‘Startup capital‘ is a term that makes every entrepreneur go into seeking the best funding options available.
It is needed before a startup idea can be implemented in full force. Most brilliant startup ideas have been buried due to the absence of startup capital.
Needless to say that it is a must-have for every startup as it is required as a burn rate, for use in testing and validating all assumptions.
Raising startup capital can be a very easy project if approached with the right knowledge. It can also be a huge pain due to ignorance.
There are plenty ways to raise startup capital, but most of them are just conventional.
How about we discover both the conventional and unconventional ways of raising startup? Sounds good?
I am guessing you said, yes.
How to raise startup Capital, conventionally:
- Find an Angel Investor
- Start a Crowdfunding Campaign
- Apply for a loan
- Love money
- Find Venture Capitalist
- Find an Angel Investor
1. Find an Angel Investor
By definition, an angel investor is an accredited individual with a net worth exceeding $1 million or an annual income of more than $200,000.
With this knowledge, you should already know that an angel investor is a very serious personality and will not invest in a business with poor financial projections.
To get funded by an Angel Investor, you must have a great business plan and a great pitch.
A startup business plan doesn’t need to be a many pages document of say 100 pages as most people make of it; it can be as simple as a 1 Page document, distinguished as Business Model Canvas (BMC).
While your Business plan is a 1 pager; your pitch document can be 14 pages, which is usually called a “Pitch Deck”
Contents of a Business Model Canvas:
Your Business Model Canvas (BMC) must address the following key points:
— Unique Value Proposition(s)
— Unfair Advantage (s)
— Key Partners
— Key Activities
— Cost structure
— Customer Segments
— Key resources
— Revenue streams
Contents of a Pitch Deck:
— Unique Value Proposition(s)
— Market Validation
— Market Size
— Market Entry Strategy
If you need help working on your Pitch Deck and Business Model Canvas (BMC), Click the whatsapp icon and you will be assisted.
2. Start a Crowdfunding Campaign
You can say that this is one of the best funding options in the book. It is a traditional way of raising startup capital for any business or project.
It capitalizes on the strength of many. $1 ,000,000 can be raised by 1,000 people if they individually give out $1,000.
Many startups have used this Strategy have leveled it as one of the Best Funding Options as it can be very fast if everything is done properly.
You can use Kickstarter program or any other crowdfunding system to raise funding, but you must ensure that you have:
— Great brand story
— Unique Value Proposition
— Great personality
Brent Gleeson, a leadership and team building coach specializing in organizational transformations, states,
“if you believe in your vision and have an absolute refusal to accept failure as an option, you should feel comfortable investing your own money into the business.”
And that is what bootstrapping is all about. It involves using your own money to build your Startup. It bring little or no drama.
As a startup founder, you can rely completely on your personal income when considering bootstrapping as your only funding option.
4. Apply for a loan
Applying for a loan can serve as a funding option too. Startups can raise capital by applying for loans from reputable banks or fintech business establishments that offer such services.
It is not advisable for Startups with no track of yearly revenue of less than $50,000. This track record proves to the organizations that your business has real customers and can make money to repay its debt.
To get funding through this Strategy, a startup must have a great financial statement with great projections of up to 5 years.
5. Love money
Raising capital through the help of family and friends is what I call “Love Money”. It is one of the best funding options so far.
It is not wrong to seek for financial support from family and friends when trying to raise startup capital for your business.
Infact it is very safe!
6. Find Venture Capitalist
Venture capitalists (VCs) typically want to invest in slightly more mature companies than angel investors and will sometimes want to have more of a say in managing the day-to-day operations.
Just like the Angel Investors, VCs will also require you to present a Business plan and a pitch to them before they can be convinced to invest in your business.
VCs are described as sharks, they do not invest in startups that will not give them back up to 3 times their Investment in about 3— 5 years duration.
How to raise startup Capital, unconventionally:
1. Get a rich co-founder
Getting a rich co-founder is one of the best funding options because of the ease it brings to the startup.
Most startup imagine that they should only look for a co-founder when they need a certain skill set in the team.
Founders of tech startups are fond of getting a co-founder who is better at coding.
Yes it works, that’s why getting a rich co-founder will work as well as long as each party is handling a unique responsibility.
2. Fund your startup with the income from another business.
If your new startup is not your first business enterprise, you can consider funding it by using profits from an existing business.
This is a safe way of raising capital for your startup.
You can also start a conventional business, such as buying and selling or mini-importation or affiliate marketing and then use the proceeds to finance your new startup solving a unique problem.
3. Apply for startup grants
Startup grants is indeed one of the best funding options in the history of entrepreneurship and startup capital.
You can get funding by pitching your business in a grant pitching exercise, usually organized by NGOs or well-meaning organizations such as Tony Elumelu Entrepreneurship Foundation, Total Startupper Challenge, and others.
4. Start Lean
Starting lean is one of the unconventional ways of raising startup capital without the usual headache that comes from other ways.
It involves starting where you are with the little resources you have. It is a great option for startups that want to have the feeling of “starting from scratch” which begets a huge business experience and so many possibilities of failing.
Every startup can start lean and survive.
It is a great option as long as your idea is unique and addresses the pain points of your potential customers.
There is no better thing you can do with your life than to build solutions that solves people’s problems.
There is no better joy to experience than that which comes from addressing the pain points of your customers through your unique solution.
Choose one, two or three ways explained in this article to raise capital for your startup idea, it might just be the next big thing.
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