The 6 domains of the Entrepreneurship Ecosystem: Part Four — FINANCE
Last week we focused on Human Capital. Today we’ll delve into segment #4, FINANCE
While finance can mean many things to many people, here we mean the accessibility of money. Many times you don’t need funding, what you need is customers.
Funding can happen in different ways. Throughout our global experience we see entrepreneurs seeking funding, and we also see funders looking for good entrepreneurial ideas. There is always a healthy discussion to challenge what entrepreneurs think or what funder’s think. Funding can come in the form of micro loans, from angel investors, friends & family, venture capitalist, private equity, and of course, IPO.
Many times the best funding comes from your customers. In today’s world, crowd funding can be a tool as some countries or states might allow certain forms of it. Crowd funding can raise funds from your customers in multiple ways. One is cash in exchanged for a product or service, another would be cash as a donation to get started, and third cash for equity in your company. Remember to check local, state, and federal laws.
The assumption that you have access or will have access to money gives entrepreneurs the courage to take the risk to move forward. You don’t want to wait for funding to happen to take the first step to getting the business moving. Always ask for enough (but not too much) money for your Runway. Think of the airport — there is a limit to the length the runway should be — not too short, not too long, but you must maintain it. Maybe you need XX, but can’t handle the payments in the end.
BEFORE YOU GO
- Know who to ask for funding before you ask
- Know what industries or types of business the funders fund, and how much they generally offer
- Know your ways of paying back any money you receive
Faris Alami is Founder and CEO of International Strategic Management, Inc. (ISM). He works internationally, presenting Exploring Entrepreneurship Workshops and other entrepreneurial ecosystem — related ventures.