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How to fund your new startup venture

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|May 24|magazine14 min read

Looking for some startup funding?  There are plenty of different ways to finance your latest project. Becoming familiar with different options and learning which avenues could be more beneficial to you and your needs could assist you in reaching a higher level of success much sooner. After all, when it comes to business, two things you don’t want to waste are time and money. Take a look at the various ways you could potentially pursue startup funding, as well as the pros and cons of each alternative.

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Crowdfunding

You’ve most likely heard the term “crowdfunding” before, as it’s becoming a more and more popular source to gain funds. In short, this idea deals with individuals donating money to a person or organization that he or she wants to support.

Pro: Anyone who is interested in contributing, despite how much he or she can actually give, will be permitted to do so; therefore, the opportunity to have more investors is present.

Con:  Receiving crowdfunding capital is never guaranteed and often works best for projects dealing with the arts or culture.

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Angel Investors

Who doesn’t need an angel watching over their shoulder from time to time? “Angels” are often times retired company executives who choose to directly invest in small firms. These “angels” are usually experts in their career fields and share their knowledge, contacts and financial gains with firms or organizations they choose to invest in. Specifically, angels tend to assist with the early stages of the investment.

Pro: Angels can be a good fit for startups, with investments usually happening quickly, ranging from $25,000 to $1.5 million in a lump sum.

Con: Angels usually keep low profiles and can be difficult to find. Furthermore, most angels expect a high rate of return.

Government Funding

Though many may choose to opt away from Canadian government grants and loans, it’s important to remember that this type of funding is still available—kind of. Yes, grants are often desired due to the fact that free money can be obtained or money that doesn’t have to be paid back. However, grants are usually hard to come by for the simple fact that a specific niche generally has to be prominent in order for the cash to be given out. Other government funding programs are loans that will eventually have to be paid back with interest. 

Pro: If you’re able to successfully secure a grant, then you will be rewarded money you won’t have to pay back at a later time.

Con: If you do pursue government funding in the form of a loan, you will be required to not only pay back what you borrowed, but also be contracted to pay interest on said loan.

 Cold, Hard Cash from Loved Ones

Depending on the financial status of your family and/or friends, you may be able to reach out to a loved one for some financial assistance with your latest business venture. The specific agreement or contract between the entrepreneur and the one giving the “love money” will usually be determined by the two parties involved.

Pro:  It’s sometimes much easier to ask for and accept money from a loved one versus a complete stranger. As well, a family member or friend may be more inclined to offer help.

Con: There’s a reason the phrase “don’t mix business with pleasure” is so well known.

Personal Savings

How disciplined are you at putting 20 percent of your paycheck into your savings account? Believe it or not, the most common source behind startup funding is personal savings. If you plan on funding 25 percent to 50 percent of your business yourself, then you can prove to potential investors that you’re not only dedicated to your business, but that you’re simultaneously taking on some risk.

Pro: What better way to prove yourself in the competitive world of business than by funding most of your project yourself? The experience could be quite gratifying, with you not having to pay back too many loans or high interest rates or seek outside assistance.

Con: When using your personal savings account for startup funding, you run the risk of losing everything.

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The Best Option for YOU

When it comes to startup funding, remember to do your research. For example, you need to explore all of your available options and then only pursue the choices that will completely accommodate you and your needs. Because each and every avenue has its own risk and reward, it will be important to do your homework. After all, you want to be able to prove that you’re a worthy competitor in the game of business.  

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