“How to raise capital”is the biggest
concern for every start-up enterprise. Every start-up requires sizeble
investment before it starts to deliver profits that in turn are utilized for
the growth of business. You need funds at every step of your business
Check out 4 most reliable sources
you can raise capital for your startup for:
Though still in its infancy, crowd
funding is fast emerging as an effective technique of raising
money for start-up enterprises. The
concept of crowd funding is evident from its name that refers to the process of
funding a project by the personal funds of the people involved.
The process of crowd funding begins
from a business proposal. You propose an idea to people who you think would
have an interest in your business idea and would be ready to invest in it. The
contributors or funders have the flexibility to choose the amount or
percentage. It is usually an online process where investors get small amounts
of equity in lieu of the funds they contribute to the enterprise.
Crowd funding has gained popularity
in the United Stated after it got direct mention in Jumpstart Our Business
Startups (JOBS) Act which is aimed at “encouraging funding small businesses in
the United States by easing different securities regulations”.
Fundable, Indiegogo and Kickstarter
are among the best crowd funding websites for small businesses.
Angel Investing is the process of
getting a business funded from Angel Investors who are the affluent individuals
eager to invest in start-up business. These investments are usually in lieu of
ownership equity or convertible debt. For those unfamiliar with the term, a
convertible debt is a bond with a maturity term of over 10 years, which can be
converted into shares of the issuing company or cash value.
Google, Twitter, Facebook, and Skype
are some renowned names which have received funds from angel investors. In
addition to the funds that angel investing provides, the entrepreneur also gets
valuable advice and connections that helps in business development. Some
prominent angel investing networks include Tech Coast Angels, Golden Seeds and
Start-up entrepreneurs can go for
venture capital to fund their business needs. Venture capitalists are
interested in investing in early-stage
businesses that have high potential for return
on investment. Typically such business ventures are accompanied by a fair
amount of risk but the VCs are prepared for that. Venture capitalists usually
hold equity in the business they invest in.
They choose to invest in the
companies that have a novel technology and higher growth prospects which
include Software, IT and Biotechnology. Venture capital is a great option of fund
raising for relatively new ventures that
find it difficult to raise funds in public market. It also supports the
establishments that could not secure a bank role.
Bank loan is among the most common
ways in which new business entrepreneurs use to raise capital for their
business. Before approving the loan, the bank may demand a loan guarantee from
the Small Business Association (SBA) – a government body who guarantees up to
80% of the total loan value for the applicants who comply to all desired
As an alternative to SBA’s
guarantee, you can also offer some other form of security including your home
to seek loan approval from the bank.
In addition to above mentioned ways,
seeking help from family and friends is traditional but very effective way to
raise funds for your start-up business. This way, you can also avoid the hefty
interest rate and the tension that above sources of funds provide. It gets
problematic at times as personal relationships are at stake. You can put any
lending agreement in writing with clearly mentioned terms and conditions even
if it is a “friendly” loan.
For more insight into fund raising for start-up
business, you can join a CEO peer group or CEO associations where you can gain
more information on how you can get capital for business development.