Is this the first time you are planning to raise fund for your venture? Raising capital is a highly grueling task as you constantly have to identify your company’s strengths and weaknesses and assess the associated risk at each level. Finding fund however is not impossible and there are a variety of ways you can raise fund for your startup. Here I am giving you a few Tips for Raising Capital with the hope that these will make you a more confident person and help you choose a suitable startup funding campaign.
Firstly, there’s nothing like self-investment. If you have absolutely no personal savings, it’s OK but it really helps if you invest at least 25% to 50% from your personal savings, say, through your credit card or some other source. This gives significant credibility to your business and motivates other investors to pour money in your startup.
You can also raise money from your family and friends although it is not always the safest option as you run the risk of ruining your relationships. If you cannot repay as you promised, it might take them away from you forever. We all know how delicate these relationships are. Right? So, it is better not to take the risk if you have other options. However, if you are super-confident that there will be no such financial issues, you can definitely approach your family/friends for the capital.
Ok, have you tried crowd funding? Not a bad idea at all. It is the process of raising a small amount of money from a large number of people, usually done online. If everything falls in place, your crowd funding campaign can be a real success. Although there are fees associated with the process but there are also many benefits that you can get access to. Till now, over $2 billion has been raised through platforms like Indigogo, Kickstarter and others.
As your next option, you may think about taking bank loans which is, quite unfortunately, next to impossible. Banks and similar financial organizations do not prefer to invest in a startup, especially at a seed stage as the risk associated is huge.
Your next option can be venture capital. Yes, it is currently the most popular form of startup fund that entrepreneurs like you can go crazy about. But hold on, it’s not so easy. Finding the right venture capital firm, convincing the investors, sharing a percentage of your ownership in the company are some of the biggest considerations associated with venture capital funding.
Make sure you chase only those investors who are interested in your sector, your stage and have deep pockets, quite obviously. Venture capital brings with it a lot of other value added services like guidance and mentorship, contacts, exit facilities, etc. If you are successful in raising venture capital, you won’t have to think about chasing another investor, as in most cases, venture capitalists offer several rounds of financing. Their main objective is to earn huge profit after a certain period, say 3 to 8 years, so they make sure that your business run smoothly until you start generating revenues and make profit.
These are some of the basic things you must be aware of while raising capital for your venture. Simultaneously, keep expanding your network. Get in touch with as many people as you can as you never know when someday someone may forward to introduce you to a potential investor.
For more tips on capital raising, feel free to visit us at Merger Alpha http://mergeralpha.com/