Entrepreneurs come up with ideas to start their business. Starting the company with an idea or product can seem to be exciting. But, growing it can seem like a daunting task. Raising funds for the business or startup is an essential step in establishing it or its growth. It can be frustrating for an entrepreneur for raising funds.
Many entrepreneurs get confused and have no idea whom to approach and where to start fundraising their business. Startups require adequate funding for their growth. Here are five tips on raising funds for business/startups –
1. Choose Bootstrapping
Bootstrapping means starting a company with personal savings. A bootstrap implies the launch of a business by an entrepreneur with little or no outside cash. In bootstrapping, an entrepreneur decides to start his own business by calling upon his own family and friends for obtaining funds.
An entrepreneur can raise funds by pitching the idea or proof of business concept to trusted family and friends for starting the business. If they are convinced and agree to pool in funds, then an entrepreneur can raise funds internally. An entrepreneur can first consider bootstrap and then try internal crowdfunding.
2. Build a Business Plan
An entrepreneur needs to develop a solid business plan to obtain the desired funding. The development of a business plan involves how, what, when, where and why aspects of the business functioning. An entrepreneur must prepare a blueprint with the concrete details in place for building his business. It is better to cover every part of the company in the plan.
An entrepreneur must think about the weekly or monthly running of the business needs with factual revenue projection and expenses. Any investor will have an interest and ask about the plans of the company or startup before investing. A proper and concrete business plan will attract investors to invest in it.
3. Create a Strong Market
Investors invest in companies and startups that are innovative and have the potential to grow. An entrepreneur who launches his product or services in the market has a better chance of obtaining investments. When a product or service or proof of concept is launched in the market, entrepreneurs can test it with prospective clients.
With feedback and improvements from the clients, an entrepreneur can create a good market for the product. Most of the time, investors are interested in investing in products out in the market and credibility. It is better to bootstrap or borrow equity, get the product or proof of concept market access and raise funds for its growth and expansion.
4. Get your Timing Right
An entrepreneur needs to position his business in the right way to obtain funds and decide when to approach investors. An entrepreneur needs to consider the timing of his company at the time of raising funds. Approaching the investors too late or too early may not yield the expected returns.
Staging the growth of the business is an essential aspect for entrepreneurs. Instead of raising funds at one go, entrepreneurs should stage the funding through a series of multiple rounds for obtaining a better valuation of their business. The entrepreneurs need to consider their options of raising funds and approach the desired investor at the right time.
5. Go for Angel Investors
Angel investors are usually one time investors. Angel investors are a better option for startups than venture capitalists at the early stages. An entrepreneur needs to present his business in the right pitch for convincing them to invest in it. The right pitch will help in obtaining funds. It is better if the entrepreneur prepares the presentation for the investors himself. He will need to do some research about the angel investors before approaching them for investments.
An entrepreneur needs to approach the investors who will most likely be interested in his business and share the same goals and ideas. Angel investors prefer startups coming from incubators than other startups. An entrepreneur can consider going for business incubation before going for raising funds. Access to business incubation will help the startup develop, grow, and enter the market, attracting investors.
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