Money is the bloodline of any business and a business needs to generate enough cash so that it can meet its expenses and have enough left to grow. Simply put, a business cannot do and won’t amount to much at all without the fuel called – ‘CAPITAL’.
At some point every entrepreneur finds himself asking the question “How do I raise capital for my business?” Raising capital can be a major challenge and could take a long time to secure but however, there are many options which could be considered to help yield the desired funds needed.
Here are seven ways you can raise capital for a start-up:
1. IDENTIFY YOUR NEEDS AND GET YOUR BUSINESS PLAN RIGHT
Every entrepreneurs dream is to see their business ideas grow and flourish but first off you’ll have to start by creating a detailed business plan. You need to know how much investments your business will need and why.
If you have identified a great opportunity and have a well-thought out plan and capital raising strategy you would have a greater chance of your goals being accomplished.
Knowing ones goals helps a person incorporate all the criteria that are needed to help focus a person’s efforts and increase the chances of achieving a dream.
2. LAUNCH A CROWDFUNDING CAMPAING
There are a number of crowdfunding success stories out there. It is a popular way to generate capital for startups. Crowdfunding is the use of small amounts of capital from large number of individuals to finance a new business venture. With this method, you can get funding from websites where investors can support your business no matter where they are.
This is how crowdfunding works- An entrepreneur will put up a detailed description of his business on a crowdfunding platform. He will mention the goals of the business, plans for making profit, how much funding he needs and for what reasons. Then consumers can read about the business and give money if they like the idea.
This method might attract venture-capital investment down the line for you if your business has a particularly successful campaign. Crowdfunding is a competitive place to earn, so your business has to be rock solid to gain the attention of average consumers.
If you get this right, it is likely to work well for you in the end. Some websites you could use for this method for raising capital are NaijaFund, CircleUp, MicroVenture, Fundanenterprise, Indiegogo Kickstarter and Elesaro.
3. APPLY FOR A GOVERNMENT OR BANK LOAN
Traditional financing remains the primary way small businesses could raise money. Depending on the country you are, it is possible to get a loan from government. This would happen if your business idea contributes to the growth of the country or develop a particular industry or area.
Funding from banks would involve the usual process of preparing any loan documents you will need to show ahead of time. Also, you would need to share your business plan and the evaluation details along with the project report for needs like tech devices, office furniture, machinery and the likes. In some cases your personal information may be checked as well.
4. ASK FROM FAMILY AND FRIENDS
Some entrepreneurs believe that most things should stay within the family, so a good alternative method to raising capital is lending from friends and family. One advantage here is that the conditions from family and friends will not be as rigid as that of banks and other financial institutions. In doing this one must demonstrate passion and due diligence by having a sound business plan and directive. Your friends and family would be proud of you when you succeed and be glad they helped invest in your business.
5. FIND AN ANGEL INVESTOR
Angel investors are individuals who provide capital for a business start-up, usually in exchange for ownership equity. They can also offer mentoring or advice alongside capital. It is a financing method that is more personal. They are a good source of capital for your business. You have to capture an angel investor’s attention with enthusiasm and promising data points about your company’s current situation and future potential.
Angel investors have helped to start up many companies like Google.
Knowing that angel investors can be a good source of capital for your business; you must have a solid business plan put together and a great pitch. The Jos Angel Network is a wonderful example.
6. RAISE CAPITAL BY WINNING CONTESTS
A number of universities, angel investor networks and other similar organizations run business plan contests. Often, there is a monetary prize involved for the winner. It encourages entrepreneurs with business ideas to push through with their businesses. In such competitions, you either have to build a product or prepare a business plan. For example Diamond Bank Plc annually organizes a BET contest and winners are given some grant to start or expand their business.
7. GET INVESTMENT FROM VENTURE CAPITALS
Venture capitals for a tech startup are one of the best ways to accelerate growth and gain industry guidance. They are professionally managed funds who invest in companies that have huge potential. They prefer to invest in slightly more matured companies than angel investors and sometimes want to have more of a say in managing the daily operations. Venture capitals generally come from well-off investors, investment banks, and other financial institutions. Examples of some Venture Capitals fully operational in Nigeria are Venture Platform, Greenhouse Capital, Growth Capital Fund and EchoVC Partners.
There are many options to building capital. You can always choose the one that best suites you and put it into practice. By being diligent, resourceful and persistent, you can raise the capital you need. Take your time to prepare, network, and create the perfect pitch and soon you’ll fulfill your dream of turning your start up into a huge functional business.