5 Eye-opening Tips on How to Raise Funds for Startups During a Recession

The recession has hit everyone – and that means it’s hit startups as well. As the number of venture capital (VC) deals and angel investors have dwindled, startups need to find alternative ways of getting funding in order to survive.

No matter how great your idea is or how viable your company is, if you don’t have cash in the bank it’s going to be difficult for you to raise funds from outside investors.

In order to raise funds for startups, even if they are willing, banks might require that you have enough capital reserves before they will finance your startup.

This article will help you figure out the best ways of raising funds for your startup during this recessionary period without having to depend on VC investment or selling equity to get it.

1. Jumpstart your fundraising efforts with a crowdfunding campaign

You’re probably hearing a lot of talks about crowdfunding right now. After all, it’s a simple and straightforward way to raise capital without giving away equity or depending on venture capitalists.

Crowdfunding, according to Wikipedia, is “the practice of funding a project or venture by raising money from a large number of people, typically via the internet.” Crowdfunding has been used for for-profit entrepreneurial ventures such as developing hardware, software, and a game and social ventures or even a cause. It indeed provides a more inclusive way of funding entrepreneurial ideas.

And, while there are plenty of crowdfunding sites out there, such as Kickstarter and Indiegogo there’s also a lot of confusion out there. So, it’s important to put together a successful crowdfunding campaign that can bring in the funds you need to keep your company going. It also makes sense to engage with the community and pledge to some other projects prior to launching your idea.

There are a few things you should do to make sure your campaign is a success. First, ensure that you have a solid marketing plan in place to drive potential investors to your campaign. Second, make sure your campaign is on the right crowdfunding site. Third, make sure you give your investors value.

2. Consider Equity Crowdfunding to Raise Capital

Equity crowdfunding sites are attractive because they allow investors to participate in the company’s success by sharing in the profits of the investment.

Equity crowdfunding, according to Wikipedia, is “the online offering of private company securities to a group of people for investment and therefore it is a part of the capital markets. Because equity crowdfunding involves investment into a commercial enterprise, it is often subject to securities and financial regulation.”

If you can get a large number of small investors to invest a large amount of money, it can give your campaign a lot of credibility. You may also be able to find a good deal on equity crowdfunding sites.

This is an attractive option for startups looking to raise funds as they can access a large number of investors who are looking to invest in startups. These equity-based funding options can help startups get liquidity quickly, enabling them to expand their businesses more quickly and hire more people more quickly.

The only downside to this is that actual money is invested into the company. This means that if the company fails, the investors lose their money.

There are a few things you should do to make sure your campaign is a success. First, ensure that you have a solid marketing plan in place to drive potential investors to your campaign. Second, make sure your campaign is on the right crowdfunding site. Third, make sure you give your investors value.

3. Talk to Mentors with Startup Experience in a Recession

If you’re looking for someone with startup experience in a recession, why not talk to some of the mentors who have been on the sidelines? These mentors have ideally startup experience in a recessionary period and might have better advice than the general public on what’s happening in the world of investments.

And, if they’re interested in helping out startups, they might be willing to offer some advice on how to get funding within their network. An experienced mentor might also be able to provide some tips on how to raise funds when the venture capital market has slowed down.

This can be helpful, as such mentors might have connections to angels and VC firms that can help you get your funding done.

There are a few things you should do to make sure your collaboration with mentors will become a success. First, ensure that you have made an extensive yet quick search for a suitable mentor that can help you during a recession.

Second, make clear objectives and goals for mentorship sessions jointly with the mentor. Third, keep a close contact with the mentor and openly discuss issues even after the recession.

4. Hire Freelancers to Save Time and Effort

If you need to delegate some responsibilities, you can always hire freelancers to do the job for you. A lot of business owners find hiring freelancers as a viable option to save time and effort.

If you don’t have the time or skills to do the technical and/or some non-technical aspects of your business, you can always hire freelancers to do the job for you. Freelancers are great enablers in the early stage of your startup to build a website, write content, code, prepare a prototype, etc. Freelancers are very cost efficient and suitable for a recessionary period for startups.

The only downside is that such freelancers have low commitment to the growth and success of your startup.

There are a few things you should do to make sure your freelance experience is a success. First, ensure that you find freelancers via reputable platforms such as Upwork, Fiverr and TopTal.

Second, make sure you are on the same page with the freelancer in terms of deliverables and deadlines. Third, make sure you maintain a good communication with freelancers until their job is done.

5. Approach Banks for Debt Funding

Banks are lending institutions that are primarily geared towards providing loans to businesses or individuals based on the strength of their financial position and the payment terms of the loan.

They offer a range of banking services from commercial lending to investment banking. If you have a strong business plan and are willing to pay a high interest rate for credit, you might be able to get a bank loan.

Bank loans are available even during a recession.

There are a few things you should do to make sure your debt funding is a success. First, ensure that you have a solid business plan in place to attract analysts in a bank. It is advisable to have meetings to discuss your business plan before submission.

Second, look into the interest rate and see if you are able to pay back installments on time. Third, make sure you have the documents and guarantor in place in case it is needed.

Conclusion

As the saying goes, the best time to plant a tree is twenty years ago, the second best time is now, and the worst time is tomorrow.

This means that the best time to raise funds for your startup is now even if there is a recession hitting the economy. You need to get creative and look outside traditional channels in order to get funding, and you should do everything you can to raise as much money as you need to keep the business afloat.

The trick is to keep your campaign (or business plan) simple, focused, and compelling, while making sure you’re on the right fundraising platform. With careful planning and execution, you can raise a lot of money, and be well on your way to success.