Entrepreneurs
DIY
Angel Investors
Crowdfunding
This is the most preferred option: raising the money yourself means that you remain in control of your company by avoiding the whole ‘equity for funding’ exchange. Instead of going big with funding from the outset, aim to go small by looking to family and friends first. You can even allocate a small percentage of authorised shares to several individual investors, each of whom puts in a small amount of money to help get the business off the ground.
These are usually high net worth individuals or businesses themselves who are willing to invest in start-ups. They can be a really great source of funding, as there is usually less red tape involved to get them to write a check. Many of them are entrepreneurs themselves so they can also offer advice, and their benefit is 100% tied to the success of the business.
Crowdfunding is a relatively new and non-traditional way to raise capital for your start-up. Essentially it involves pitching your business or idea on a public platform, and asking many people for small donations as an investment, in exchange for specialist (usually once-off) rewards. This may be a great platform to generate presales as well. Typically B2B and more complex ideas struggle with crowdfunding, but it’s all down to the way you present it and the story you tell.
Venture Capital (VC) Venture Capitalists are professional groups specifically on the lookout for start-ups to fund – and therefore usually have the money and resources to help your business, especially if it’s an opportunity that represents a larger, more stable investment. Benefits include advice, mentorship and support. VC firms usually take longer to make decisive investment decisions, and you may need to be willing to give up some equity and therefore some control of your company.
Bank or Institutional Loans You might not get the benefits and advice that comes with angel investors or VCs, but small business loans do have their advantages: you get to retain full ownership and control of your business (provided you make repayments). You’ll need a business model to apply, as banks/institutions will expect to see how every cent is spent, along with a financial and cash flow plan. If you’re willing to do the work to mitigate the risk, a bank loan might be right for you.
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