Launching a startup takes guts, determination, hard work, inventiveness, out-of-the-box thinking and a little persistence. It also requires a great idea to begin with, a solid business plan and of course, funds to actually start it. While you can work on the rest of the startup ‘must-haves’ as you go, the funds to start it are a little trickier to come by. It’s pretty simple – without money, you can’t start your business.
You can develop ideas all you want, but without the money to back them, the chances of any of those ideas turning into reality is zero to none. Thankfully, there are a lot of ways to raise funds for a business – but each with its pros and cons. If you are a budding entrepreneur with a fantastic idea but no funds, here are a few ways you can raise that much needed capital.
You might be rolling your eyes and thinking “no kidding,” but just think about it for a moment. Starting a business in the digital landscape is probably easier than it’s ever been, and generally speaking, it’s cheaper too. Not convinced? Then consider that according to Small Business Trends, “The vast majority of startup funds (82 percent) came from the entrepreneur himself or herself, or family and friends.” Self funding (also known as bootstrapping) allows you to retain control of your business by avoiding the comon equity for funding exchange. And it offers you obvious disadvantage of saving time - time that would otherwise be needed to save.
If raising funds yourself is just not an option for you, you could explore the crowdfunding option. Crowdfunding, a concept which stemmed from crowdsourcing, is an immensely popular form of raising funds for entrepreneurs today. If you took this route, you would publish a detailed description of your business on a platform such as Kickstarter including the goals of the business, future financial strategies for turning a profit, your target audience, the amount of funding you need and the reasons you need the money. Then anyone would be able to contribute money towards your enterprise. Generally, those giving money make pledges online in exchange for special rewards.
Venture capitalists are professional groups that look specifically for startups to fund. They often have a lot of money available to offer to startups and plenty of resources to help your business succeed. But, there are some downsides to this option. One is that they generally look for larger opportunities that appear more stable. Another is that you have to be flexible with your business and sometimes give up more control. This is a good option if you are looking for a guidance and support, and are prepared to compromise.
Angel investors are similar to venture capitalists except they are much smaller operations – often only one person. Many will demand a large portion of your business, and 49 percent ownership is not unheard of. Despite this, angel investors are one of the most popular funding options for serious entrepreneurs as they allow founders to retain control of their company and receive mentorship where it's needed. Even if your startup fails to get the nod from a venture capitalist, it might still attract the attention of an angel investor.
Banks are an obvious place to go looking for money, and even though you won’t get the benefits offered by venture capitalists and angel investors, a small business loan has it’s advantages: you retain full ownership and control of your business. The challenge here is to prove that you will be able to make repayments. A bank will want to see how every rand will be spent and will expect to see a cashflow plan. And even if you have all your ducks in a row, they might still consider your enterprise to be too risky if you're a first time business owner. Only those with proven business models need apply.
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