You’ve probably just opened a new business and are looking for ways to secure its future. Of course, hiring the right talent, having an actionable business plan, and investing in marketing techniques will help. However, one thing that you shouldn’t compromise on is your financial stability.
Every early-stage startup founder must understand their finances, have cash reserves, and diversify their investments to succeed. Industry leaders consider it a critical component to securing the stability and prosperity of your business. One of the reasons small businesses fail in the first few years is the lack of capital funding and other financial hurdles.
However, with proper tactics to secure your seed-stage startup’s finances, you can ensure a smooth financial future. For instance, you can partner with venture capitalists or use your personal assets for funding.
Do you want to secure your early-stage startup’s financial future? Then, in this blog, we will discuss three such ways that will help you keep your new business afloat.
#1. Investing in an Identity Verification Solution
One thing that many seed-stage startup founders overlook is the prevalence of online fraud in their industry. In general, fraudsters and cybercriminals target finance and e-commerce companies, but they can harm other industries too. Seed-stage startups are the most vulnerable to such fraudulent activities.
On average, 51% of businesses experienced fraud between 2020 and 2022. Moreover, companies lose approximately 5% of their total revenue to fraudulent activities and cyber breaches.
Your early-stage company is more likely to fall into the trap of illegal activities, including identity theft and money laundering. For example, if you mistakenly hire scammers, they can steal the identities of your executives, send fake emails, or make wire transfers to offshore accounts. Due to that, your new company might be under scrutiny from the federal authorities.
That’s why you must invest in an identity verification (IDV) solution. It features benefits like enhanced smart capture, real-time processing, face-to-face verification, adverse media screening, and more.
Collaborating with an IDV provider can help you spot undetected fraudulent activities, forgeries, and risks. They can also help you elevate the customer experience.
For example, Microsoft used IDV solutions to empower their business’s ability to verify personal information. As a result, the management team ensured greater control over their company’s assets. Microsoft stated that these tools can help companies digitally onboard employees and securely access resources.
One World Bank blog states that all startups should have tools to verify digital IDs. It is a crucial step towards fighting identity fraud and increasing your business’s transparency. An IDV solution can also promote secure online transactions between your business, clients, and employees.
According to AU10TIX, a full-service IDV solution can have fully automated and advanced technology that continuously detects potential fraud. Along with identity verification services, your early-stage startup can benefit from biometric screenings. Prime Trust, a FinTech API company, used AU10TIX’s IDV tools to safeguard itself from synthetic fraud in digital transactions.
#2. Partnering With Investors
The next thing seed-stage startup founders should focus on is securing funding from the right resources. For instance, you can reach out to venture capitalists and investors if your company is running low on funds.
These organizations or individuals will invest in your startup in exchange for an ownership stake. Usually, seed or early-stage small businesses use this tactic when they need large funds to grow their brand.
In the second quarter of 2023, there was a total investment of USD 31.8 billion in early-stage startups. During this stage, your startup can secure funding between a few hundred thousand dollars and a few million, depending on its valuation.
These investors not only bring funding but also industry expertise and connections. Consider it a valuable partnership or mentorship to help reach new heights as a small business. You can find such investors on LinkedIn or through crowdfunding and being more involved in the industry.
But before you can secure funds, you need to have a clear plan. For example, your seed-stage startup needs a solid business plan demonstrating your company’s potential for success. While pitching your startup, you must present a clear vision and goal to portray your leadership skills.
Remember to be well-prepared and confident while pitching your business plan. The investors should get a clear understanding of your company’s financial turmoil and your plans for client acquisition and revenue growth.
Other than that, consider the terms of investment, ownership structure, and repayment options. These will help you review the investment agreement and ensure the investor’s regulations align with your business goals.
#3. Utilizing Your Assets
Utilizing personal assets and savings can help solidify your seed-stage startup’s financial future. Many entrepreneurs consider it a common method to secure funding when their small businesses are in trouble.
On average, 66.3% of new founders started their business with personal savings. This funding came from their retirement funds, savings accounts, or investment portfolios.
Many consider it an attractive way of funding as it allows startup founders to remain in control of their businesses. Moreover, self-funding ensures you avoid obligations and costs associated with traditional lending options.
Even then, it’s crucial to be aware of the risks involved. Usually, using personal assets and savings to fund your seed-stage business can put your financial security at risk. That means if your startup fails, you won’t have a way to recover those lost funds. As a result, you’d have to file for bankruptcy.
The only way to minimize this risk is by having a solid business plan. That way, you can perfectly outline your goals, financial projections, and strategies. Furthermore, you should ensure that you have substantial resources to sustain the future cash flow requirements.
Consider the tax implications of using personal assets and collaborate with professionals before investing. Doing so will help minimize risks and increase your early-stage startup’s success rate.
The Bottom Line
You can safeguard your early-stage startup’s financial future by using the tips shared. However, it’s best to have a clear understanding of your organization’s current financial situation before anything. That way, you can determine whether you’d prefer partnering with investors or using your personal assets.
Either way, your new startup should collaborate with an IDV provider to stay safe from potential cybercrime and fraud. Now, you are ready to secure your business’s future by ensuring financial stability and safety.