Brilliant ideas solving everyday problems can make any person very rich very fast. One of the most appealing characteristics of entrepreneurship is the opportunity to become millionaires and billionaires. However, not everything is this easy. One of the first hurdles any startup faces is the issue of raising seed funding for the company in order to better develop the product. While a few entrepreneurs try to self fund their company, that may not be a viable option for everyone.
Today, let’s take a look at some ways to raise funds for startups.
Master Business Plan
One of the main components an investor will consider is not just the viability of your product but your overall business plan. A good business plan includes contingency plans, alternative sources, detailed market research, product specifications, production, marketing and distribution strategies among other things. In order to get investors to trust your idea and company, chalk out a business plan that demonstrates a measurable strategy to accomplish your goals and objectives. Include your five year and ten year plan for your company. It shows that you are in it for the long run and won’t flake in the middle. A master business plan works multiple ways. It can be used to get investors and even consider alternative sources.
Crowdfunding
One of the newer ways for startups to raise funds has been through crowdfunding. Using a legitimate crowdfunding platform, entrepreneurs can put up a detailed description of the product, the goals of the business, what are the plans to make a profit and how much funds they require. Investors and other interested people can then give money if they like the idea. Crowdfunding, in simpler terms, is similar to taking a loan, donation, contribution or investment from more than one person at the same time. Crowdfunding also helps in generating interest in the product and may also attract venture capital investment down the line. Some of the most popular crowdfunding platforms are Kickstarter, Fundlined, GoFundMe and Onevest.
Angel Investors
Angel Investors are individual investors with surplus cash and a lot of interest in innovations and good ideas. A lot of Angel investors are also interested in mentoring startups and offer their services along with their money. Tech giants like Google and Yahoo along with ecommerce giant Alibaba started off with Angel investors. In exchange for their investments sometimes angel investors also look for an equity stake in the company. Famous TV show Shark Tank is a good example. Angel investors such as Mark Cuban, Lori Greiner and Kevin O’Leary among others review entrepreneur and their products investing in those who show promise in return for equity or profits. However, angel investors invest lesser amounts when compared to a venture capitalist.
Venture Capital firms
In a booming startup ecosystem like India, international venture capital firms such as SoftBank, Alibaba, Naspers and others are always on the lookout for the next Apple or Flipkart. These firms are professionally managed funds who invest in companies that have huge potential. While they place big bets on startups and business in exchange for an equity stake, they generally exit the company when there is an IPO or acquisition. The downside to venture funding is that these companies are more keen on recovering their investments.
Networking
The most effective means to get funding is by meeting the right people and creating a network. Networking is especially essential for entrepreneurs and founders who don’t have have a proven track record and are not famous. Referrals mean a lot in the startup industry and knowing the right person can get you an invite into the most elite networks.
While meeting with potential investors, remember to keep the pitch, simple, short and to the point. Don’t make it about the numbers, but make it a story with a happy ending. Once investors like the initial pitch, then involve the numbers, the contingency plans and all other essentials.
What’s your startup funding story? Write to us at [email protected] or leave us a comment below. If you have any tips for all aspiring entrepreneurs, we are waiting to hear from you!
