Raising Startup Capital
In the world of business, the age old truth “It takes money to make money” is rarely proven false. In fact, there are many financial factors to consider when opening a business. Do you need office space? How about equipment? How many employees do you need before opening? How about an accountant? There are many, unavoidable aspects of being a business owner that require funds. But the good news is, you won’t necessarily need to cover all of these expenses through your personal savings account. There are many ways to raise startup capital.
There are many avenues an entrepreneur may explore to raise startup capital. For centuries people have been asking friends for funds to support their endeavors. Now, you can do that online. There are a multitude of crowdfunding sites at your disposal. Companies such as GoFundMe and Kickstarter provide webpages and to host your fundraising campaign, and tools to help you reach not only your friends, but strangers who may support your business, or even investment groups.
Crowdsourcing, however, is dependent upon a successful campaign. While it is as simple as signing up for an account, agreeing to let the host of your choice take a small percentage, and recording a video about your business, a campaign that hopes to reach its full potential requires quite a bit of investment. The internet is flooded with crowdsourced projects. If you want your video to rise to the top of the heap, you must produce “unicorn content.”
Unicorn content are your flyers, videos, ads, etc. that are expertly produced, and draw a high level of interest through minimal engagement. Unless you are a professional video editor yourself, have a background in graphic design, or majored in marketing, chances are this campaign in itself will require a good amount of start-up capital. If you already have a large social network that will support and share your content, primarily depending upon crowd-sourced funding can be a slow and aggravating process. However, many have successfully use these tools to massive success. Just be aware it will be more work then signing up and watching the donations come in.
Rather than crowdsourcing, an entrepreneur may visit an investor directly. Or an investment banking firm. If you live in a highly-populated area, there is a high chance there are many investment offices to which you may bring your pitch directly. You may choose to simply prepare your pitch and bring it in by hand; however, be aware that an unsolicited submission may very readily be discarded.
Instead, look for opportunities to build relationships with investors. Small-Business fairs or Investment Expos are opportunities to advertise your budding business to investors who are already looking to place their clients funds into booming new corporations.
Another way to build relationships is to connect through the investment group’s website or social media accounts. Take your time. Do your research. Look for groups with a history of investing in businesses that are similar to yours. You are more likely to receive an offer from investors who already have an interest in your field. Beware of conflicting interests, but be persistent in your pursuit of a partner who shares your interests.
Receiving funding from investors can be both time consuming and discouraging; however, for many its biggest detractor is the fact that an investor may seek shares of the company rather than a simple return on their investment. In fact, this is quite frequently the case. For those who need immediate startup capital, and do not want to dilute their shares, a loan is a valid option that should not be avoided for its negative stigma.
Many entrepreneurs fear immediately taking on debt. For many business, using a loan as startup capital is risky and unattractive. Considering most startups have little proof of product, a loan requires a lender willing to give money to an unproven corporation, but also, an entrepreneur must exhibit faith in the product or service they intend to provide. When one takes out a loan they are expressing belief in the future of their company. However, for that reason, it must be approached with caution. Funds that come from loans must be carefully budgeted.
If you choose to take a loan for your startup capital, be careful to make sure you plan for the interest rate offered. You must consider how long it will take to pay back the money borrowed, plus the interest accrued. Loans are a very common form of startup capital. But if you choose this route, account carefully.
Ultimately, there are a multitude of methods through which to raise startup capital. Choose the one that is best for the amount you need to raise, as well as the time span in which you need to raise the funds.