. Here types of crowdfunding:
- Reward-based crowdfunding
This form of crowdfunding is the most popular, especially in the creative industries. Donors receive a thank you for their financial support, which is more extensive depending on the amount awarded. The “reward” can be anything that fits the company, from a small thank you card to a version of the finished product.
- Equity-based crowdfunding
With equity-based crowdfunding, lenders become investors and receive a share in the company with which they also participate in sales. Investors usually aim for a later exit.
- Lending-based crowdfunding
With lending-based crowdfunding, lenders offer a loan with a fixed interest rate and a fixed term. For entrepreneurs, the main advantage here is that no banks have to be convinced to lend.
- Donation-based crowdfunding
This crowdfunding is based on donations, so donors cannot expect any direct consideration. This form is most suitable for charitable projects.