Money is essential in business, especially at the start. Although it would be ideal for startups to fund their development with their own money, the reality is that most small businesses simply don’t have the capital themselves to invest in growth.
As a result of this, startups typically need to turn to funding to help get their product or idea off the ground, and stay there. Read more to discover the 5 main reasons why funding is important for startups.
Money is essential in business, especially at the start. Although it would be ideal for startups to fund their development with their own money, the reality is that most small businesses simply don’t have the capital to invest in growth.
As a result of this, startups typically need to turn to funding to help get their product or idea off the ground, and stay there.
Funding Is Important For Startups Because:
- It allows your small business to grow and scale
- It can help develop your business idea
- You can market your business
- It allows you to get additional value from your investors
- It helps attract future investors
1. It Allows Your Small Business To Grow & Scale
Once your startup is off the ground, you need to keep it there. But unfortunately, the average survival rate for a startup is just 10%, meaning a whopping 90% of all startups fail before they grow. This statistic alone shows just how important early funding is, because a great idea and a strong will to succeed is simply not enough to survive in today’s economy.
Startup survival requires constant improvement from your business and you need to keep up with changing trends and keep your business in the forefront of your consumers’ minds. Having the person-power to do this costs money, and so does advertising your business (but we’ll touch on this in the next points).
To put it into perspective, Apple, Google, and Amazon all started as small startups and grew into business giants thanks to funding. So if you’re an entrepreneur who’s looking to grow and scale, funding is pretty essential.
The average survival rate for a startup is just 10%, meaning a whopping 90% of all startups fail before they grow.
2. It Can Help Develop Your Business Idea
Startup funding can be used to develop a business idea or a product. This begins with a series of idea sessions to narrow your startup idea. At this point, you’ll need to conduct market research to understand public opinion. Once you’ve validated or discarded your ideas, that’s when you’ll start to need startup funding.
You’ll begin to develop your validated startup idea and start to test it against the current market. The characteristics of your startup will determine how much funding is necessary for this stage. For example, if your startup puts out a physical product, you’ll have to spend a decent amount of money on developing a prototype that can be used to test out the product.
3. You Can Market Your Business
Once you have your business plan, you need to make your startup known. A strong marketing campaign can be the difference between a failed startup and a successful one.
The times are long gone when people relied on magazines, brochures and newspapers to market their products and services. Nowadays, almost everything happens online and start ups rely on digital marketing as an essential tool for growing their business and promoting their particular product or service.
This can be done via social media advertising, SEO and paid advertising, just to name a few. But effective marketing requires expertise and time, so you’ll likely have to employ your own head of marketing, or go through a marketing agency.
Whatever you choose, it won’t be cheap, which is where funding can help.
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A strong marketing campaign can be the difference between a failed startup and a successful one.
4. It Allows You To Get Additional Value From Your Investors
The first reason to contact investors is, of course, to get funding. But investors can offer more than just money.
They can help you get deals with other companies with which they have connections and help you build your network. After all, your success in the market is in their interest as well.
5. It Helps Attract Future Investors
If you get funds for your startup business, it increases your visibility and captivates the attention of the market. This way it is easier for you to achieve your goals by intriguing potential future investors and customers.
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Startup funding can be used to develop a business idea or a product.
How Can Startups Get Funding?
Getting funding is no “piece of cake”. However, startup companies today have several options to get the funding they need. Venture capital, angel investing, or crowdfunding as some of the relatively new opportunities. These options do however usually come with a number of disadvantages, such as losing percentages of equity and complete control of your business.
That being said, these aren’t the only options for entrepreneurs. Funding support is also available through startup accelerator programs, like our Tramshed Tech Start Up Academy.
Tramshed Tech is a startup ecosystem and the best place to start and grow your business because we understand the challenges entrepreneurs face.
One of the many business support schemes we run is the Startup Academy - Tramshed Tech’s flagship incubation programme supported by Google for startups. The 12-week programme has provided a structure for entrepreneurs and early stage business owners to start and grow their business.
Our accelerator program concludes with an investor event, where each company will have the opportunity to pitch to investors. The most innovative startup will be awarded £10,000 in equity-free cash directly from 'Google for Startups' during the pitch event.
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