Start-up financing: The best options for start-up founders

Creating a startup is an exciting and challenging journey. While a great idea and passion are the foundation, the right funding is often the deciding factor for success.

After all, a successful start-up needs not only an innovative business idea, but also solid financing, with or without equity.

To convince potential investors, founders must meet certain requirements.

Around 80 percent of all newly founded start-ups fail within three years. The main causes include problems in the team, a lack of market demand and insufficient capital. 

Table of contents

• Requirements
• Bootstrapping
• Promotional loans
• Credits & Loans
• Crowdfunding
• Crowdinvesting
• Venture Capital
• Incubator
• Accelerator
• Business Angels
• Founder Scholarships
• Contests

The key requirements for successful financing

Before you start looking for investors for your start-up, there are crucial requirements that you should fulfill. A well-thought-out business plan, a solid financial plan and a convincing pitch deck are key to getting potential investors excited about your business idea.

Business plan

A detailed business plan is a must to communicate the startup's potential to investors.

The business plan includes:

• Market opportunities
• Target group
• Product or service
• Competition
• Growth strategy

Financial plan

A developed financial plan is essential to demonstrate the financial sustainability of the startup.

The financial plan includes:

• Sales forecasts
• Costs
• Investment requirements
• Break-even point

Investors want to see how the startup can achieve its financial goals and what return they can expect.

Pitch Deck

The pitch deck is a visual presentation that presents the most important information about the start-up in a compact and appealing way.

A pitch deck includes:

• Business idea
• Market
• Team
• Competitive advantage
• Sales forecasts
• Financial requirements

The pitch deck should be compelling and well designed to capture the interest of investors.

Bootstrapping: Using your own resources to achieve success

When it comes to funding a startup, there's one tried-and-true method that's often underrated: Bootstrapping. Bootstrapping involves founders using their personal savings, credit cards, or other available resources to get the business off the ground and keep it running.

It is a self-financing method where entrepreneurs use their own financial resources to cover initial costs and develop the business.

The advantage of bootstrapping is that founders retain full control of their company and do not have to incur debt or obligations to investors.

They can make decisions independently and are not dependent on investors to implement their business plans.

Bootstrapping is not suitable for every startup, especially if it requires high initial investment or rapid growth. However, it can be an attractive option for founders who want to implement their idea without depending on external investors and retain full control over their company.

Promotional loans as a springboard to success

Development loans offered by government organizations, state institutions or other funding programs can give startup founders the financial boost they need and help them successfully implement their business ideas.

Careful review of requirements and terms is important to find the right funding option. Applying for development loans requires a solid business plan, meeting application requirements and meeting deadlines.

Loans & Credits

Flexible financing options that help startups get the capital they need to grow and develop include loans & credits.

They provide financial support from banks, credit institutions and other partners.

Bank loans 

The traditional method of financing via bank loans is widely known. The usual loan amounts are between € 25,000 and € 300,000.

The main advantage is that the loan is repaid over a fixed period of time at a fixed interest rate and the bank does not receive any participation or say in the matter.

However, banks are also risk-averse for these reasons. As a rule, you only get a loan if your business model is already successful on the market.

For higher loan amounts, banks often require additional collateral such as guarantees or real estate.

Loan

A loan is one of the most popular financing options for startups. It is an arrangement where money is borrowed from a bank, credit institution or investor to start or expand the business.

The biggest advantage of a loan is that the start-up gets immediate access to a larger sum of money without having to give up shares in companies.

In addition, a loan allows the startup founder greater control over their business and flexibility to use the money according to their own needs.

However, it is important to be aware that a loan must be repaid, often with interest.

It is therefore advisable to carefully assess the financial viability of the start-up and prepare a detailed repayment plan before taking out a loan.

Crowdfunding - The power of the crowd

Crowdfunding has established itself as an innovative and popular financing method for start-ups. Here, the required capital is collected online by a large number of people.

Startup founders can use crowdfunding platforms to present their business idea and encourage potential investors, also known as backers, to contribute money to the project.

The advantage of crowdfunding is that it facilitates access to capital and increases the reach of the startup.

It allows founders to introduce their product or service to a wide audience while building a loyal community.

Furthermore, crowdfunding often comes with additional benefits, such as receiving valuable feedback and the ability to engage the target audience early on.

However, it is important to note that successful crowdfunding requires a solid marketing and communications strategy to capture the attention of potential supporters.

Crowdinvesting - The participation of the masses in start-up success

Here, a large number of people, also called investors, participate financially in a start-up and receive company shares or a share in future profits in return.

Crowdinvesting offers founders the opportunity to raise capital from a broad crowd without relying on a single source of investment.

The advantages of crowdinvesting are not only the financial support, but also the potential synergies and the network created by the investors.

In addition, crowdinvesting can accelerate the market launch of the product or service, as investors often also act as ambassadors for the start-up.

It should be noted, however, that crowdfunding requires a clear business strategy and a convincing business plan to gain the trust of investors.

Venture capital

Venture capital is one of the most prominent funding methods for startup founders looking for a strategic partnership and a substantial injection of capital.

In this method, specialized companies, also known as venture capital firms, invest in promising start-ups with high growth potential.

The great advantage of venture capital is that it provides founders not only with financial resources, but also with valuable know-how and contacts in the industry.

The venture capital firms are often experienced investors who recognize the potential of the start-up and can help it scale and expand. However, the founders usually walk away with a portion of the company's shares in the process, as the venture capital firm acquires a stake in the company in return.

Still, venture capital can be a transformative option for startup founders to accelerate growth and gain a foothold in the marketplace.

The key here is to find a suitable partner that fits the start-up's vision and long-term goals.

Incubator - A breeding ground for the growth of start-ups

Incubators are organizations or programs specifically designed to support and nurture startups in their early stages.

They provide not only financial support, but also valuable resources, mentoring and networking to accelerate the startup's growth.

An incubator often provides office space, infrastructure and access to professionals and industry experts. By participating in an incubator, startup founders can benefit from an immense wealth of experience and receive valuable feedback to improve their business idea.

In addition, an incubator opens up opportunities for founders to learn from other startups and exchange ideas with like-minded people.

It should be noted, however, that joining an incubator can be competitive and that often some ownership of the company must be surrendered.

That said, an incubator offers a unique opportunity for startup founders to grow in a supportive environment and leverage valuable resources to successfully move their business forward.

Accelerator

Accelerators are intensive and time-limited programs that aim to nurture startups and accelerate their growth in a short period of time.

They provide not only financial support, but also coaching, mentoring, access to investors and valuable resources.

By participating in an accelerator, start-up founders are given the opportunity to refine their business models, accelerate their product development and optimize their time-to-market.

The advantages of an accelerator lie in the intensive support and access to a broad network of experts and investors.

However, it is important to note that accelerators typically require a stake in the company and have high expectations for the startup's growth and success.

Still, an accelerator can be a valuable option for startup founders to experience accelerated development and make progress in a short period of time.

Business Angels - Wings for Start-up Success

Business angels are experienced entrepreneurs or wealthy individuals who invest their own capital in promising startups.

They not only provide financial support, but also bring valuable expertise, valuable networks, and valuable mentoring opportunities.

Business angels are often willing to take risks and invest in early stages of development if the start-up's potential is high. In return, they receive a stake in the company or an agreement on future profits.

The advantage of working with business angels is that they not only provide financial resources, but also act as strategic partners who support the start-up with their expertise and contacts.

A personal relationship with a business angel can be invaluable to startup founders, helping them overcome challenges and capitalize on opportunities.

Therefore, it is important to find a business angel that fits the vision and goals of the startup in order to build a successful partnership.

Founder scholarships

Founder grants are a promising funding method for startup founders who are just starting out and need financial support.

These scholarships are offered by government institutions, private organizations or universities and provide financial support to the founders to advance their business idea.

In addition to financial support, startup grants often provide access to mentoring programs, networking events, and training to help startup founders develop their knowledge and skills.

The advantage of start-up grants is that they give founders the opportunity to validate their idea and take the first steps without taking major financial risks.

However, it is important to note that start-up grants are often competitive and certain criteria must be met to be eligible.

Competitions - opportunities for start-up founders to achieve financial breakthrough

Competitions provide an exciting funding method for startup founders to not only gain financial support, but also gain valuable recognition and visibility in the industry.

In the startup world, there are numerous competitions organized by companies, organizations or investors that aim to promote innovative business ideas.

By participating in a competition, start-up founders have the chance to present their idea to a jury of experts and convince potential investors or sponsors.

In addition to potential prize money, competitions also offer valuable networking opportunities, feedback from experts, and the chance to connect with other promising startups.

It's important to research different competitions to make sure they fit the startup's industry and goals.

Conclusion 

Financing a startup is a complex process that requires extensive analysis, careful planning and smart decision making.

Not every start-up needs outside capital. This depends heavily on the founders, the business model, the industry and the desired growth ambitions.

When fresh money is needed, a good knowledge of one's financial situation is the first step. It is important to understand the company's cost structure in order to determine the actual financial requirements and select the financing option accordingly.

When choosing the right financing option, one should also consider the long-term impact on the company.

Bringing external investors on board always involves a loss of control. With bootstrapping, on the other hand, you retain full decision-making freedom.

In addition to capital, many investors, business angels and accelerators are also available with advice, tips and their network. How valuable this can be for one's own company must also be illuminated.

The choice of the right start-up financing should in any case be made with great care. The advantages and disadvantages of the individual forms of financing should be carefully evaluated.