So you have an idea for a company? Have been playing around with it for months? You’ve done the deep soul searching and now it’s time to take the plunge and go all in, turning your idea into a business. Going about the obvious things of picking a name, mapping out the business plans have been keeping you busy off late. But then, even at the slightest thought of the capital, your mind goes blank!
The process is full of mystery and the worst part is that you probably have no idea where to even begin. Raising a seed around can get pretty simple, provided you are following the right steps from day one. Some points to demystify this entire process are :
1. Track Everyone and Everything: Track
You will be meeting hundreds of people about your company in the early days before you decide to raise money, and it is likely that your first investors will be people from that time period. Tracking every point of contact with potential future investors will give you a database of people to reach out to when it is the time to focus on your seed round.
2. Analyze the Market. Thoroughly:
Interpreting the existing market scenario is primarily important. Take a call and wait for the market to develop patiently according to your perspective.
3. Stay Connected :
It is unlikely that someone is going to invest right after the first meeting, by just seeing a snapshot of what you have done. Remember, Investors, like to invest in lines, not dots.
You performing over time in a series of dots (follow-up emails, meetings, calls) can help them get connected with you to paint a clearer picture of your team and company. If you are following point 1 correctly, potential investors will feel like they already know you when it’s time to ask for the check.
4. Too many cooks spoil the broth:
Never have more than 2-3 founders. In case you need more experts, you can always hire them. Having one founder is not always the best option. Different outlooks and divided risks is always a favorable position to be in.
5. Keep an eye on your accounts:
Expenses, bills of the previous and upcoming months need to be maintained. This will help you to keep a track of the loopholes in your capital. While going to an investor, show them the accounts and logistically present the number of funds required. This shall give you an upper hand.
6. A Compelling Story sounds good:
Let not your pitch-deck sound like a robot. Use it to show your team’s strengths and why you are taking on this particular challenge. It’s simply about getting the potential investor excited enough to put their money on the line to be a part of the story with you.
7. Funds = Bonus:
Raising a startup on the basis of bootstrapping is considered to be an ideal one. Consider the funds as the bonus. This will help you control the company completely without any pressure from the outside investors. Also, it lets you focus on your business more rather than always being in the hunt for an investor.
8. Make sure you are financially stable:
Giving up an existing job to start a venture is not quite a good thing to do. Knowing about the highs and lows of the business, ensure that all your debts are cleared. Also, make sure that the medical insurance, family savings, and credit cards are in place. Moreover, keep a minimum runway of 9-12 months. Once you have got this sorted, it will be easier for you to concentrate on your venture.
9. Gulp down that bitter pill:
It is good to accept that a startup is not working. Knowing that 80-90% of the startups get tossed over, you should not hesitate to make your call and well, move on. As a risk taker, this has to be your last resort but keep in mind that at times you need to let things go
10. Do your own research:
Talk to the alum companies if you are applying to an accelerator. Talk to the portfolio companies if you are planning to raise capital from an angel investor or probably a venture fund. Those are the best source of references you won’t read the news.
Now, if you are wondering how to raise funds without equity or share options then continue reading below where we have described 5 ways to raise funds for a startup to raise funds for your startup without equity or Share options:
1) Bootstrapping Your Startup Business:
Self-funding, also known as bootstrapping, is an effective way of startup financing, especially when you are just starting your business. First-time entrepreneurs often have trouble getting funding without first showing some traction and a plan for potential success. You can invest from your own savings or can get your family and friends to contribute. This will be easy to raise due to fewer formalities/compliances, plus fewer costs of raising. In most situations, family and friends are flexible with the interest rate.
Self-funding or bootstrapping should be considered as a first funding option because of its advantages. When you have your own money, you are tied to the business. On a later stage, investors consider this as a good point. But this is suitable only if the initial requirement is small. Some businesses need money right from the day-1 and for such businesses, bootstrapping may not be a good option.
Bootstrapping is also about stretching resources – both financial and otherwise – as far as they can. Check out these 30 tips to save money and improve your business cash flow.
2) Crowdfunding :
Crowdfunding is one of the newer ways of funding a startup that has been gaining a lot of popularity lately. It’s like taking a loan, pre-order, contribution or investments from more than one person at the same time.
This is how crowdfunding works – An entrepreneur will put up a detailed description of his business on a crowdfunding platform. He will mention the goals of his business, plans for making a profit, how much funding he needs and for what reasons, etc. and then consumers can read about the business and give money if they like the idea. Those giving money will make online pledges with the promise of pre-buying the product or giving a donation. Anyone can contribute money toward helping a business that they really believe in.
Why should you consider Crowdfunding as a funding option for your business?
The best thing about crowdfunding is that it can also generate interest and hence helps in marketing the product alongside financing. It is also a boon if you do not sue if there will be any demand for the product you are working on. This process can cut out professional investors and brokers by putting funding in the hands of common people. It also might attract venture-capital investment down the line if a company has a particularly successful campaign. Also keep in mind that crowdfunding is a competitive place to earn funding, so unless your business is absolutely rock solid and can gain the attention of the average consumers through just a description and some images online, you may not find crowdfunding to work for you in the end. Some of the popular crowdfunding sites in India are Indiegogo, Wishberry, Ketto, Fundlined, and Catapooolt. In the US, Kickstarter, RocketHub, Dreamfunded, Onevest, and GoFundMe are popular crowdfunding platforms.
3. Govt Programs That Offer Startup Capital:
The Government of India has launched 10,000 Crore Startup Fund in Union budget 2014-15 to improve startup ecosystem in India. In order to boost innovative product companies, Government has launched ‘Bank Of Ideas and Innovations’ program.
Government-backed ‘Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA)‘ starts with an initial corpus of Rs. 20,000 crore to extend benefits to around 10 lakhs SMEs. You are supposed to submit your business plan and once approved, the loan gets sanctioned. You get a MUDRA Card, which is like a credit card, which you can use to purchase raw materials, other expenses etc. Shishu, Kishor, and Tarun are three categories of loans available under the promising scheme. Learn more about MUDRA.
Also, different states have come up different programs like Kerala State Self Entrepreneur Development Mission (KSSEDM), Maharashtra Centre for Entrepreneurship Development, Rajasthan Startup Fest, etc to encourage small businesses.
SIDBI – Small Industries Development Bank Of India also offer business loans to MSME sector. In the US, there is a small business lending fund and a dedicated portal for Government grants available for local businesses. If you comply with the eligibility criteria, Government grants as a funding option could be one of the best. You just need to make yourself aware of the various Government initiatives. Remember, Start-up process entails complex procedures and many bureaucratic hurdles, entrepreneurs are better off using professional services. Hiring a virtual lawyer and virtual accountant can save time and help ensure that the process goes smoothly. For any Legal and Accounting support, Happy to help you, let us talk! 🙂