Are you considering starting a business but you have yet to secure your preseed funding?
By reading this guide to preseed funding sources, you will find seven ways to generate preseed funding and one strategy to generate funding after you’ve already started your new business.
Smart Preseed Funding Tips to Help You Start or Grow a Business
If you haven’t dipped your toes into the entrepreneurial waters yet, but you have a great business idea that you intend to put into practice, or if you’re planning on expanding your small business, there’s only one thing on your mind: money.
You must be preoccupied with how much money you need to bring your vision to life and how you’re going to get that money. Because obviously, if you’re not ridiculously rich, you’ll have to seek funding for your business.
That’s when you’re faced with a harsh reality. Money doesn’t grow on trees and raising a considerable amount is no easy task.
That’s also the reason why most entrepreneurs give up or put their dreams on hold indefinitely.
But since we’re here to find solutions, not to complain about the vicissitudes of life in general or the challenges of the business environment in particular, we’ll share with you some tips on how to get the funding you need to get your startup off the ground or take it to the next level.
Let’s bring in the preseed funding.
What is Preseed Funding?
Did you ever see the movie “The Upside?”
In the film, actor Brian Cranston plays a man who wants to help his employee find preseed funding. That way, when the employee goes out on his own, he’ll have the needed capital to start his own business.
“Seed money” is the money you need for your business. Think of the funds to start a business’s growth like a seed is the start of a plant’s growth.
Preseed funding is money you generate before you start your business.
Bootstrapping for beginners
If you’ve come to the conclusion that you don’t require a huge amount of money to get your business going or growing, you might not have to look very far to find your funding source. You can be the source yourself.
And no, we’re not talking about selling your house, your car, or any of your assets. All you have to do is check your accounts, your savings, your credit cards, and your income, and then do the math.
What is bootstrapping?
If after adding everything up you discover you have enough money to put your plan into action, you’ve found the best way to fund your business.
That’s called bootstrapping at its best and it can save you a lot of hassle. It’s also a risk-free option as you won’t need a third party to help you out. So, what are you waiting for? Grab a pen and paper and start adding up those figures.
When you follow this method, you provide your own preseed funding from your assets.
Support from family and friends
When bootstrapping doesn’t work, but you still don’t want to get financial institutions involved in your business equations, what do you do?
You ask those who are closest to you for financial support. Borrowing money from family members and friends is the next best thing when you realize that no matter how deep you dig into your pockets, you’re still not going to be able to raise the necessary funds.
As with bootstrapping, it’s a much safer option than looking for other forms of external funding. But remember, if you want to convince your family or friends that investing in your business is worth it, you should have a business plan in place that will help them understand how your idea is going to work.
Good old business loans
If you’ve already considered your options and decided you want to take the classic route to fund your startup or your business expansion, you can always apply for business loans.
There’s a wide variety of providers that offer small business loans for people just like you, so it’s a great way to get the money you need for your endeavors fast, as long as you meet the requirements for it.
Business loans are usually a good idea when you need a bigger amount, but you have to be cautious and make sure you don’t borrow more money than you can pay back.
Also, keep in mind that different lenders have different requirements, so you’ll have to do some shopping around before you choose the provider that suits your financial needs.
There are many types of preseed funding loans you can apply for:
- Payday loans: You offer your first paycheck as collateral against the loan.
- Caveat loans: Loans you can take two to three years to pay back.
- Lydia loans: These are loans based on the amount of cash you have in your bank account.
Venture investors to the rescue
What if you don’t want anything to do with loan providers, but you still need to find the money to fund your business?
Most entrepreneurs turn to venture investors for support, and you can try doing the same. It’s up to you to look for individuals who are willing to invest in your business.
Admittedly, this can be a difficult and time-consuming task, but if you manage to find the right investor, all your efforts will be rewarded. Once you’ve managed to capture their attention and get them interested in parenting up with you, you can move on to the next stage of the process which is deciding on the terms of the investment.
The power of crowdfunding
Crowdfunding is another popular way to raise money for a business. This option hasn’t been around for as long as other funding solutions have, yet in recent years we’ve heard many success stories from people who started their entrepreneurial journey through crowdfunding.
The concept is quite simple: You pitch your business idea on a crowdfunding platform and you raise money from like-minded people who see the potential in what you’re planning to do and are willing to back you up.
If you can convince enough people that your idea will work, you’ll be able to earn the money you need.
There’s a way you could raise the money yourself that doesn’t involve searching through your bank accounts or getting a second job to help you maximize your income.
The secret lies in improving your business efficiency in order to grow your profits and ultimately raise enough money to expand your small company.
As you can assume, this won’t happen overnight. You have to do a thorough assessment of your business, so you can identify the areas that can be improved and implement viable solutions. With the right strategies, you can boost your sales and your earnings.
Note: This method works after you start your business, and therefore is not considered “preseed funding.”
To invest or not to invest
This is the question!
Maybe you don’t actually need to raise funds in order to start a business or make it grow. Maybe you already have everything you need, and there’s no strong reason to chase after preseed funding from investors or borrow money from someone else.
We live in a day and age where digital tools have made it easier than ever to set up a business with limited resources. Chances are you can already put your plan into motion without a large investment.
Preseed Funding FAQ
Where can you look for preseed funding?
You can look anywhere: Ask family and friends, take out a bank loan, find investors, and even look through your own assets to find preseed funding for your startup.
What is preseed funding?
Preseed funding is money you generate before you start your new business. Once generated, you invest the money in your new business to facilitate its growth and efficiency.
How does preseed funding work?
That depends on the type of preseed funding you find. For instance, family may not ask for interest, but a bank that loans you money certainly will.
Wrapping Up: Where Should You Look for Preseed Funding?
You have to act smart and re-evaluate your business needs and possibilities before making any major financial decisions.
Readers, please share so new entrepreneurs discover these preseed funding ideas.
I look forward to your views in the comment section. Do you have any strategies for generating preseed funding for new startups?
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