6 Ways To Increase Investment in Your Startup
KEYWORD PHRASES – raise funds for a startup
You have a million-dollar business idea and you want to bring it out in the market? And, you are also willing to put in sweat equity to bring that idea to fruition? Great, what next?
Starting a business is not rocket science, but is no less daunting than that. The first thing that you need to establish a business is money or capital. The stage of raising funds for a startup poses great challenges, but is crucial enough to decide the success or failure of your venture. Right from attracting investors to managing the capital successfully, raising seed money can be daunting if you lack knowledge and fail to strategise. Several aspiring entrepreneurs typically give up on their idea at this stage or fail to establish their business because of the lack of capital.
Good financial planning and strategising is the key to attract investment for your startup. If you are an aspiring entrepreneur and looking for tips to enhance investment, here is a brief guide to raise funds for a startup.
Tap into Your Own Finances
Investment in your startup plan must start with you. If you do not have enough money to back you, why would anyone lend you? Lacking the money to even partially fund your business plan equals low credibility. No one, including your friends and relatives, will be willing to take chances with their money. Showing credibility is vital to secure investment for your startup. Tap into your savings to fund your business idea. Knowledgeable investors want to see financial confidence and credibility when funding business ideas. They will favour enthusiasts with more than just sweat equity.
Have the Right Team in Place
A powerful management team adds value to a business and attracts investors easily. Having sufficient knowledge in the field is not enough to qualify as a strong founding team. Along with knowledge and experience, the right balance of skills is vital to propel businesses to successful heights. Working with someone with a similar thinking process may seem great but can be counterproductive in the long run. This is because the team would lack valuable foundation skills. For example, for a real estate business, a founding team of one with expertise in real estate and the other with knowledge about finance and investments would be fruitful. A team with complementary skills shows strong success rate and will easily attract investors.
Go for Strategic Investors
Funding from strategic investors is the best thing your business could get. These investors have interests that align with your business and seek more than just financial returns from your venture. They can be in the form of companies as well as individuals. There are several established companies that seek to expand in new areas or solve their own problems and can bring in investments to profitable ideas that serve as a solution to their demands. Large corporations like Google, IBM, Intel, Microsoft, promote startups through early and later stage investments. Such investors can also end up being potential clients, promoters, partners, and acquirers in the long run.
Individual strategic investors or angel investor is another option. These individuals not only provide funds but also bring along their valuable skills and advice to your business. While some take an active part in the business, others may act as sleeping partners. Make sure you are willing to part with a good amount of stake when considering strategic investors.
Consider Clients for Raising Investment
There’s nothing great than finding a client who finds enough value in your idea to contribute to the seed money. Client investment can come in different forms – they could be early adopters and fund you for a prototype development, they could make a direct investment, or they may share a part of their business operations with you to minimise risk. Ask yourself who are your potential clients and how would they benefit from your product or service? The answer will help you frame a pitch and gain their interest to invest in your company. If you secure the interest of some big names, then you may have the added credibility to your advantage.
The only limited thing in your hand is finances when you are starting out. Bootstrapping or using every penny wisely is the most cost-effective way to enhance your financial resources. Controlling expenses or utilising resources optimally could be beneficial in not only enhancing investment but also in attracting potential investors. Investors would be interested in a team who knows the value of their money and handles it accordingly. Keep fixed costs to the minimum and carefully handle variable expenses. Ideas for bootstrapping include using shared office spaces and equipment, being a part of business incubators, negotiating fees and terms with service providers and suppliers, using technology like to save expenses like travel, hiring fresh graduates, etc.
Crowdfunding is gaining wide popularity amongst aspiring entrepreneurs. Unlike other investment options, crowdfunding allows you to gain small amounts of money from the ordinary public. Plus, you need not necessarily provide them dividends as returns. Crowdfunding can be done in various ways. While equity fundraising is one, you can raise donation-based money or provide investors with early access to your products and services in return for their investment. This option is great for individual inventors, entrepreneurs, and those seeking to make a difference in the world through their venture. This investment option is also great for ventures aligned with social issues as such issues pique the interest of the public and can attract investment.
There’s no one way to raise funds for a startup. A good amount of thought and a strong financial and business plan will ensure you gracefully attract investment and drive your venture toward success.
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