6 Alternatives to VC Funding that Every Entrepreneur Should Know
Venture capital has become famous due to the news and television. Most startup founders assume that VC funding is perfect for them. However, it is actually not a good fit for many small companies.
If you are taking VC money, then you need to give up a large chunk of your startup. You need an amazing growth rate for meeting the VC expectations. Your investors will always ask questions from you. If you are a women entrepreneur, then you should consider other funding options first.
In this, you are going to fund your company with your own resources. It is not glamorous like VC funding. However, it is best for new startups. If you are self-funding your startup, then you will limit your startup growth.
But, bootstrapping will ensure that you have flexibility. You can run your business without any questions. In simple words, you are betting money on yourself. You can look for better investment options in the future. Bootstrapping will help you in negotiating better results in the future.
2. Family and friends
Outside investment mainly starts with family and friends. Only your family and friends can invest money in a business that is still not making any money. Your family and friends have full faith in you.
However, there are some limitations. Not everyone has friends that can give you a five-figure check. Also, your friends are going to take a big risk by investing in your money. This can lead to an awkward Thanksgiving.
Small business owners can take loans from banks. Most founders don’t like taking a loan from banks. If you are taking a traditional loan, then you need revenue, credit rating, and collateral. Founders can also take a personal loan from the bank. You should be ready to take the risks associated with the loan.
4. Angel Investors
Angel investors invest their own money in different startups. They have the freedom to pick any startup they want. Thus, they can fund any startup that they want. If an angel investor feels passionate about your startup, then they can write a big check for your startup.
You should invest your time in creating a relationship with your angel investor. It is important to develop relationships with investors that can add value to your startup. For example, make good relationships with investors that can provide you advice, resources, and connections.
5. Non-dilutive funding
The most famous example of non-dilutive funding is government grants. It is not like debt or equity funding. You don’t need to worry about giving a big chunk of your business. Also, you don’t need to worry about paying it back. Most governments are helping their small businesses during the coronavirus crisis.
Non-dilutive funding comes with its own set of challenges. Grant-writing is a very time-consuming process. You need to first find a grant program that is perfect for your business. If your startup is qualified for a government grant, then you should definitely take it.
6. Strategic Partnerships
This type of partnership is formed when a business partners with a small business that complements its strategy, product, or service. They will provide you funding, resources, and support in return.
This type of funding is still underrated. This investment won’t depend on huge ROI. Most startups can enjoy the benefits of a strategic partnership. It is better when compared to traditional venture capital. Most women entrepreneurs find it easy to raise funds from strategic partnerships. Your partner will also provide you with support and exposure. Thus, they will help you in growing your business. It is one of the best funding options available for startups.