From an idea to execution, a lot of factors are taken into consideration such as forming a team, geographical conditions, demographics, competitors, target audience & of course investment.
Most often, founders face difficulty in acquiring the funds required to establish a proper organisation. Managing employee salaries, office space, advertising, marketing, meeting customers’ demands, utilising growth opportunities and scope for development is highly impossible to handle without funds.
While there are different options to gain funds or raise capital, people prefer their own funds or money from relatives & friends to reduce the debt or equity.
Apart from family, friends, or self-investment; to raise capital from a 3rd party you will have to follow certain steps or rather create a solid image of your firm to present before an investor.
- Business Plan :
Nothing works without a concrete business plan. What should a business plan consist? briefly explain to the reader what your company is and why do you think it will be successful. Give a company description, stating mission and vision statement, employee details, etc., Analyse the niche market, talk about your competitors, what are the services you offer or your product list, management strategies, raise a funding request, try to add an elevator pitch, give them an insight into future projects and financial projections for at least next 5 years.
- Once the business plan is ready, try visiting a local bank that can help with a loan. The second best alternative being seeking funds from family or relatives.
- Approach Venture Capitalists :
A Venture capitalist is generally a private investor to companies who can probably deliver high growth potential in exchange for a stake. They risk investing because they can earn a huge return on their investments if the company gets successful.
- Angel Investors :
Angel investors unlike VCs also provide an option to convert investment for convertible debt. Though they can take an equity share in the start-up, debt could also be considered. Often these angel investors are entrepreneurs themselves or former business people. Another advantage of having an angel investor could be their expertise in the niche or business as a whole. Their management skills could be of great help in the initial stages.
- Crowdfunding Platforms :
Online resources serve the best purpose. While Kickstarter is a great platform, few other alternatives could be AngelList, CircleUp, Crowdfunder, fundable, etc. If you can manage to promote your project efficiently then money generation wouldn’t be a problem, there could also be chances of receiving more than the goal you set which could help in further growth and development of the company.
- Look for a potential partner :
It’s always beneficial to have a partner while taking decisions on behalf of the organisation. You might not be right always or you might want advice or a 2nd person point of view. During the initial stages, if you can manage to bring in a partner – savings could help and they could reduce your liability.
- Know your expenses :
The most difficult yet challenging phase in a start-up is during its initial stages. With savings, you could unknowingly spend on office spaces, furniture, or high-priced services. Instead, keep a check on your expenses, try working from home or use rented spaces, use effective yet budget-friendly materials, try a barter system – offer services or products in return for products or services.
Setting up a business is definitely the most exciting and thrilling experience, but you also need to understand it comes with a hefty price. Have a concrete business plan, the right approach, an amazing product and you are through! Good luck.