Startup Financing: 10 Tips for Successful Startup Financing
The dream of owning your own business is a desire that many people around the world harbor. But the step into self-employment is daring and the path is rocky. The necessary capital as well as the financial risks and the worry of not having a steady income are the most common reasons, that lead to the step ultimately not being taken, even though there are now many funding and support programs for the self-employed in Germany.
In fact, startup financing is the most important aspect when founding a company. In this section you will receive ten tips for successfully financing your startup company.
Inhaltsverzeichnis
- 1 Startup Financing: 10 Tips for Successful Startup Financing
- 1.1 10 Tips for Successfully Financing a Startup
- 1.1.1 Tip 1: The Right Idea Is a Must
- 1.1.2 Tip 2: Pay Attention to the Right Financing
- 1.1.3 Tip 3: Choose the Appropriate Legal Form
- 1.1.4 Tip 4: Presentation and Marketing
- 1.1.5 Tip 5: Coaching and Training So You Know What You’re Talking About
- 1.1.6 Tip 6: Customer Acquisition Secures Your Survival
- 1.1.7 Tip 7: Customer Relationship Management (CRM)
- 1.1.8 Tip 8: Avoid Tax Traps
- 1.1.9 Tip 9: Build Reserves
- 1.1.10 Tip 10: Operate Frugally, Compare Thoroughly
- 1.2 Conclusion and Summary
- 1.3 Free Consultation
- 1.4 More Articles
- 1.1 10 Tips for Successfully Financing a Startup
| Startup Finanzierung – Übersicht | |
| ⭐ Vorgabe: | Startup Finanzierung |
| 🏆 Dauer: | Ca. 3 Monate |
| 💰 Kosten: | Projektspezifisch |
| 📺 Zielsetzung: | Startup Finanzierung einsammeln |
| ⚡ Technologien und Kenntnisse: | Bootstrapping , Crowdfunding, Crowdinvesting, Crowdlending |
Key Takeaways
Founding a startup is a bold step.
Starting a company must be carefully and thoroughly planned.
A solid and compelling business plan is an absolute must.
Financing the startup is often the biggest and most important hurdle of the endeavor.
Why Start Your Own Startup?
Many people dream of founding their own company. But why is that exactly? After all, self-employment is a rocky path with many difficulties. There is no fixed income, heavy costs, and endlessly long work hours in the office. Nevertheless, for countless men and women around the world with this desire there is nothing better and no greater goal.
The reason for this is relatively easy to recognize. Despite the disadvantages mentioned above, a startup, when it is successful, is very lucrative. Owning your own company offers you brand-new opportunities. You have the chance to sell and market your idea. You are your own boss and, if applicable, the boss of others. And: In your company, you decide how things proceed and what is done or not. When your startup succeeds, the launch becomes a real, established company, perhaps even a market leader and that is then your reward. Even if you have to share the laurels with your employees, it is still your project, your idea, and you are at the helm. For most people, this is precisely the fulfillment of their wishes and dreams, and therefore they usually accept the disadvantages associated with self-employment without hesitation.
10 Tips for Successfully Financing a Startup
No money, no action. That’s a well-known saying. And: When it comes to founding a company or a startup, this statement couldn’t be more accurate. Anyone who wants to found a startup and be successful cannot avoid secure and solid financing. This is particularly important in the early stages, as there are many risks and problems to overcome and various costs that arise later. All of this must be covered without having any revenue or customers. In very few cases do startup founders bring the necessary capital themselves. Accordingly, there is no way around financing. In this section, you will learn our ten top tips for successful startup financing.
Tip 1: The Right Idea Is a Must
The most important factor for the success of your company or startup is the idea. You need to have a good and innovative idea that does not exist in this form on the market or at least in your target group, or where you can easily compete with the competition. You therefore need to think about your project in advance and tell people, what you plan and what makes you special. If there are competitors, you must mention why potential customers are better off with you than with the competition.
But even if you have a good idea and establish a foothold in the market you can, it is still not over! You must further develop your idea, continuously offer customers something new and also keep pace with competitors and their innovations and changes.
Tip 2: Pay Attention to the Right Financing
Financing is the be-all and end-all when founding a startup. Without it, nothing works and it is therefore crucial that you consider and look at how you want and can implement the financing of your startup. You also need to think about whether you want to rely on the assistance of grants, banks, etc to implement or whether you want to achieve financing yourself or within your family circle. You will find some good financing options below.
Self-Financing through Bootstrapping
People who consider founding a startup often start dealing with financing and setting aside money as soon as the idea becomes more serious. Others have already saved over a longer period and thus have corresponding equity. This is where bootstrapping comes into play. If you have larger sums of savings and equity, you can reduce your costs and drastically lower your standard of living. This is called bootstrapping. In this way, you may be able to bridge the period until the first profits flow into your account. The advantage is that bootstrapping is a form of complete self-financing. No loans or co-investors etc. are required. But for this idea to work, a certain amount of equity is absolutely essential.
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Financing with Friends and Family
If bootstrapping or self-financing is not an option, another possibility is to bring family and friends on board. Perhaps there are acquaintances, friends, or siblings who are also interested in the business idea and thinking about founding a company. In this case, everyone can jointly raise the capital. Shared hardship is, after all, half as hard here too. And: you immediately have several trustworthy business partners. You can share the work and the whole project will be a multiple times easier to bear. If there are no interested siblings, friends, or relatives, then perhaps there are parents or family members who have no interest in collaborating in your company but who might have the necessary capital for financing and provide it to you. Here too, you thus obtain free financing with equity that remains within your family.
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Financing and Grants
Another way to finance your business is through traditional financing methods as well as government grants. In the financing area, for example, a loan or microloan is an option. In the realm of government support, there are loans, startup grants, and other offers from chambers of commerce and the government, provided through KfW Bank. We recommend that you familiarize yourself with these options and see which ones are right for you.
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Crowdfunding, Crowdinvesting, and Crowdlending
Funding by the masses has become a familiar concept. In particular, crowdfunding is repeatedly used to finance projects and ventures. You too can, if you plan a special project with your startup, attempt to secure financing through crowdfunding. Alternatively, you can use crowdinvesting to attract external co-investors and partners for your startup, or you can borrow the necessary capital from the crowd via crowdlending.
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Tip 3: Choose the Appropriate Legal Form
Look at which legal form is suitable for you and your startup. There are many differences here, and you can also save a lot on costs. Individual entrepreneurs with small startups often choose a sole proprietorship. If there are multiple partners, a partnership under civil law (GbR) is often formed. Both legal forms are cost-effective, require no capital, and can be established directly and uncomplicatedly. Alternatives include the general partnership (OHG), which requires entry in the commercial register and thus involves costs, or a GmbH. For the latter, €25,000 in equity is required, so it only makes sense for larger companies with the necessary capital. Finally, there is the stock corporation (AG), which is especially suitable for very large corporations. By the way, the legal form is not set in stone. You can rebrand your startup at any time, for example from a sole proprietorship to an OHG and eventually to a GmbH. The appropriate legal form is, in any case, of great importance for the success of your startup.
Tip 4: Presentation and Marketing
For your idea and your startup to become a success, people need to know that you exist and what you can offer them. Accordingly, presentation and representation are important. Especially in the beginning, you should rely on marketing here. Contrary to what is often expected, the costs here remain limited. For example, use social networks, where you can start pay-per-click campaigns targeting specific audiences and pay only for actual clicks. Advertise in your local newspaper, create a good website and an SEO-focused blog so that you can be found by search engines, and sign up on industry portals, blogs, etc. Introduce yourself there, write about your ideas and projects, etc. On many portals, this is free or the costs are minimal. This way, you reach a large group of potential investors and gain an established advertising platform.
Tip 5: Coaching and Training So You Know What You’re Talking About
When you found a startup, you usually already have a rough idea of what you want to do. You probably also have basic knowledge in this field. After all, you are unlikely to open an advertising agency if you have no idea and no interest in advertising and PR. But: as a company, you are a professional. Your customers turn to you to solve problems. Accordingly, you must know what is at stake. Regular training, seminars, and continuing education, as well as participation in coaching events, are therefore essential. Industries change and usually quickly. In particular, in the fields of crypto or IT, things that are current today are already outdated tomorrow. New technologies come to market, a new version of the programming language in use is released, or something else happens. Here, you must stay on top of things.
Tip 6: Customer Acquisition Secures Your Survival
A good business idea, an office, and the necessary capital are nice and certainly important. But to survive and be successful with your startup, you have to make money. That means you need customers. Whether you offer products or services, there must be people who spend their money with you. To attract customers, use customer acquisition. There are many options here, such as:
- Social Media
- Telephone
- Email and Newsletters
- Friends and Acquaintances
- Recommendations and Affiliates
- Search Engine Optimization
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Tip 7: Customer Relationship Management (CRM)
The customer is king. Everyone knows this term, and as a customer you have probably already reproached some companies about this. However, as the founder of a startup, this applies to you. Your customers are your kings. This means that customer satisfaction comes first. Especially as a startup, dissatisfied customers are like poison. You need good publicity, recommendations, and customers, who gladly come to you. This is where CRM or Customer Relationship Management comes into play. There are a variety of tools and programs. Many good tools are not expensive and even free for startups. For example, there is Bitrix24, which freely offers a comprehensive CRM offers and whose range of functions for startups is more than sufficient. Later, one can then also switch to paid accounts with even more extras. The author himself has been using Bitrix24 for many years for free and is very satisfied.
Tip 8: Avoid Tax Traps
It is no secret: anyone who makes a mistake with taxes not only has to dig deep into their pockets but face potentially huge trouble. Tax evasion and fraud are serious crimes. In the best case, you get off with a fine; in the worst case, it’s prison. As a company, there are many more taxes relevant to you. There are income and sales taxes, corporate tax, and business tax. On the other hand, there are some exemptions or special regulations for small businesses and startups. You need to know all about them. Since this is a very complex undertaking that involves a lot of time and effort, it is usually more worthwhile to entrust this tedious task to a tax advisor. That way, you have the certainty that everything is done correctly and you don’t have to worry. And: many tax advisors offer special services and packages for startups and company founders. This saves you costs and allows you, as a new founder, to afford professional tax advice.
Tip 9: Build Reserves
Startup financing is often shaky. Often all equity is tied up in the company or financed through loans and grants. There are no or only a few reserves. For this reason, you should start building these reserves immediately upon opening. Many things are still unclear in a startup. You do not know how the business will develop or in which months there will be lulls, in which months it will boom. You do not know when the next crisis will come. The current coronavirus is a good example of this. For this reason, it is important to create reserves. You may need to pay back taxes or the phone bill may be higher. Maybe there is already a lull a month after opening and the customers do not show up. In such cases, you have to cover not only these additional expenses, but also cover your normal expenses as well. You will usually not get a loan, and it is not advisable to go into debt or fall behind on payments so early. That would be almost certain demise for your startup dream. For this reason, you should start creating reserves immediately and not waste any time. The question is not whether the next crisis or lull will come but when.
Tip 10: Operate Frugally, Compare Thoroughly
Money is tight and financing is important. For this reason, you should operate frugally. Think carefully beforehand whether the purchase is really necessary and compare options. For example, does it really have to be the expensive multifunction laser printer for €300, or would a slower but cheaper model for €100 suffice? Does it really have to be Microsoft Windows with high licensing fees and MS Office, or does free Linux with OpenOffice not offer a good alternative? Compare and take a close look before spending money. Additionally, it can be worthwhile to adopt “as-a-service” products. There are now not only software-as-a-service (SaaS), but also hardware and even entire offices in this way. While monthly costs are incurred, you don’t have to worry about licensing fees, updates, etc., as all of that is handled by the service provider. And: you can return damaged, unneeded, or outdated hardware and software at any time, exchange it for a new model, or have it repaired at no extra cost.
Conclusion and Summary
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