Sourcing Venture Capital
7 Laws for Everyone Who Wants to Fund a Business
As many first-time entrepreneurs know, or have recently found out, obtaining a traditional bank loan to start a home business is far from easy these days. Finding money to get everything off the ground is without a doubt the biggest challenge: from forming a business entity to hiring personnel and renting an office space, everything you need to make your dream come true demands a certain kind of investment.
Unless you’re sufficiently wealthy enough to provide that investment, you’re going to have to look for it. Fortunately, it’s 2019, and there are many options for you to choose from; you just need to follow certain principles, or laws, to be successful.
Let’s see what these laws are and how they can impact your investment-related decisions.
Law #1: Use Crowdfunding Platforms
This is a relatively new and exciting way to raise money for your new business. You put your idea on the Internet and ask people to donate funds so you can go ahead and launch the business.
In recent years, a number of really good crowdsourcing sites have appeared, and have become very popular. For example, you’ve probably heard about Kickstarter (more than 137,000 idea were funded there), but there are also Fundable, Indiegogo, Fundly, and RocketHub. Visit these platforms to see what they can offer you.
Law #2: Find an Angel Investor
Have you heard about angel investors? These are people who are willing to invest their own money into any business (assuming they like the business idea, of course). Typically, they are high-net worth persons with experience in a particular industry. Angel investors are behind well-known companies like Google and Yahoo, and their popularity among entrepreneurs and the public increases rapidly.
To explore this option, conduct an Internet search for local angels and contact them with basic information about your future business. To get attention from angel investors, you need to apply some serious effort. You may have to write a presentation and make a video for them to present your idea in a unique way, but all the effort will be completely worth it.
Also, be aware that the deals with them will require you to give them some share of equity in your company, which is fair, because they will provide the funding.
They can be found at platforms like Angel Capital Association, AngelList and FlashFunders.
Law #3: Use Venture Capital Companies
Venture capital firms are corporations that make thoroughly considered investments in startups. They prioritize the startups that show a high potential for providing great profit, so do your best to impress them.
A significant advantage of this option is that venture capitalists have a lot of money to give, much more than any loan from a bank. This could be great if your idea requires significant investment. On the other hand, they are highly selective with the investments, which makes acquiring money from them extremely difficult.
Law #4: Consider Microloans
These are small, short-term loans with a low-interest rate given to new businesses. For example, microlending organizations typically offer loans between $500 and $50,000, which could be sufficient to cover the start of your business.
Accion and Opportunity Fund are two well-known organizations giving microloans.
Law #5: Personal Connections and Family Still Count
Many experienced entrepreneurs say that one should try to get money from family or friends before going to banks, angel, and startup accelerators. Why? Because these people will not try to get involved in your operation and are open to spreading the word within their networks. As a result, you will have maximum control over your business.
Need proof? One of the biggest names that can be mentioned here is Sir Richard Branson, who borrowed money from his aunt Joyce to start Virgin Money and take his business to another level by opening Virgin Records. Her money really helped him when he needed it the most, and he was able to advance his career. P.S. He repaid the money with interest.
Law #6: Don’t Forget About the Conventional Way
Keep in mind that you can always turn to an established banking institution and obtain a loan. The main advantage of this method is that a conventional loan is very reliable and relatively easy to find.
However, keep in mind that they are slow to fulfill, and may potentially cause you to fall behind competition with similar ideas. Review all contracts thoroughly before you sign anything.
Law #7: Explore SBA Options
If you’re based in the U.S., you may want to look at what the Small Business Administration (SBA) has to offer. It provides different loan types to help entrepreneurs get started. The list of loans can be reviewed on their Fund Your Business page (https://www.sba.gov/business-guide/plan/fund-your-business).
If you’re looking to get into the business scene, the prospect of sourcing capital can seem a bit overwhelming. However, if you follow the laws described above, you’ll have a decent number of options to choose from Business Fundingand will make a great year for your business.