There are only a few things in life that are more exciting than having a great startup idea. The rush of a startup idea is like nothing else, but an idea is just that without proper capital. There is more than one way to raise capital, and the first one starts with you. If you are not willing to invest in yourself, how can you expect others to?
Several startup entrepreneurs invest almost all their savings into their small business and that helps attract investors because, it is clear that you are fully committed to the idea. But the real problem arises when you have hardly any capital to invest. At majority of times, it is best to wait out the launch until you at least have something to offer. Getting that first round of investment is often the most difficult.
Before exploring the tips to ensure successful raise, remember that investors have a different outlook than entrepreneurs. Entrepreneurs aim to scale up a company, control it and gain profit, whereas the investors want to get the most return on an investment with as little risk as possible. One additional consideration before you embark on a fundraising is how you plan to eventually return the capital to your shareholders including yourself. This will serve you well as you consider raising capital for your business.
Here are some of the best ways to raise capital:
- Self-Funding: There is no getting around this. Only in very rare cases a startup occurs with a founder not investing any of his or her own money. Even though it does not have to be a fortune, the total sum is dependent on the startup and the unique circumstances. This does not necessarily mean selling your house or car, but if you are serious about your business plan, you need to invest your own money first. So it is important to start saving early.
- Banks and traditional lenders: Small business loans from traditional financial institutions like banks can offer surprisingly great terms and interest rates. This is your best bet for getting capital and can help optimize your credit score at the same time. Additionally, securing this loan helps other investors see that you are a real company. Moreover, rates have fallen to as low as 2.8% recently and with some banks such as Lloyds are letting people max out their loans. One can even leverage Lloyds live share price to understand the position of the company is the market and approach accordingly.
- Crowdfunding: If for whatever reason you do not qualify for a loan, there are still loads of crowdfunding options available. Carry out extensive research and select a trustworthy company with great success rate. Although this is not the traditional approach, it works wonders for many people.
- Family and Friends: This is one that most entrepreneurs are reluctant of. If you present your pitch professionally and treat them like a real investor, it could save you an awkward conversation later.
- Investment Companies and Angel Investors: This is the best of the best and the most difficult to secure. To get them interested in your idea, it all about employing your PR and marketing charm.
The bottom line is that once you have drained all the personal resources, your business will likely need to raise capital. But it is not easy approaching an investor. You must be well prepared and show serious commitment and value.
Founder Dinis Guarda
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