If you're the entrepreneurial mind behind a great idea that has since become a very small-scale startup company. First of all, congratulations on doing what only a select few have done. But with a journey of a thousand miles, some steps are harder than others, and no other step is harder than getting the capital needed in order to start.
Now, while the answer to the question 'how am I going to raise capital for my business?' is a far easier one to answer depending on how old and how successful your business your is.
A typical startup company doesn't get the same luxury, and can't approach Venture Capitalists or Angel Investors with their idea; simply because an investor can't easily calculate the return on investment they can make from blueprints.
With this in mind, what kind of avenues are available for startups looking to raise capital? There are actually more avenues for doing this successfully than you think. Much like we've previously discussed in previous articles, we will be cutting these to two specific types - debt capital and equity capital raising - as it's important to know which is which
Where your company may not be able to obtain equity capital, you may wish to consider approaching a bank or business about getting a loan during the early stages of your business.
These tend to have a relative amount of flexibility in how much you can borrow and over what kind of time-frame you can make repayments. But the emphasis needs to be on 'repayments.' So you need to be sure that your company turnover annually and monthly can effectively pay this off over the time set.
While borrowing money from a bank or business by the medium of a loan is the more formal approach to securing additional capital. Another may be to approach friends, family and acquaintances about helping get your startup off the ground.
While this saves you from any, often punishing interest rates on repayments, this still qualifies as a Debt Capital method because of the kind of awkward position that you may find yourself in should they ever need that money back.
Crowdfunding can take a number of different shapes, depending on who/what you have exposure to, and even between older, and 'newer' methods of equity crowdfunding.
The older version, of course, can include issuing stocks through an IPO, or using a dedicated crowdfunding platform.
These newer iterations can include kicking off your crowdfunding campaign through companies like Kickstarter for more casual projects, Seedrs for more established startups, or even approaching it from a 'very' new approach, such as through an Initial Coin or Exchange Offering.
The drawback with this method is that there's no guarantee that your startup of project will manage to reach your specific soft or hard-cap. But as has been seen with some projects, there's every chance of surpassing your target too.
This is one of the interesting alternatives to conventional fundraising that startups can use.
If you believe that your company has the potential to win competitions, you can choose to enter contests like pitching sessions - allowing you to both win a substantial amount of money, while also putting your company in front of interested investors and venture capitalists.
While this is a good source of additional revenue, at best it should be regarded as a stop-gap measure; a way of obtaining some more miles to your initial run-way while looking for substantial investors.
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