Fundraising 101: A Practical Guide for Entrepreneurs 

Guide for Entrepreneurs
August 4, 2021
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There are many great ideas that failed to become a reality because of the lack of funding. Start-ups need funding to stay alive, and entrepreneurs understand the importance of getting the necessary funding for the company to move forward in the early stages.

In many cases, the capital needed for a start-up to generate profit is beyond what the founders can afford. The availability of cash allows the start-up to focus on growth and building and cash is like fuel to these fast-growing companies; it allows them to move forward. The faster they grow, the quicker they can achieve profitability.

There are ways to look for funds. Nowadays, there are many options available for entrepreneurs to help them with funding. However, the appropriate funding sources will also depend on the type of business you are in.

Prepare Necessary Information

To help you find the right funding, the first thing you need to do is prepare all the necessary information. You need to have a written proposal (either formal or informal) that can give the potential investors the necessary information for them to support you. These are examples of the essential information you should include:

Your Background

Introduce yourself and tell them about your background. They need to know who they are dealing with and how reliable you can be. What are your expertise and passion for the business? Are you knowledgeable about what you are doing, and can the start-up be in good hands under you? Tell them why you do what you do so they can see if you are a good risk.

Describe Your Product/Service

You need to have a detailed description of the product or services of your start-up. It would be best if you showed them what you are offering and how this can generate income.

Demographic Details

Investors will know whether you’ve understood your market if you are able to present your demographic details to them. This includes the personality of your target group and your competition.

Marketing Plan

Have at least a general marketing plan to give them an idea of how things are going to move as with your product and services.

Understand Why You Need Funding

Before you seek out resources for your start-up, it is important that you understand the reason for the funding. One of the most common reasons is to step up your operations, gain support for a short-term expense, or gain an advantage over competitors.

Know the Timing to Raise Money

The best time to raise money is when you, as the founder, are ready to tell your story. Investors are willing to invest when they love the idea, are convinced of the vision, and can see the market opportunity. And this can be achieved when you are ready to tell them about your start-up.

Find the best Funding Sources

The types of funding sources will depend on the types of start-ups you have. Here are some of the popular ones:

Crowdfunding

Thanks to technologies, crowdfunding is one of the latest methods to raise funds. Many entrepreneurs use this to get support for their start-ups. This is considered seed funding.

You need to present your business to the public, and those who are interested in your business can contribute by donating a certain amount. In return, they will receive a certain token from you. Popular sites are Kickstarter and Indiegogo.

However, do note that these sites are highly competitive because of the many start-ups looking for funds, and you need to be able to catch the audience’s attention with your campaign.

If you are planning to try out these platforms, make sure your campaign has an inspiring backstory, professional videos and demos, media kit, and non-stop promotion to attract supporters.

Another unique way to crowdfund is through an online auction. You can conduct a live or silent auction to raise funds and offer attractive services or products to the funders.

Venture Capitalists

These are groups of people who pool their money looking for opportunities to invest in potential start-ups. It is important to note that venture capitalists prefer investing in companies that have been existing for a while and have shown themselves viable in the market.

They are looking at companies that are ready to expand and need additional cash to do so. However, venture capitalists will want to participate in your company’s growth either through mentoring or have an influence on your products and services.

They deal with large investments, thus giving your company a huge opportunity for expansion. If you are the type that values independence, you need to consider the pros and cons of getting support from venture capitalists.

Angel Investor

Similar to venture capitalists, except that angel investors are individuals looking to support start-ups.

Their fund offering will be less than the venture capitalists, but angel investors are the favourite of many entrepreneurs because you have full control of the company while getting mentored. In return, angel investors want a stake in the company, so they earn profits as the company grows.

Looking the Investors

Before you look for investors, know what type of investors you want for the company. There are places you can go or events to attend that will connect you to a potential funder.

For example, you can find venture capitalists in events such as pitchfest or hackathons. Investors are also present in event niches. You can also do your research and google individuals in your areas that are known to be investors. Nowadays, there are plenty of websites available online that you can use to get the fund you need, such as Kickstarter for crowdfunding or Angel List for angel investors.

Conclusion

Being an entrepreneur is not easy, but with today’s technologies and diversity, you have several options to explore when it comes to expanding your business. There are many ways to fundraise and maximize the company’s growth and profit. You will have to do your part by researching and analysing what options that will best serve your start-up in the long run.

 

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