Simple things to keep in mind when raising capital
May 6, 2014
OK this is not as easy as you think. Some people turn to family and friends. Where possible try and avoid that … it can save you immense future pain! Also, young people find it hard dealing with the grey suits at the bank and quite frankly, I understand! Raising capital is hard at the best times but in a market where access is limited you need to be creative. Remember, yelling down the phone at your agent saying "show me the money!" works only for a select few!
So, two tips:
1- investigate crowd funding. More than $2 billion has been raised through platforms such as Kickstarter, Indigogo and Personalize. Research the Crowd!
2 – align with movements like EntreHub and search for an investor match. Often an Angel Investor can be found where they understand you and you understand them.
Once you have completed your initial business plan you should have a fair idea of what it will cost to run your business on a day to day, week to week and year to year basis. In doing so you will know exactly what you need to fund it.
The first important thing to be clear about is never underestimate how much you need to raise in terms of capital. Initially you may be able to convince yourself that you can run lean but the truth is as your business grows you will need to invest more to both sustain and manage growth.
Secondly, if you are unable to fund the business through your own means try and stay away from raising funds directly from friends and family. We all know the stories of family relationships and friendships going bad because the initial repayment expectation was not met.
Only ever raise money from friends and family if you are positive they will be repaid when you say they will be. A third option to consider is utilising crowd funding platforms. The global crowd funding market has grown 80% to a total of $2.67 billion of funds raised.
The challenge if you go down this path is ensuring you have a specific strategy you will employ to convince people to buy into your idea. This is where your business plan and social media engagement strategy can work hand in hand. The fourth option comes about through networking.
Organisations such as EntreHub and local chambers of commerce are great networks to meet what we call Angel Investors or, those people who share both your passion and ideas. In any event each of these channels may not raise the full amount you need to fund the initial stages of the business so you may want to consider all four at the same time with a percentage coming from each.
Finally there is the bank – but unless you have a pre-established track record of savings and assets, experience in running a business before or a workable relationship the answer will probably be a polite no. Be creative and not reliant.
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