Since the startup culture has struck the world, it has again became prestigious to have your own business. With the evolution of the internet and opportunities all around, it is no longer difficult to source money for your business idea if the idea is viable enough.
10 years ago, nobody could imagine that reality shows like Shark Tank will be aired with the concept of offering money to startups. That tells us that the world is ready to source money for you, if your idea is good enough. In this article, we will look at different methods of sourcing money for your business ideas.
The first thing before you go ahead and look for money is to have a prototype. Do not go out and look for money only with the power of concept. That will not take you far. What you have to do is build a working prototype, no matter whether it is a product or service based business. After you have your prototype ready, go ahead and look for money.
The first place to look for money is definitely venture capital firms. These are firms who will buy the shares of your company in exchange for money. You will have the option to sell as much as you need in exchange for money. So for example, if you need a certain amount of money to develop the next phase of your product or to market it, you go ahead and sell up to 49% of your business to one of the venture capital firms.
When you are selling your shares, make sure that you are being very careful. It is always better to have a professional lawyer do the deals for you. There are different types of venture capitalism. In some case, the companies will want to work with you actively on the project. In other cases, they will simply offer you the money and nothing else. The companies who only offer money and do not want active participation in the day to day activities are known as angel investors.
Banks are also a great option for you to source money from. However, you have to be very careful and in deciding whether a bank would be better for you or venture capital. The good part about going for a bank is that you do not have to lose any equity of your business, which means, you will own the entire 100%. If that is something that excites you, then bank is a better option. If you think that your business is going to be valued at a lot more money in near future, then there is no point in selling your stocks to venture capital, right?
Now, there are also downsides of going to banks. No matter which banks you go to, there will be a high interest rate and you will have a time frame to payback the money. The interest rate varies from country to country, but the average is around 15%.
Grants are another great idea if you think your business is creative enough to win some competitions. These days, there are thousands of competitions specifically designed for startups and if your business is actually good, the chances are very high that you will win at least one of those. The grants pay a good amount of money, which should be able to kick start your business at the early stage.
Again, the first thing that you should do is build a working prototype. It is even better if you can pitch a running business to one of these competitions. Most of your competitors will have a concept or a prototype at maximum, so if you can pitch a running business then the chances of you winning will be much more.
If you want to target grants, the only way is to look for them on the internet. Do a few searches every month because these grants and events are not marketed well. Also, it is very important that you do not lose all your focus only after applying to one opportunity. You have to keep applying to numerous grants and competitions to make it big. It might take time but if you believe in your idea, then there is nothing that can stop you.
Also, it does not mean that you cannot apply again once you win one grant. There are startups that keep on applying to all the grants and opportunities available around. You might take that path too.
The last option to go for is Crowdfunding. Crowdfunding is a new concept but it has already been proven successful for a lot of companies. There is no reason that why it would not be a success for you as well. The idea is very simple. You pitch your business to a website like Kick Starter, for example which is a crowd funding network.
The website checks your business and approves you. From that moment, you have the opportunity to get to millions of users on that website who will come and pledge money for you, for special benefits, such as first delivery of product or added content not available anywhere else. These people pay because they believe in your product and want to become a part of bringing that product to life. You will not have to sell any shares or stocks to people when you are going for crowdfunding. However, the traditional practice is to offer them your product or services once you go live at a discounted price.
You have to be focused when you are in need of money. Make sure that you are not spending on unimportant issues when you are in a crisis. At the same time, when you take money for your business, make sure that you are not enjoying that money for your own benefits. A lot of entrepreneurs think that the money that they get for their business is their own money and they can spend it however they want. That is not true at all. You should always take a salary or a fixed percentage from your business for yourself and nothing else. This will keep the business organized for a long time.