5 Ways To Raise Capital For Your Startup
It is no surprise how individuals, especially youngsters today, are encompassed with constructive and credible proposals and ideas. Some of which tend to be so effective, environmentally friendly and beneficial to society that just might potentially be the answer most of us were in search of. Bearing in mind the current economic status it is an unfortunate, bitter reality to acknowledge how most entrepreneurs are unable to reach their benchmark or take the initial steps into setting up a business due to a lack of a sustainable financial funding stream.
You may base the position of your business on luck or the ideology behind your start-up. But, the truth lies somewhere far from the two. Starting up a business usually requires a great deal of money like unsecured business loans, which, according to business terminology, is referred to as capital. Capital investment is the core of a business and is the money that you initially employ or invest in your start-up. This major investment is often sponsored by your financial ability, and your marketing skills which to be assisted by collecting market data (for information about the importance of accurate data check the blog at https://techbuddys.co/role-of-big-data-in-digital-marketing-services-for-small-business/. The first few years of the business are all about you retrieving your capital investment rather than hoping for a return on it (profit). According to a study, most businesses are not able to make it past the first few years of start-up and are ultimately forced to close down. This is because they are not able to withstand market pressure and compete with businesses that are cost-effective and have settled well into the industry. However, with the right methods involved, any entrepreneur can come through. This is why we’ve listed down some ways that could potentially help you raise capital for your business.
1. Loans
A common and most referred to option is funding the business through bank loans. Even though technology has advanced greatly, entrepreneurs usually find themselves going back to primary options in terms of funding. Applying for a loan gives you an edge in keeping control of the business. There are several policies and terms given by a bank if you wish to apply for a business loan, but they all differ and vary from one another. No matter how unique your idea might sound, a bank would always need to know the credibility of the business in the long run. Mainly to see if the revenue earned could afford the monthly payments to the bank. A good credit score and strong annual revenue could lead you a good deal with the bank. However, be sure to go through all the terms and look out for the best interest rates.
2. Approach potential investors (Networking
)Research and look around for potential investors who might have previously invested in a similar start-up like yours. It’s always best to list down a few influential investors rather than aiming for one. Bear in mind you will most likely face rejection, it won’t be easy, but it’s not impossible either.Socialize at events and build connections as you go. Ask your friends and family if they know any influential people around or within their contacts. Get them to connect you to such kind of people that might be able to mentor you and place you in the exact direction you need to go in. There’s no such thing as too many contacts. They might just come in handy for your business at some point.
3. Crowdfunding
Crowdfunding is an excellent way to gather funds for your business. As per the nature of your business, you may choose from rewards or equity-based crowdfunding. Projects and start-ups with unique and innovative, artistic ideas have a greater chance at this sort of funding. This option contains a lower risk as people can see the product beforehand, and also gets funds to finance the product. This often results in pre-bookings. If attractive enough to the public eye, you might not go unnoticed by investors too. You also have the edge of receiving feedback from the early adopters of your prototypes. Many entrepreneurs opt for crowdfunding to maintain control of the business and avoid censorship.
4. Bootstrapping
Bootstrapping is also referred to as self-funding. This is one of the safest options for entrepreneurs. First-timers often have trouble landing themselves an investment deal. This is why most professional entrepreneurs prefer using their sources of financial funding. Making use of your savings or selling out your assets does not require you to bear the burden of debt as you would with a loan, or even have you worried about giving out shares to your investors, which will have an impact on the baseline. Bootstrapping is also a way of showing investors how serious you are about the start-up with the risk you’ve taken. It portrays your dedication and hard work you might have employed in the business. Bootstrapping is the most effective and best way for you to keep control of your business.
5. Angel investors
Angel investors are renowned individuals with an annual income of more than $200 000 or a net worth exceeding $1 million. Though they tend to be sole investors but often team up with several other fellow angel investors. Angel investors can lead you to a good deal for you and your start-up. However, you need to be extremely well prepared before presenting your business idea. Angel investors often lookout for the most unique and credible business start-ups. You would need to enthusiastically put up a solid pitch and some valid, promising data points to gain their attention. If your idea is approved, angel investors often strike deals with the entrepreneur for a stake in their business after assessing the potential it may have. They may invest individually or may even team up with other angel investors based on the figures you put up. Though it may be tricky, you can always look around for such investors around you, and you may be lucky enough to land yourself a great deal.
Conclusion
Monetary funds for a business can be quite a task, but with the right research and after assessing the disposition of your business you might just be able to find out about a financial funding stream for your start-up. It’s always best to go over the pros and cons of each option available before making a decision. Good luck!