Without sufficient capital, the best business idea is usually very difficult to implement. We reveal 8 possible ways founders can get the funds they need to get off the ground.
No matter how successful the business idea – if the right startup financing and thus the necessary capital is missing, the company foundation or growth will not succeed after the successful startup. There is now a wide range of different financing instruments available for founders and young companies. But which possibilities are there concretely?
When bootstrapping (amer.-English term for "shoelaces"), the start-up is financed entirely by the founder's own funds. The company figuratively pulls itself into profitability by its own shoelaces. This type of financing obviously offers the most independence, but is only applicable for a few business models in practice.
2. Promotional loans
Funding banks, such as KfW, are tasked with promoting economic development. This also includes support for startups and young entrepreneurs – both in the founding and in the further financing of the company's growth: special programs such as KfW's ERP-Grunderkredit (ERP Startup Loan) are among them.
What can the ERP startup loan be used for?
KfW's ERP-Grunderkredit – Universell development program provides founders with up to 25 million euros in development loans to start, take over or consolidate a company. With these funds, for example, the following can be financed:
3. Startup grants
In addition to subsidies from public development banks, which must be repaid like a loan, other public institutions at the state, federal or EU level also award non-repayable grants for start-ups. But these are usually tied to certain conditions.
4. Founder competitions
As a founder, you are used to selling your idea in the best possible way. Startup and pitch competitions are a great way to meet investors or business angels and convince them of your business plan. Of course, entrepreneurs should not rely exclusively on this opportunity, but a certain presence in the founder and startup scene in the region can also be valuable when looking for financing.
5. Startup financing through credit
While hard to come by for young companies, financing via traditional loans is also possible. However, this form of financing often fails because of the collateral and equity that must be provided. However, founders and young companies should not throw in the towel too early for a bank loan: A loan may also be possible for founders and younger businesses.
6. venture capital
Venture capital (English term for risk or venture capital) is not a loan but a form of participation in a company by a venture capitalist. A distinction is made between seed stage, early stage and later stage financing. The investor sometimes takes high risks of loss and therefore chooses potential companies to support very carefully.
7. Business Angels
Compared to the venture capitalist, the business angel usually supports the founder not only with capital, but also with his expertise, know-how and network. On the one hand, there are business angel networks, but also individuals who make contact with young companies, for example, through start-up and pitch competitions.
Crowdfunding, such as crowdfunding, crowdlending, or crowdinvesting, is usually obtained by businesses through online platforms that specialize in providing it to private or commercial users. The crowd thereby finances a project – the financial resources do not come from a bank or other financial provider, but mostly from individuals who invest money in this way. The consideration can be interest or a percentage or profit share in the company.
In recent years, startups in particular rely on this form of financing when they are denied funding through other channels: About the possibility of creating a strong emotional bond with potential investors, companies in the start-up phase can convince financiers and create a start even with just an idea. In addition, success on a crowd platform can help provide an initial indication of how the product will be received in the marketplace.