7 Ways to get funds to take forward your business idea
Most entrepreneurs have a business idea and they start looking for money to take it forward.
First and foremost, you need to validate your business idea before you start spending any money, and that means before you need any money…and this can be done when you are developing your career, living with your parents, or when you are unemployed and receiving benefits…
1 – Bootstrapping
You will be amazed, but this is the best way to take your business forward. You can scrap all your savings, sell everything that you don’t want, sell your house, move to a smaller one, or to your parents house.
If you are employed, keep your job until you have paying customers and profit, and use your own money to pay for the initial expenses for setting up your business.
The decision to go for bootstrapping doesn’t fit all the business models, but if you are able to do it, it will pay off in the long run, as VCs and Business Angels will see you as more fundable.
2 – Family & Friends
Along with bootstrapping this is the best way to get money for your first expenses until you have paying customers.
You can present your idea, in a professional way, despite the fact that your family and friends might give you the money just because they want to help you, nevertheless, you should commit to giving them a small percentage of your business and explain what returns they might have, if they invest.
This is the best option, if your business idea is to be executed at local, regional level, or is an online business with little investment requirements at idea stage.
3 – Competitions
There are many competitions sponsored by organizations, private, or government organizations to screen business ideas in which they will invest by giving a prize, that might be a package of services for you to set up your company, money or both.
You can apply to pitch, these are usually competitions that are agnostic in terms of business idea stage, but you should look at the regulations, because they might be targeting only idea stage businesses without prior investment.
4 – Grants and Government sponsorship
There are many Governmental initiatives across all geographies from Europe, Latin America to US, to get money to businesses in order to boost economic growth. You can search the municipality where you are located or plan to be located, and apply to sponsorship, or grants.
If you live in an EU country, you also can apply to some of the EU grants, especially if your business has an impact regarding the environment, or health.
If your business idea requires a lot of investment in R&D and it is a physical product or hardware, EU grants are the best option.
5 – Crowdfunding
Crowdfunding platforms became very popular to allow entrepreneurs, including artists and authors to go forward with their ventures by raising money starting from small sums from a large number of people, by creating a campaign and launching it online.
The most famous Crowdfunding platforms are Kickstarter and IndieGogo, and they are the best to fund a book launch, a physical product if you have a prototype.
You can post your campaign and offer something to your bakers, a discount in a book pre-launch, or to acquire the product depending on how much each person will donate.
6 – Angel Investors
Angel Investors are independent investors, people with some wealth and also experience in an industry that are willing to invest in the early stage of the business, either focused in local, regional, national or global businesses.
Often act as part of an association or group of business angels to maximize their investment potential.
Business Angels are also the go to persons if you want someone with experience to be an advisor or member of the board.
7 – Venture Capital Firms
Venture Capital firms also known as VCs, invest in businesses that are expected to go Global, and that are expected to have big valuations, the so-called, Unicorn startups.
Venture Capital firms are experts in investing in one or two stages of the business, some in earlier stages, others in growth stages.
These firms seek great returns on investment and expect that your business grows fast, investing mainly if you have traction, meaning customers or an audience ready to be monetized.
To get funded by a VC firm, requires a lot of preparation and time, you need to define how much money you are going to ask, and what you are willing to give in return (equity and control).
You will need to list and approach all VC firms that are investing in your industry, vertical, and business stage, that are writing checks in the amount that you need. Beware, if they are not backing any other startup that could be a competitor.
To approach a VC firm you need to have a compelling pitch deck explaining the problem, the solution, the market, describing your traction and unit economics.
It takes about one year to get funded in Europe and six months in the US, if you are able to explain why you need the money and why they should invest in you.
Remember that you first investors are your customers, if they are willing to try your services or products! As your customer base grows you will need more technology, a bigger structure, and then money will be needed…
Written by Clara Mota, Chief Entrepreneur Officer at Start out of the Building, a consulting business focused in Innovation, Strategy, Software Solutions, and Startup Advisory & Mentorship with customers around the world. Clara, had a career in blue chip companies (easyjet, Ecolab, Coca-Cola European Partners) and exporting companies with several international roles based in London and Barcelona, but has been pitching her business ideas since she was 18 years old, and conceptualized six businesses (apps, digital marketplaces, tourism, events), having taken forward herself two of them.