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Six Steps to Starting Your Startup, Step Two: Secure Funding

This post is the second of a six-part series on some recommended steps to launching a startup business. (Here is the first post in the series.) However, there is no one way to start any business, so you should always consult multiple sources and/or authorities on what your business may need before you start it.

Getting Funded

Every business needs money to operate, and startups especially need money to get going. Startups need a business plan (as we mentioned in the first post in the series) to procure the money that can help them get the funding they need to begin work and to continue operating. Once you have made a business plan, you can give it to investors or financial institutions to procure funding or a loan.

Types of Funding

Incubators and accelerators are one form of early-stage funding for startup companies, usually called seed funding. Investors may give you money in exchange for an equity stake in your company if they see value in your company and its ideas. Financial institutions, on the other hand, will give you a loan with a somewhat high interest rate. Because of the lower cost of capital, it’s generally a better idea to get an investor in your business or go to an incubator or accelerator.

Types of Investors

Incubators, accelerators and investors all provide funding, usually for a stake in your company’s equity, but accelerators and incubators usually supply initial funding alongside support services and guidance. Until your idea and business is a little more mature, an incubator or accelerator is likely a better bet for your business to secure funding. After you’ve developed your business and are better able to demonstrate its value, seeking funding from a venture capitalist or angel investor is good idea. An angel investor is usually a single investor looking to invest a little in a company while exercising a somewhat higher risk tolerance. A venture capitalist is usually a large firm with a lot of money to invest which usually has a slightly lower risk tolerance.

Finding Additional Funding

Once you are ready to seek series A funding (your first foray into larger amounts of funding from investors) and beyond, finding venture capitalists is your best bet. For those residing in Ohio, you can seek out funding from Youngstown’s Valley Growth Ventures. VGV is a for-profit investment fund created to support high-growth companies across the state of Ohio. 

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