(1) BootstrappingSome entrepreneurs still prefer to go down the the funding route used by some of the most successful companies – like Dell Computers, Apple, FaceBook Inc and so on. Bootstrapping involves entrepreneurs doing away with loans, equity or other traditional funding options while choosing to self-finance their business from personal savings or other funds at hand. This works best for business ideas that don’t require much capital from conception. Pros: ● Full control – Entrepreneurs who bootstrap are in absolute control of the business; ranging from decision-making to implementation of ideas. ● Learning key skills – Bootstrapping provides room for entrepreneurs to learn core skills like management and the efficient utilisation of available resources to drive the business forward. ● No profit sharing – A business that survives bootstrapping to a point where the business starts yielding profits will enjoy huge benefits as it is neither tied to an equity nor a loan. Cons: ● Not all companies can be bootstrapped – Some require huge capital from conception and such large funds may not readily be raised through bootstrapping. ● Slow business growth – Handling all sectors of a business while also worrying about cash flow will definitely reduce a business’ speed of growth. ● Chances of running into debts – Businesses don’t immediately start yielding profits. It’s highly possible for a bootstrapping businessperson to run out of funds and run into loads of debts before seeing growth.
(2) CrowdfundingThis is one of the most popular funding options as a result of how easy recent tech advancements have made creating a crowdfunding project – and also because of its successes over the years. The common criteria for creating a successful project involves having a unique idea and effectively communicating it to the audience, convincing them to fund the idea by showing a huge potential of growth and providing an enticing reward in return. Crowdfunding can be effective as a funding option if well-planned and executed, but here are major pros and cons to help determine if it’s the best fit for your business. Pros: ● No fees attached – If a crowdfunding project fails, all the funds raised will be returned to the investors and the entrepreneur will neither gain nor lose anything. ● It’s easy to set up – Platforms like Kickstarter, Indiegogo and CircleUp make it easy to start a campaign. You simply need to message the site with your idea, create a video upon being accepted and effectively market your campaign after getting published. ● It aids marketing and brand exposure – A successfully funded campaign gives the business exposure even before it is launched. Also, it makes for great PR. ● Building a strong customer base – Participants of a successful crowdfunding project oftentimes turn to loyal customers after the business is launched. Cons: ● Crowdfunding does not prove very effective for companies needing large capital. It works best if you require $100,000 or less. ● Requires a lot of marketing – For a campaign to be a success, it takes a lot of marketing to get the campaign in front of a lot of audience, and this marketing can often times be very expensive. ● Your idea can be stolen – Without proper protection of your idea via patent or copyright, your idea can be stolen in the process of crowdfunding. ● If failed, project can damage your brand reputation. Read on for further funding options such as venture capital and angel investment.
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