Funding Challenges Start-ups Face and How to Solve Them
Posted 26 Feb, 2020
Author - Priscilla Aimila
Funding Challenges Start-ups Face and How to Solve Them.
Funding is arguably the most important aspect of any business at all stages. Many start-ups face a series of financial challenges at the onset of their business; it is almost inevitable. This is reason enough to know the major start-up financing challenges and understand how to solve them.
There is no alternative to funding so you must go through the process to be able to grow your business. If this is the case, you must be prepared.
There is an optimism that comes with starting a business. People are excited and they are very serious until the issue of funding comes up. If an entrepreneur can survive that time without losing focus and maintaining their optimism, they will pull it off.
Most times, start-ups depend on investors to get their companies going. To this end, they hustle for the right investors to pitch. This is where it might become a problem.
According to Bill Rader, president, and CEO of Efferent Labs “Getting in front of the right investor is always a challenge, but even when you do that you are also competing against a lot of people for the same money.”
Therefore, you do not have to depend entirely on investors. You may also want to consider self-funding especially at the initial stage and as your business grows and expands there is a high possibility of getting investors along the way.
You may not be able to raise the money you need on your own even if you have had success in the past. You will need to become part of your business community to do that. it helps you in unimaginable ways. The need radically network is key to the survival of the business and its success. Reach out to more people and you will be fine.
In this article, I want to discuss 3 major start-up funding challenges and how to overcome them. These challenges affect almost all businesses at their infant stage.
How To Solve Start-up Funding Challenges
1. Finding the right investor: Finding the right investors who will be willing to back your business as a start-up is unarguably the biggest challenge start-ups face. You will do well to know that it is not every investor that is right for your company. Some are just not right for you so getting investors is quite different from getting the right investors.
According to Jayna Cookie of EVENTup “it’s important for business owners to think about their financing options. It can be tempting to jump at every company that’s interested, but this may not be the best use of time. You need to ask yourself what companies they are investing in and at what stage.”
You will need to do some research to determine the kind of angel investors and venture capitalists that you pitch to.
The challenge obviously is getting the right investors. To solve this challenge, you will be strategic in going after investors. It is important so that you will end up with the right type of investors for your business.
2. Networking: To raise funds, you will need to network. Networking is at the base of financing your start-up. Networking here simply means forming alliances and relationships with companies that can be mutually beneficial.
If you want to grow your business, you need people to do that. You cannot, in all honesty, do that all by yourself. You will need to explore all the strategies for developing a healthy and working relationship with other companies. Today an entrepreneur has a lot of opportunities of getting their ideas out there, put in the necessary work and connect with the right people. 3. Have an exit strategy: Having an exit strategy can help provide more opportunities for funding. By having clear goals set and an idea of where you want to be in the future, you can potentially consider other funding options. While every business is different, having defined parameters on how much money you need and what you need it for can help you as you approach investors.