Top three ways to fund your venture
Have a great idea. The plan in is place. The processes are outlined. The human and technical resources are acquired. The funding….now where do you get that from?
In the recent decade observed is a shift in avenues explored for earnings. We find lesser people enthusiastic about seeking jobs, and more wanting to create jobs, and rightly, what is better than being your own boss! And this trend is highly prevalent amongst the youngsters.
However, despite a brilliant idea and a solid execution plan, the common issue faces in setting up your own venture is fuelling it by funding. And when it comes to start up, the chances of you having enough funds to take it forward is slim.
So how do you fuel your new engine?
The first and obvious option. It needn’t be from your close friends and family, a good option is a bank. Nearly all local banks have a unit that supports SMEs and startups. Their conditions are somewhat lenient given the fact that you are trying to establish something. A bank will give your business funding with very clear conditions of interest rates and payment requirements. They will also often provide general resources for information, networking, and mentorship.
However, it takes a lot of paperwork and proof of the profitability of your business. Banks don’t like taking risks on startups that might not work, so they will also want to see a proven history of your sales and success before they consider funding you. Not only do they want to see a history of experience, they also want to see a clear business and fund allocation plan from your team.
An angel investor is an individual with private wealth who usually is enthusiastic about funding causes that solve a big problem in the world while also providing a return on their investment. An ‘angel’ will usually fund a startup in exchange for a percentage of equity in the business. They will essentially allow you to receive funding without having to pay back any interest as you would have to do with a traditional loan.
But no one is too good. In exchange for angel funding, you will also have to give up some control of your company. Because an angel will actually have a stake in your business, they will also have some decision-making power in terms of the direction of your startup. They have higher tolerance for risk and failure, but that also means they have higher standards. An angel could push your limits in terms of the diligence and efficiency of your team.
This typically provides an opportunity to go directly to your customers to raise awareness and money for your business. In addition, sometimes entrepreneurs use crowdfunding first, and once they have proven the market demand — go on to raise money through venture capital firms (at much better terms) for the next phase of their business. In many other funding models, you will need to allow investors helping you direct your business to maximize their return on investment. In crowdfunding, you can definitely listen to others and get advice, but you still keep creative control on your business. It’s important to say that crowdfunding takes work! You will have to tell a really great story, and make sure that you have a plan, outreach strategy and a great community around you to reach your funding goal and bring your idea to completion.