Startups Find More Paths Than Ever to Secure Capital

Coming up with a game-changing idea is sometimes the easiest step in forming a startup venture.

Believe it or not, coming up with a game-changing idea is sometimes the easiest step in forming a startup venture. The real challenge for most entrepreneurs, particularly those with no previous business experience, is to secure the funding needed to get an idea off of the ground. In many cases, securing startup capital can mean a long, often frustrating series of pitch meetings and proposals.

Fortunately, the digital economy has provided some alternatives to traditional venture capital financing. One of the more popular methods is to start a crowdfunding campaign. Another trendy method relies upon cutting-edge cryptocurrency technologies, which allow certain types of tech startups to arrange an ICO to investors with the promise that a successful business will yield large gains in the value of the currency. While these are attractive options that bring innovative startup ideas straight to potential investors, all fundraising methods require at least some early-stage idea or product development in order to succeed.

Preparing to Seek Financing

In the earliest days of any startup venture, there will be at least some costs incurred to develop a product, create a prototype, and write up a business plan. All of these things are essential steps that must already be complete in order to prove to potential investors that an idea is worth the financial risk. This usually means that the founder of a project has to invest some of their own money in order to get started.

Sometimes, if the need is great enough it's possible to get a business loan. The problem is that banks are very hesitant to provide such loans, and often have very high standards for approval. Another possibility is to make use of revolving lines of credit such as business credit cards. These tend to be easier to get for new businesses, and the top credit cards offer good rewards and competitive interest rates. They are typically tied to the personal credit of the business owner, so this is a choice that should be made with some care.

Crowdfunding vs. Pre-Seed vs. ICO

After the basic preparations have been made, the next step is to decide how much money the venture needs to sustain itself in its infancy. If the total funding needed is low enough, the quickest and easiest method is to develop a crowdfunding campaign. This is especially true if you're creating a tangible product, as individual investors are often drawn to ideas that will benefit them personally.

Another potential route for obtaining early venture capital is to look for investment firms that specialize in "pre-seed" funding. The term refers to financing rounds of less than $500,000 for businesses that are in research and development stages or are in a prototype phase. The requirements will vary, but there has been a distinct shift recently to small investments with low barriers to entry.

The latest form of venture financing is organizing initial coin offerings (ICO) using cryptocurrencies. These financial instruments fluctuate in price and investors are betting that the currency involved will gain value to deliver a return. As of now, ICOs usually involve startups that are tied to the blockchain technology that undergirds cryptocurrency platforms, but their popularity guarantees it won't be long until non-technology firms begin to use them to secure working capital.

A Brave New Startup World

It's comforting to know that there are so many new and traditional financing options available for innovators to advance great new ideas. Ironically enough, some of the technology that has enabled the latest platforms was paid for by traditional venture capitalists. It's a thriving and competitive ecosystem that is ready to deliver the next generation of businesses to the marketplace with unprecedented speed and success. For those aiming to be a part of that success, there's never been a better time to get started.