One of the most commonly talked-about the hurdles of starting a new business is raising capital. Startups require sufficient money for equipment, staff, offices, and product development amongst other business-related resources. Having a good fundraising plan can mean the difference between an idea that stays on paper only, and one that comes to fruition. Here are a few fundraising fundamentals that can help you source the right capital needed for your idea.
1. Know Your Capital Goals Like the Back of Your Hand
You should know exactly how much money you need for every aspect of your business, and your business plan should state this accordingly. There’s no room for vague projections based on hunches and “guestimates.” Investors want to know how each penny will be spent to help them ascertain how soon they can recoup their funds. Make sure that your financial projections are clear and feasible.
2. Create the Right Expectations
Startups typically use a phased approach to attaining investment capital. Rarely do they acquire all of their venture funds in one fell swoop. It takes time to reach out to investors and sell them on your idea. It’s common for new startups to go through various rounds of capital procurement. Be prepared for this.
3. Start at Home
Don’t be afraid to ask the people in your inner circle to assist you on your journey-you’d be surprised by how many of them may be looking for a way to invest their savings. Before applying for small business loans with banks and credit unions, consider running your business idea by your family members, friends, and colleagues to see who may be willing to chip in on its funding. If you do, treat them as serious investors and be sure to draw up the necessary paperwork to avoid possible issues later.
4. Try Crowdfunding
Crowdfunding platforms are continuing to raise millions of investment funds for new startups. The great thing is that they offer something for everybody. Where traditional bank and institutional loan providers may have been more favorable to non-creative businesses, crowdfunding welcomes innovation and creative ventures with open arms. For example, Patreon and ArtistShare both provide platforms for fans of creative content providers to support their favorite projects via online pledges. Check out platforms like Indiegogo and Kickstarter for your investment needs.
5. Tap the Angels
Consider angel investors for your startup venture. Scout out angel investors online or at industry networking events. Rub shoulders with industry leaders and influencers to help spread the word of your venture and garner investment interest. Angel investors offer more leniency than small business and venture capitalist loan providers because they’re independent (i.e., wealthy individuals with money to spend how they please) and they can also offer you other types of assistance through their contacts. After all, if you win, they win.
Lastly, remember that raising capital for your new business isn’t an overnight process. It takes time to procure suitable investors who may be interested in your idea. Take the time to explore all of your investment options before committing to any one lender.
What is a useful tip you have used to raise capital?