5 Sources of Funds for Student Startups
Getting financial backing for a start-up is one of the key issues for any entrepreneur. According to statistics, about 50% of new businesses fail to pass the five-year mark.
A poor strategy at the beginning can jeopardize the entire project. Yet, there is no need to put all eggs in one basket. A newly made entrepreneur needs to decide how to diversify sources. Diversification of start-up finances will allow creating a project that could tackle a potential crisis. This action will also increase the chances of receiving appropriate sums to meet the specific needs of a start-up.
Student start-ups are quite popular today. The development of strategies, business and marketing plans, let alone gaining money, takes time. Yet, homework remains a huge part of the student’s life. Such entrepreneurs may use the help of EssayWritingService, for example. Anyway, they will need a writing essays service to spare some free time sooner or later.
Keep in mind that any bank would not like to be the sole donor of any young enterprise. So, demonstrate a multi-source search that will make you look like an active entrepreneur. Regardless of which source you choose, it is important to think over a business plan and strategy for promoting the idea in advance.
Once thorough research and analysis of market data for the start-up are done, it is entirely up to the owner to receive financial support for the project.
Crowdfunding
Such platforms as kickstarter.com show new ways to fund young entrepreneurs. This type of venture has been gaining popularity over the last decade. The process is more like getting a loan, deposit, or investment from more than one person at the same time. To make it work, the entrepreneur should:
- post a detailed description of the venture on a crowdfunding platform;
- describe the goals of the project, plans for making a profit, etc.;
- state how much finances they need and for what reasons.
After that, consumers study the information about the venture and donate money, provided they like the idea.
Pros
This is not just a source of income. It essentially creates public interest for the business while providing some free marketing at the same time.
Also, crowdfunding eliminates the complexities of putting the business project in the hands of an investor or broker. This way, it enables young entrepreneurs to represent their interests on an equal footing with more experienced ones. This approach also has great potential to attract venture capital investments as the business develops.
Cons
The fierce competition inherent in crowdfunding platforms can be challenging if another entrepreneur is better at pitching the same business idea.
Venture Capital
Big bets are in order here. Venture capital funds are professionally managed funds that invest in companies with huge potential. Such organizations provide money as well as expertise and mentorship. They also analyze where an organization is heading, evaluating a venture in terms of sustainability and scalability. This type of investment better suits small businesses that have grown outside the start-up phase and are generating income.
Pros
Venture capitalists always track the progress of the start-up they have invested in. This way, they secure the growth of their investments.
Cons
Venture capitalists will remain loyal to the business until they return their capital and profits. It usually happens within three to five years.
Incubators and Accelerator Programs
Early-stage ventures may consider incubator and accelerator programs as a funding option. Such programs are often based in major cities and help hundreds of start-ups every year.
Incubators are like a parent to a child who fosters a business by providing development tools, learning, and networking for the future business. Accelerators are pretty much the same thing, but unlike an incubator that helps a business grow over time, an accelerator takes a giant leap forward.
Pros
Start-up owners receive mentoring from their investors. Also, they have an option to team up with other projects.
Cons
The program is valid for 4-8 months, but if the idea of the project has low popularity, it heads south fast.
Winning Contests
Another way to get money is by participating in contests. In their terms, entrepreneurs showcase or submit their ideas and compete against different competitors claiming the same funding for their projects. As a member, one has to submit a comprehensive and detailed business plan.
Pros
While entering these contests, media coverage will be allocated to the start-up. It will give the project that much-needed free publicity.
Cons
Losing contests can demoralize, which can force entrepreneurs to abandon their plans to start a business.
Grant Programs
Government programs that offer start-up capital are a great way to find funding for a new idea. Like other competitions, this funding source would require a detailed plan and a high-quality presentation of the end product.
The grant committee makes all decisions. Once the plan has been thoroughly reviewed and approved, you will be provided with the funds to launch the start-up.
Pros
Government funding tends to be substantial, thus giving entrepreneurs excess capital to run their projects.
Cons
The process of reviewing, approving, and possibly releasing funds can be time-consuming due to bureaucracy.
Pick the Source That Suits Your Needs
Define the scale of the project and try to see what investors gain from funding it. Those who think like their target audience succeed in persuading potential investors.
Any entrepreneur already knows their business down to the last detail. All that remains is to develop and present the business model to the right people and convince them that the startup has the potential.