No matter how you spin it, sufficient capital is a necessity for the growth of a successful startup. As Finextra says, “capital is the basic ingredient for any business to thrive.” However, raising capital can be a difficult, time-consuming endeavor for any startup company. Let’s explore some ways to raise capital for startups.
You may have a strong business plan and need to raise startup funds, or you could also be a small company looking to raise the capital to expand your reach or change your market. Regardless of where you sit on this spectrum, you almost certainly need capital to continue moving forward.
Whatever your needs are, there are several different ways that you can go about raising money for your small business. Here are a few of the ways that you can raise startup capital.
Crowdfunding
In short, crowdfunding is promoting your business idea and encouraging people to invest. There are a variety of crowdfunding platforms, including gofundme and kickstarter, that can help you gain support from investors.
Here are some of the benefits of crowdfunding:
- No debt: One of the most noteworthy benefits of crowdfunding is that you won’t have any significant debts to pay afterward. Almost any other business loan you get will involve significant debt that includes interest rates.
- Free advertising: Crowdfunding through different platforms allows you to promote the cause, but it also lets the people promote your business for you. Through sharing on these sites, as well as social media, your investors and potential investors can also function as your advertisers.
Here are some cons of crowdfunding to raise funds for your business:
- No assurances: As you promote your cause and ask the general public for donations, there is no guarantee how much money you will receive. A small startup could have a goal of $15,000, but only receive $2,000. While that smaller amount of money may still be helpful, it is difficult to plan ahead when you do not know how much support you will garner.
- Competition: You will not be the only startup financing their growth through a crowdsourcing platform. Your competition may also pitch their similar business model on a crowdfunding platform, meaning that you may lose out on capital because another company took attention away from yours.
Angel Investors
Sometimes, an individual or group of individuals will make what is called an angel investment in your company. This means that the person or persons will provide significant capital in a business startup.
Here are some of the primary benefits of angel investors:
- Risk: Generally, angel investors invest in risky startups. If they like your idea and business model, they will provide finances even if you have yet to prove yourself. This is very different from banks, who need to see profitability before they invest.
- Mentorship: Typically, angel investors will have experience in the field you are in, which allows them to come alongside you, help you understand the business or industry, and advise you on decisions and future plans. Having this sort of partnership can aid the growth and success of your business.
- No debt: Most angel investors do not require you to return the money that they provide you, which differs from all other options except crowdfunding.
Here are some of the biggest drawbacks of angel investors:
- Small Amount of Capital: Compared to the amount of money that you could receive from a venture capital loan or the bank, angel investors usually don’t provide that much capital. There are exceptions, but generally, angel investments are less than $100,000.
- Loss of Control: According to The Balance Small Business, “your angel investor will have a say in how the business is run and will also receive a portion of the profits when the business is sold.” This differs from bank and venture capital models, but this makes sense when you remember that you do not have a debt to repay.
Venture Capital
Venture capital is financing for startup companies that need capital. Venture capitalists are gambling on the success of your business, so their rates are steep. Here are some of the primary benefits:
- Risk: If you can prove that you will be successful, venture capitalists will invest before you demonstrate profitability.
- Capital: Most venture capitalists will provide significant dollar amounts, especially when compared to bank loans.
Here are some of the main drawbacks of venture capital:
- Interest: Because of the risk involved, venture capital generally involves exceptionally high interest rates. This can make paying the loan back a difficult process that lasts years longer than it would for a bank.
- Control: In addition to the interest rates, venture capitalists need some control in your business to make their risky investment worthwhile. This can lead to conflict or your business operations changing from your original intention.
Bank Loans
In theory, this is the simplest of the types of loans, but in reality they are quite complicated. Here is the benefit of working with banks.
- Cheap interest rates: This is the lone benefit for SaaS and other similar tech companies. The rates are significantly lower than venture capital.
Here are the cons of working with banks:
- Time-consuming: One of the worst parts of applying for government loans is the time involved. Receiving venture capital or even crowd sourced funds can be quick. The bureaucracy involved with bank loans complicates and extends the process significantly.
- Must be Profitable: This all but prevents most tech startups from receiving bank loans.
How does RevTek Raise Capital for Startups?
RevTek helps small business in the tech field gain the capital that they need to expand and surpass their current levels of success. RevTek provides the combination of capital and freedom that can help you gain the capital you need.
Our model is quite simple: we provide the capital, and you pay it back in manageable monthly payments based on your monthly, recurring revenue. To be eligible, you do not need to be profitable, but you should have a predictable recurring revenue of at least $50,000 a month.
Here are some of the major benefits of gaining capital from RevTek:
- We don’t take your equity. RevTek has no interest in gaining power or taking away your equity. We want to ensure that you succeed.
- We don’t take control. Many of the options provided to you involve losing some control of your business. Whether it be an angel investor or venture capital group, they are looking for some share and power in your business. Not RevTek. Our goal is to provide you with the capital that you the need to carry out your effective business plan or expand into a new market.
- Quick and simple. Many of the methods mentioned above for raising capital are quite complex, time-consuming, and can leave you feeling unsure of the end result. At RevTek, we provide a painless, quick process.
If you are looking to raise capital for your startup, we want to help you. Our experienced team can provide you with the money you need to develop or grow your tech startup. Contact us today to learn more about how we can help your business succeed and grow.