Startup Seed Money: Finding It Is Half the Battle


Without a true understanding of how to fund a business, it may not even be possible to think about creating one. Today’s entrepreneurs are financing their startup companies in incredibly innovative ways, landing around $70,000 – the average cost of starting a company – to lay the groundwork for their latest and greatest ideas. Of course, knowing how to bring in seed money isn’t the only thing you need to keep a business afloat: 30 percent of new startups will last around three years, 50 percent will make it for only five years, and 69 percent will manage to stay afloat for seven years.

Even in the U.S., where corporations rule the land, small businesses generate about $7.8 trillion in annual revenue. An incredible 80 percent of new jobs are offered by small startup companies, which make up 98.2 percent of all U.S. firms and employ 42.7 million people.

Interestingly, startup failure has much to do with seed money – 46 percent of failures stem from incompetence and lack of funding. In other words, bad planning and organization can tank a company before it really gets off the ground. Each startup requires around $80,000 a year to stay afloat.

How do entrepreneurs finance their dream companies? First, they strip their personal finances down to the bare minimum, using whatever resources are at their fingertips to launch a business. They access money from personal savings accounts, home-equity loans, and credit cards. Many entrepreneurs get their start with a very small budget.

Although there are greater risks involved, many entrepreneurs also look to government grants for seed money. There are 11 federal agencies that dish out startup funding each year. However, these grants are given on the basis of accountability; many ask that entrepreneurs show their progress and operate according to deadlines. Those who do not achieve the progress they set out to achieve may be forced to pay a penalty.

Small business innovation research grants and small business technology transfer grants are intended to support market research in the early stages of a startup company and require a concise business plan. For those able to meet their goals, however, grants are an excellent way to fund a company, as they do not need to be paid back.


7 Innovative Ways to Finance a Startup Business
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