Starting your own business can be tough, especially when it comes to raising the funds. The secret lies in following a systematic approach. A lot of aspiring entrepreneurs and visionaries reach out to us on professional social media platforms asking us about the ways to raise money for their business.
So here I am today, spilling all the beans step by step for everyone. I hope it helps.
Different Stages Of A Startup's Lifecycle
For determining the process to raise funds, it is important to thoroughly understand the different stages of any startup. This plays a significant role in obtaining startup financing. So without any further ado, let us get started.
1. The Big Idea- Is It Worth It?
When we get a business idea, our emotions or excitement may refrain us from developing an objective perspective.
So what should be done?
Before initiating the process to raise investments, wait for some time and evaluate if it is worth it. There have been a lot of cases where the idea seems perfect initially but is far from reality. While introspecting you might find out some flaws or areas you need to work on.
During your research try to find answers to these questions-
- Is it worth it?
- What value does it have to offer to the world?
- Will it bring a progressive change?
- Who is the target audience?
2. Business Planning- Idea Is Not Everything!
The second stage involves understanding the fact that an idea is not the only key to entrepreneurial success. It is not easy to accept the fact that your idea is not enough, but it is the right approach. For the initial funding, it is necessary that you calculate the following-
- The money you need for a start
- Possible risks
- Regulatory requirements
- Potential profit
These pointers will help you to know exactly what your idea is worth. Once you find out the answers, you will be able to explain the same to the investors.
A business plan will allow you to document your success, creating a powerful foundation from a legal standpoint as well. Make sure to answer these question while you create one for yourself-
- What are anticipated income and expenses?
- What is the cost of my own time?
- What are the bottlenecks to be taken into account?
Double-check your calculations and plan and then ask a professional for a detailed evaluation. Move ahead only when you are sure of everything.
3. MVP- A Workable Version Of Your Business!
Startups often initiate their operations with a prototype or MVP. It is basically a part of the business that you can demonstrate in front of the investors. This will help them to comprehend the complete process.
If you don't have the technical expertise to create your own prototype, then you need to invest time and money for the same. You can hire a professional team for the development. Another way to go about it is to find yourself a technical co-founder as they would be able to proceed with the MVP development when the time comes.
How To Find Money For The Initial Stages?
Once we have our basics ready, it is time to find funds for the initial stages. Here are some ways to do the same.
Starting a new business is full of risks and far from easy. So if you have an amount saved, I recommend that you start with it. This will free you from outside influence and in case of failure, you will not be in debt. Having said that I do understand the need for getting more investors, but this can be done at other stages. Initially, it is important to start right and strong.
2. Bank Loans/ Credit Cards
Now let's answer another emerging question at this point; what should be done in case there are no savings?
No, the answer is not investors. Not yet!
There are two options for you now- bank loans and credit cards. But there are pros and cons for both. Let us consider major pointers before moving ahead.
Financing a new business with a credit card does not take long to get approved. So if you don't have enough savings and want to start quickly, then this is indeed the best option for you. But if you run behind on due payments, then it can be risky. The delay will not only damage your loan but also shoot up the interest rate. You could also end up carrying the loan for years. While bank loans require you to have a credit rating, taxed taxes, collateral, assets, etc.
How To Find Investors?
At this stage, you have a business plan that displays efficiency and prospects for development. With your Minimal Viable Product, you can draw more and more investors, and for its complete creation, you would need the required amount.
Here's a fact that is tough to digest-
There aren't many investors that want to invest at the initial stage of an idea!
My motive here is not to discourage you but to prepare you for any hurdle that might come your way. Don't worry, I will provide you with a solution.
If not everyone, you can still find the ones willing to invest.
- Be confident about the idea
- Have a clear business plan
Now let me introduce three ways by which you can get investors.
The growth of these platforms can be considered as significant acceleration of non-profit organizations. They can provide you a unique opportunity to implement ideas and deliver them to the target audience. Some of the examples of crowdfunding platforms include-
2. Business Angels
They are private investors with huge incomes who invest their own funds into the development of a startup in exchange for a share in the project. They majorly invest at an early stage when the idea has not been tested. Business angels are always willing to take on high risks and may or may not act independently.
3. Startup Accelerators & Incubators
These are two ways to develop business both strategically and financially.
Accelerator programs have a fixed time frame and their work begins with the application process. Individual companies with a group of mentors spend weeks or months building their business and terminating the problems along the way. Their goal is to start the business in a few months. Here are some popular accelerators-
- Y Combinator
One of our created applications scooped $750k in seed funding led by Y Combinator.
They initiate with the companies that are at an early stage without any set time frame. Idealab is a good example of an incubator. While some of them have an application process, others work with startups with their trusted partners.
That is all for now. In case you have any doubts, feel free to reach out or drop your comments below.