RAISING FUND FOR YOUR BUSINESS

                                                    

                                          

One of the most common questions I get from entrepreneurs is how to go about raising funds for a new venture. They often have an idea they love, and maybe a prototype, but no idea how much money they need to raise, where to find the funds or how to even prepare for “the ask.” Here are my tips:

• Pitch your needs to friends and family. As a general rule, professional investors will expect that you already have commitments from family and friends to show your credibility. If your friends and family don’t believe in you, don’t expect outsiders to jump in. This is the primary source of non-personal funds for very early stage startups.

• Join a startup incubator or accelerator. These organizations are very popular these days and are often associated with major universities, community development organizations and even large companies. Most provide free resources to startups, including office facilities and consulting, and many provide seed funding.

• Trade equity or services for startup help. This is most often called bartering your skills or something you have for something you need.

• Start a crowdfunding campaign online. This newest source of funding, where anyone can participate, is exemplified by online sites such as Kickstarter and IndieGoGo. Here people make online pledges to your startup during a campaign, to pre-buy the product for later delivery, give donations or qualify for a reward, such as a T-shirt.

• Negotiate an advance from a strategic partner or customer. Find a major customer, or a complementary business, who sees such value in your idea that they are willing to give you an advance on royalty payments to complete your development.

• Solicit venture capital investors. These are professional investors who invest institutional money in qualified startups, usually with a proven business model that’s ready to scale. They typically look for big opportunities, needing a couple of million dollars or more, with a proven team.

• Apply to local angel investor groups. Most metropolitan areas have groups of local high-net-worth individuals interested in supporting startups and willing to invest up to a million dollars or more for qualified startups.

• Seek a bank loan or line of credit. In general, this won’t happen for a new startup unless you have a good credit history or existing assets that you are willing to put at risk for collateral.
• Fund your startup yourself. These days, the costs to start a business are at an all-time low, and more than 90 percent of startups are self-funded (also called bootstrapping). It may take a bit longer to save money before you start and grow organically, but the advantage is that you don’t have to give up any equity or control. Your business is yours alone.

#Rhett

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