Having a big idea is the obvious first step in putting your plans into motion, but your passion is not going to fund your project. Funding a startup can depend on a mix of factors and you must consider how each of these factors will impact your business’s ability to raise, manage, and maintain capital not only at the beginning but throughout its lifespan as well. Capitol is the common denominator for success no matter if your business is just getting off the ground or ramping up rapidly. In addition to learning about the different ways to secure funding you should also invest time in learning about the importance of the strategy behind it.
Vary Your Investors
Determining where and from you who will get capitol in the form of investors can be challenging. Each style of investor will come with its own set of terms and expectations. The three most common investor categories are pre-investor, passive investor, and active investor, and the type of individual investor is varied within each of these categories. At the very beginning of your business, it can be tough to get outside financial commitments because you lack the hard evidence and proof that many investors require to commit their funds.
In this case, look to your own finances to see where adjustments can be made to allocate personal funds towards your startup. Simple in-home budget cuts may help, but likely will not produce the amount of cash needed to allocate towards a new venture. When applicable the option of selling your life insurance is one example of a way to use a significant chunk of your own money to fund your startup. You can review a guide on selling your life insurance policy and you can estimate the cash value of your policy in seconds to determine if this is a viable and sensical option.
Consider Your Future
Regardless of if this is your first, or one hundredth startup, it is necessary to understand that things will not go exactly according to plan. You must consider your businesses future, and the unexpected bumps in the road, as you explore options for startup funding. Selecting a source that is going to support hiccups and transitions that deviate from the original plan is essential.
As you think about the road to come, it is perfectly acceptable to think big and visualize greatness. The most successful startups in the world all had to come from nothing to get where they are today. As your valuation increases so will the interest of investors. Learning how and when to take risks regarding strategic attempts to grow will lend itself to also recognizing when to seek out investor cash.
Explore Debt Structures
At the very beginning of your startup, your options for raising capitol are arguably more limited than they will be as you gain momentum, and your business grows. Just because your business does not currently qualify for funding options like certain types of loans, or asset-based lines of credit, does not mean that it never will. It is a good idea to research the most reliable ways to fund a startup at the beginning, so that you understand what it will take to eventually qualify for opportunities that you currently do not.
Banks tend to have a structure that is more heavily focused on asset-oriented options while private funds provide more flexibility across the spectrum. Debt does not only apply to money owed though, also consider what your potential investors will want in the forms of equity or power in decision making in exchange for their investment. Consider if those non-monetary terms make sense for your business plan before your blindly accept them.
Perfect Your Pitch
In the infancy stages of your business, what you are pitching to investors is just a hope and a prayer. You have the faith in your idea because it is your creation and your passion, as a result you do not need to sell yourself on its potential. Potential investors are not that involved emotionally though, so it is your job to perfect your pitch to create that excitement and emotion within them. During the seed stage when you do not have tangible numbers and figures to present you must still have predictions and plans for growth that represent a sound investment opportunity.