How to Raise Capital for Your Startup Business
Starting a business is a difficult venture, especially if you have no money to spare. It can be quite expensive to register and license your business depending on where you live. Once that’s taken care of, you face development, advertising, and manufacturing expenses. To keep yourself afloat, you’re going to need to find somewhere to get that initial cash to finance your startup.
Attract Venture Capital
One of the best ways to get the money you need is through a venture capital firm. These firms are generally run by wealthy individuals that have an interest in startups. In exchange for equity and partial ownership of your business, they will give you the cash to finance your business. Venture firms will typically specialize in certain areas. Find a firm that specializes in your industry and set up an appointment to pitch your business. When you present your pitch, according to Canter Real Estate Group, you should make sure that you are well prepared. Be open and honest about your idea’s potential drawbacks. Venture capitalists are savvy investors and are quite wary of deals that sound too good to be true.
If you don’t want to hand over so much of your business to a single entity, another option is to sell shares. According to Josh Freeman, converting your business into sellable shares will give you additional flexibility. With your business split into shares, you can just as easily take money from a large investor as you do from a small investor. You can go public on the stock market, or you can sell to private investors. Selling privately is typically easier and quicker, but there are some limitations on what you are and are not allowed to do. It’s usually best to consult with a lawyer before selling any shares to make sure that you are not trading illegally.
If you want to get some capital without giving up any ownership, according to the UKCFA, a great way to do that is through crowdfunding websites. There are several examples of these sites like Kickstarter, Indiegogo, GoFundMe, and Crowdfunder. On these sites you can offer exclusive deals on preorders. You can use the money from these presales to finance your initial business costs. If your crowdfunding is successful, you can start your business with guaranteed customers. If your crowdfunding isn’t successful, that may be a good sign that your product isn’t going to be a hit.
As you look for ways to make ends meet, remember that money isn’t the most important factor in a business’s success. There have been hundreds of businesses that have received large amounts of capital and then gone out of business. The most important factor is how well you stay in tune to the needs of your customers.
Read this next: Where Should You Spend Your Budget as a Young Startup?
Are you fund raising for your startup? Our Seed Accelerator Program can help.