8 Founder tips for startup financing

Without sufficient capital, the best business idea is usually very difficult to implement. We reveal 8 possible ways founders can get the funds they need to get off the ground.

founder financing

No matter how successful the business idea – if the right startup financing and thus the necessary capital is lacking, the company will not succeed in being founded or growing after a successful startup. There is now a wide range of different financing instruments for founders and young companies. But what are the concrete possibilities?

1. Bootstrapping

When bootstrapping (amer.-the start-up is financed entirely from the founder's own funds. The company is figuratively pulling itself by its own laces into profitability. This type of financing offers of course the most independence, but is only applicable for a few business models in practice.

2. Development loans

Development banks such as kfw have the task of promoting economic development. This also includes support for startups and young entrepreneurs – both in the founding and in the further financing of company growth: special programs such as the ERP founder loan from the kfw are part of this.

What can the ERP start-up loan be used for??

Founders can receive up to 25 million euros as a promotional loan from the kfw's ERP start-up loan program to start, take over or consolidate a company. With this means the following can be financed for example:

Plant and machinery, IT and software

Construction costs and furnishings

Operating and business equipment

Material and merchandise inventories

Marketing and consulting costs

3. Start-up grants

In addition to grants from public development banks, which must be repaid like a loan, other public institutions at the state, federal or EU level also award non-repayable grants for start-ups. However, these are usually linked to certain conditions.

4. Founder competitions

As a founder, you are used to selling your idea in the best possible way. Founder and pitch competitions offer a good opportunity to get to know investors or business angels and to convince them of the company's plan. Of course, entrepreneurs shouldn't focus exclusively on this opportunity, but having some presence in the founding and startup scene in the region can also be valuable when seeking funding.

5. Startup financing through loans

Difficult for young companies to obtain, but financing through traditional loans is also possible. However, this form of financing often fails because of the collateral and equity that must be provided. However, founders and young companies should not be too quick to jump at the chance of a bank loan: a loan may also be possible for founders and younger companies.

6. Venture capital

Venture capital is not a loan, but a form of company participation by a venture capital provider. A distinction is made between seed stage, early stage and later stage financing. The investor sometimes runs a high risk of loss and therefore chooses possible companies to support very carefully.

7. Business angels

Compared to the venture capitalist, the business angel usually supports the founder not only with capital, but also with his expertise, know-how and network. On the one hand, there are business angel networks, but there are also individuals who make contact with young companies, for example through founder and pitch competitions.

8. Crowdfunding

Crowd financing such as crowdfunding, crowdlending or crowdinvesting is usually obtained by companies via online platforms that specialize in brokering to private or commercial users. The crowd finances a project – the funds do not come from a bank or another financial provider, but mostly from individuals who invest money in this way. The consideration can consist of interest or a percentage or profit share in the company.

In recent years, startups in particular have turned to this form of financing when they are denied funding by other means: by creating a strong emotional bond with potential investors, companies in the startup phase can convince investors and get off the ground even with just an idea. In addition, success on a crowd platform can help provide an initial indication of how the product will be received in the marketplace.

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