5 Types of Investments that will help you fund your SMEs
Gathering enough funds to support your business is one of the hardest tasks to achieve, especially when you are not a big corporate; almost like having a winning idea. Below I have complied a list of 5 types of investments you should consider.
Personal Investment
You might think “Really? If I had enough money, I wouldn’t need investors!”. This is true, but financially supporting your own SME has many advantages. You have total control of your business. Future investors, partners and employees will look up to you as a committed entrepreneur. You’re putting money where your mouth is. However, how can you save enough money to invest in your start-up?
Save your day job
When you start a new project, the temptation to neglect everything else so that you can completely focus on it is very strong. My advice is: don’t do it. Especially at the beginning, your day job can be a funding resource and, let’s not forget, a safety net if your project fails. Once your new project requires more time and commitment, you might still be able to switch to more flexible jobs (e.g. Uber driver). So, work hard and save money.
Be parsimonious
To put money aside and being careful with expenses is the second logical step to invest in your start-up. You might be already mindful of how you spend your cash, but there are always some cuts that can be made to save a few pounds. Do you really need Spotify Premium? Or Netflix? I know that it can be hard, and these might seems small amounts, but it all adds up very quickly. Make a list of your expenses and decide what your priorities are.
FFF Investment
If you are not familiar with the FFF acronym, it stands for Family, Friends and Fools. I know, asking your relatives and friends for money to fund your business is not fun. The whole process of talking to your parents to ask them for help can make you feel like you’re 15 again, and you’re asking for your pocket money. And, maybe, you won’t receive a “small loan of $1 million” by your father as Trump had, but every penny matters.
It doesn’t have to be a grant. You can repay them by involving them in the project, or making them minority shareholders.
Public Investments
The UK government offers many investments programs for small and medium enterprises. Currently, there are several different loans and schemes that you can join. You can benefit from clearly defined terms and conditions, and have access to resources such as a network of mentors. Moreover, if your start-up operates in an innovative field, you could get access to grants from programs like Innovate UK or Horizons 2020.
Private Investments
Private investors are always looking for SMEs with long-term growth potential. From Angel funding to Venture Capitals, sophisticated private investors search the market to find companies that need financial support. They want to diversify their portfolio and eventually gain profit from the growth of your business. This search for opportunities to fund has in itself become a new market in recent years (see Aspect Ventures, who raised 181$ to invest in SMEs).
However, this type of backing can have major downsides. In exchange for financial support, you have to give away part of the equity and potentially some amount of control over your business (e.g. by granting voting rights on the board of directors).
Crowdfunding
One of the latest and most common practices to find investments is crowdfunding. Websites like Kickstarter, Indiegogo and more recently Crowdcube or Seedrs, can be the ideal platform for your start-up, especially if you are B2C product or service. Here, your ability as a storyteller can make the difference. You have to create compelling videos and stories about your vision to convince people that your idea is worthy of their money.
Our Event on #Fundraising
On our Strillobyte twitter channel we host a monthly #GoodTechChat around technology and more. This month, the topic will be #Fundraising.
On 7th March, from 8 p.m. to 9 p.m., join us to discuss tips and ideas about how to access funding, and to network with professionals involved in the #Fundraising sector. You could meet your future investors, so save the date!
Final Question
Which of the types of investments we mentioned do you think is the more effective?
Each type of investment has its pros and cons, depending on the stage that your business is at. Choose your strategy wisely, and do not forget that money is just one of the pillars that will support your dream. Great ideas and businesses need great teams to support growth. Surround yourself with innovative and creative people that excel at what you lack.
Marco Strillozzi (Founder of Strillobyte)
