Entrepreneurship is a science, and it works well when you follow the specific steps. For every business one of the most important things is funds. You will require money to run your business, expand your business and day to day activities.
There are so many options and no option are right or wrong but we just need to pick best suitable options. This may vary depending upon stage of your startup.
So, let’s understand what the options are available for raising funds for your startup.
Put yourself in, fully, without stretching yourself to the breaking point. It is the first recourse of most startup founders to tap self-funding avenue without cutting corners in personal life. It is important to analyze the requirement of quantum, your ability to fund it before committing to writing a self-cheque for yourself.
Talk to members of the family, take guidance from the known circle of winners. Do your homework, know what it means to your immediate family. Don’t sell pipe dreams to yourself and your family. If your savings is enough to take your venture to the next level without compromising the quality of your family life, go ahead. The best part is, no legal documentation is needed. Best suited for first-time business owners and tiny startups.
Friends are like a safety net. They are accessible, empathetic, and tremendously confident of your capabilities. Tap them. Reach out with a passion for all your friends and acquaintances. Communication is the key. Talk, chat, share.
You may seek a low interest-bearing loan or interest-free loan from them. Again, the process of funding your need at this level would be devoid of any long winding legal formalities or documentation. And a relatively a very supportive source than an unknown agency.
As the name suggests, this is the place to go for guidance for startups. Not just funding, (and incidentally they do not fund by themselves) they provide the nourishment needed from all perspectives during the neonatal stage of the startups.
They are early stage growth enhancers and provide the much needed multi-dimensional support services starting from office space sharing to access to finance. The best place for a startup to hone up and learn the steps to find funders.
Several institutions cutting across domains have set up incubators to enhance the startup ecosystem in a healthy way. From the education sector like the Ahmedabad branch of Indian Institute of Management’s CII IIMA (in collaboration with the State government of Gujarat and Indian government) to Indian Angel Network’s IAN Incubator, there are several incubators for the startups to approach.
Though functioning on similar lines as Incubators, Accelerators have a more well-defined agenda and program structures. They typically offer short term supportive services with hands-on guidance from experts and mentors drawn from diverse fields of business, technology, and finance.
Reach out to the unknown. This involves a degree of ingenuity. It was called “Private Placement” in BC – Before Crowdfunding -era! It was a remarkable success when putting to test in the early 1990s. Make out a crisp business plan; target high net worth individuals who frequent elite clubs of your city, members of prestigious trade and business houses, stockbrokers (remember, their clients are regular investors in public shares).
Offer a reasonable and assured rate of returns. The added advantage you have with these folks is you are “identifiable”, unlike in the corporates they invest. It lends a sense of security to the investors. Rope in a legal guy to guide you with the required paperwork.
If you have a sexy idea and you’re great at social media, crowdfunding might be an option. When websites like Kickstarter and Indiegogo first started, there were a number of businesses that had great success pulling together funding through their reach. The downside? Lots of companies aim for crowdfunding, so you have to generate a lot of buzz to make it through the overall signal noise. It’s also very possible to overextend yourself and frustrate backers, which can lead to a great deal of animosity before your company is even really off the ground.
The Small Business Administration as well as other organizations sometimes offers grants to small businesses that are run by women, minorities, or veterans. If you fit into one of these categories, it’s worth speaking to your local SBA chapter, or Chamber of Commerce, to see if there’s local grant money that you may be able to apply for. The downside? Check carefully to make sure you won’t need to pay the money back, or agree to certain conditions down the road. Not all grants have stipulations, but it’s good to know what you’re agreeing to before you accept the funds.
Let’s face it; unless you have an incredible idea and a strong business history, you’re probably not going to make it onto Shark Tank. Many local COCs and SBAs have decided, however, to run local Shark Tank-style competitions. Since these are more locally-focused, often requiring that a business operates in a particular area in order to enter, they may be less competitive.
They are also a great way to practice your pitch for other investors. Generally, you won’t lose anything but a time for trying. And even if you’re not the number one choice, you may spread awareness of your business.
The downside? You could invest a lot of time into your business plan and investor presentation, but not be chosen for one of the prizes. That work will probably benefit your business, however, so it’s hard to really count this as a downside.
This is the suggestion no one likes. If you currently have a job that is meeting your expenses and letting you live a relatively comfortable lifestyle, don’t be in such a hurry to quit your job and follow your business dreams. Spend some time getting the business off the ground and building through the early, difficult phases with the solidity of your 9-5 job paying your bills.
This lets you build your business with fewer compromises, and lets you stay true to your vision without needing to give in to financial pressure. You can also get a great experience from your day job to help you run your company down the road.
The downside? It is possible that you’ll miss opportunities by focusing on your day job and running your company as a side business. You might also be unable to devote the necessary time and energy to really engage with the project and get it off the ground.
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