Summer is drawing to a close and, if you’re like me, you’re starting to focus on what’s left to achieve by the end of the year.
For some of you, it’s time to get serious about your finances and raise funds so you can really get your business off the ground.
July was all about Money Matters. To round off the topic of finance I have a guest post for you on some extra things to consider before you look externally for funding.
how to cleverly raise funds for your startup
Do you have that one great idea that you want to produce because you believe it can change the world? If so, then building a startup is the initial step to do it. However, there are many stages that you need to undergo before creating your own startup, like generating enough funding to operate.
Raising capital is one of the first challenges startups face and this is where 90% of them fail. It’s important to develop strategies that will attract funding through angel investors, venture capitalists, and even attending conferences.
However, it’s easier said than done, as finding the right source of capital is far more complicated than just receiving a cheque. You might also want to avoid Forbes’ list of common mistakes in raising startup capital to get you on the right foot.
In this post, we have highlighted steps that you can follow as a guide to help you in acquiring your startup funding and kickstart your business agenda. Read on to find out more about it below.
reel in professional investors
Here’s a fact: the chances of getting venture capital for a seed stage startup is very low, about 1 in 4,000 to be exact. Bill Gates even called its success rate as ‘pathetic’ with its double standards that criticise many development efforts for not doing enough. So, it’s not surprising that many budding entrepreneurs try their best to look for investors. But, how do you efficiently and effectively find professional investors?
First, locate nearby investors. These people want to invest in companies that are within ‘their radar’. So focus your efforts on investors that are near your business or your region.
Second, identify your investor’s strategy. Find investors that adhere to your business specifics (funding needed, business models, etc.).
Lastly, once you’ve found the right investors, convince them how successful your idea can be. Dr. Hakan Ener cited ways to present your proposal including:
- Highlight the expected financial and operational results
- Discuss in detail how you will spend the money
- Think ‘lean’ and only ask for funding to cover the next phase of development
- Contact audience members individually to thank them afterwards
- Never expect a quick ‘Yes’ or ‘No’
Bootstrap utilises unused opportunities that are already in your business by managing your finances better to achieve your goal. Because you are the one financing the growth, it has become a great way for entrepreneurs to finance their own startups without the help of others.
How to effectively bootstrap your business?
- Hold fixed costs to a minimum (delay capital purchases, share office services and equipment, negotiate fees and terms with providers and suppliers).
- Treat variable costs as if you’re spending your own money (seek trade credit terms with suppliers, hire interns, use teleconferencing to save thousands on business travel expense).
- Obtain financing by requesting customers write a letter of credit, which you can use to suppliers as security.
The most profitable way to foster your business’ cash flow is by starting each production order off on the right track to avoid wasting time, material, effort, and money.
Although it might take a bit longer, investing is another effective ways to raise money for starting a business. By growing your own wealth, it help initiate your dream business even without seeking funding assistance from investors or VCs.
Different investment opportunities promise financial-freedom if executed strategically, such as stocks, bonds, mutual funds, currency pair, etc. The stock market is the initial go-to for many new investors, as it offers them high profits while allowing them to maintain or sell the asset easily.
However, it’s not easy making money out of stocks, especially since the market has been volatile in the last few years. As a result, many investors are diversifying their portfolios with other profitable short-term assets, such as foreign exchange or forex.
FXCM recommends trading forex instead of stocks as it offers more investment benefits for new investors. You get to transact in a 24-hour market, which offers you more market exposure to raise your investments. In addition, the market insight page cited that “Investors will find it far easier to combine this kind of trading with part- or full-time work,” as there’s no specific time that you need to trade forex unlike in stocks.
The most important you will need to consider is to know your investment personality first (limit for risk, goals) so you can maximise the time you spend on the market. You don’t want to waste your time investing in stocks for the long-term when your projected launch of your startup is within the year? So, remember to invest wisely.
what comes next?
While these guidelines may give you an insight into how to raise money to start your dream business, it doesn’t guarantee success. Every game is different and every player reacts differently in the field. Of course, your perseverance, dedication, and creativity in gaining capital, play big roles in this process.
If you’re considering raising funds for your startup, leave a comment below and let me know. I’m about to release a service just for you!