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Startup success is not only driven by the availability of capital but also depends largely on the quality of support they receive from backers. Fintech visionaries, such as Paul Graham—Co-founder of Y Combinator for alternatives to conventional funding models (banks)—– and Oleg Boyko – head of international private equity firm Finstar Financial Group—– support Fintech companies by being a strategic partner with years of industry expertise and insights that can be leaned on and leveraged for guidance in a complex and competitive marketplace to achieve long-term future success.
However, the survival of a startup in this highly competitive market, largely, depends on finding the right source of capital. In certain instances, banks can be a good option as they take more of a back seat approach. But a growing number of startups are turning to peer-to-peer lending and alternative means of funding, for a deeper level of support than just purely a cash injection. Let’s take a look at some of the options currently available for new business ventures.
Options for new business ventures
- Alternative business funding
- Peer-to-peer lending
- Government programs
Starting a new business on a constrained budget without investor capital is called bootstrapping, and it makes sense if you don’t want to spend months on investment pitch preparation and courting investors at networking events. In addition, with bootstrapping, you won’t have the stress and risk of having an investor that wants to meet regularly and discuss how, operationally, you can optimize your business. As a founder who is trying to stay innovative this pressure might be a lot to handle, thus many startups in Europe are going the self-funded route. The funds will usually come from savings accounts, friends and family, or equity from other team members. However, at some point investment capital is usually required to scale the business so, it is more a question of timing.
Alternative business funding
In this varied capital lending market, there are also alternative funding options available? Take for instance microfinance lenders, who in simple terms, provide an alternative to conventional banks, for small business owners that need loans. It could be that a serial entrepreneur is currently financially overstretched or has a poor credit rating due to other businesses operations.
A non-bank financial company (NBFC) is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency. It may be a good option as a capital bridge.
International investor Oleg Boyko believes in fintech’s potential to reach the 2.5 billion people globally that do not have access to banking services. Boyko intends to create next-generation financial intermediaries that works to serve the needs of individuals who aren’t well served by mainstream banks. Then there are combinators, like Paul Graham’s Y Combinator that offer seed funding for startups. Seed funding is the earliest stage of venture funding. It pays your expenses while you’re getting started. This could be a viable option for those who are simply not in a position, financially, to bootstrap, or …read more
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