Stride Post Latest News
Related Articles
Each company is at a different stage of development; some are just starting; some have already started selling products; some have expanded into overseas markets. But businesses all have one thing in common: they all need capital investment to move to the next stage.
Think: Does my company need to raise capital?
If you’re just starting, the answer is usually “yes, you need to.” The typical growth curve for a start-up starts from scratch, and when you spend money in the early days of the company, funding levels quickly plummet. It is only when sales begin that the growth curve may turn from loss to profit and hopefully continue upward. You can start a small business with your funds, the so-called “self-help method,” but the progress will be very slow. For other entrepreneurs, there is a great need for financial assistance to support the important operations of the company, such as manpower, product development, intellectual property, and marketing. Without these key operations, most companies can only stand still.
How long does the fundraising process take?
“It takes 6-10 months from the time you decide you need to raise money to get the money,” said Tony Brookes, founder of direct, a UK-based analytics start-up. His company has raised its initial investment and is preparing for the next round. “Of course, it may take longer. You may need to propose to the investment middleman first, then to the investor — going through 3 or 4 different meetings, it takes a while to get a lot of money from someone else.” Sounds great, but: “No one is obligated to give you money, you have to win the investment.” So, how do you get that all-important capital? Here are the methods you can refer to:
How to get business capital?
1. Self-funded
Self-help – “self-employment” – is very popular because you are only responsible for yourself. You retain 100% control of the business and do not owe investors or lenders any money. Although it is different from perception, 80% of successful businesses are established this way, using only their own money. The average capital of a startup is only $10,000.
Example: Tough Mudder, an outdoor obstacle course, and competition company. The founders invested $70,000 of their funds, used pre-sale tickets, and invested funds to build obstacle course facilities, creating a multi-million-dollar company with a global market value.
Suitable for: Any start-up business. as long as you have money.
2. Crowdfunding
Crowdfunding sites help you make (usually small) cash investments from all corners of the world. The best-known examples are often one-of-a-kind or niche consumer goods that large companies are reluctant to take the risk of producing. Some global companies started with crowdfunding. Popular crowdfunding sites include Kickstarter, IndieGoGo, Patreon, AngelList, and GoFundMe.
Case in point: Cards Against Humanity, a card game company that sells humor and creativity, raised £15,000 on Kickstarter and turned it into a multi-million dollar business.
Who it’s for: “Small investments or high-risk ideas,” says didici founder Tony Brookes.
3. Check with your correspondent bank
This is the more traditional method of charging interest on the bank loan, so your repayments will be more than you borrowed – but if the business is successful, this may not be a problem. The interest charge means the bank won’t get your equity in the company. Bank loans are a big plus if you want to gain 100% control of your business. Bank lending standards are higher than most angel investors, so make sure you pay attention to every little detail. For more information on how to write a well-thought-out career plan, take a look at our comprehensive guide.
Case in point: Some big companies – like Starbucks and The Body Shop – started with bank loans.
Suitable for: One-person companies with actual performance or low management and sales expenses, most likely to succeed by applying for bank loans.
4. Obtaining seed funds
Seed funds will invest cash into the start-up company, hoping to grow smoothly in the future and hand over transcripts. Although seed capital is called “investment by family and friends”, it does not mean that professional investors, equity funds, and banks cannot join. No matter who the funders are, they expect to be paid. The reward may be a company’s shares, and if the company grows beyond the investment point in the future, you can sell the shares for a profit.
Who: Ambitious early-stage startups.
Incubators or accelerators? _ Where is the difference? · Incubators turn innovative ideas into startups. Ideal for entrepreneurs in the early stages of setting up a company. · Accelerators transform startups into growth companies, providing intensive mentoring and/or investment to help startups grow rapidly.
5. Find Angel Investors
Angel investors may appear at the seed stage, or later in the early stages of a business. Angel investors are usually individuals who invest their funds, not groups or venture capital firms (which control syndicated funds). Angel investors come in all types and sizes – from members of your family, high-value individuals, or retired CEOs. You can also search online for Angel Network groups and organizations in your area.
Example: Facebook accepted angel funding in its early days. In 2004, entrepreneur and investment expert Peter Thiel invested $500,000 of his funds in an emerging social networking company in exchange for a 10.2% stake in the company. Now Facebook’s global revenue exceeds $40 billion. Peter Thiel’s angel investment is worth the ticket price, and it’s a good deal.
Suitable for: Startups at any stage.
6. Venture Capital
While a few small companies do receive venture capital, startups that want to dominate the world often need seven figures or more. There are very few venture capital deals: only 8,046 deals in 2017. VCs are risk-averse and will expect (or require) you to come up with the company’s business policy. But the money they put in is also pretty staggering: a total of $84 billion invested in 2017 or about $10.4 million per deal. The fundraising stage of a company is usually divided into A round, B round, and so on.
Case in point: Deliveroo, one of the darlings of new startups in Europe, recently raised a Series F round. Eight venture capital firms invested a total of $385 million.
Ideal for: Startups with super-ambitious ambitions, or fast-growing businesses of any size.
Fundraising advice from Didici founder Tony Brookes
1. Investments are not taken for granted – build trust at every stage and earn investment.
2. Plan back from the end – what is your exit strategy? Start planning back here. Whatever you do, don’t make unrealistic comments about your business.
3. Always look for like-minded investors – Investors must have the same vision for the company as yours.
4. Act on the business you want to be – make sure all documents are neatly organized and in the same format, know the system you want to use, like a CRM platform, etc.
5. Be open to feedback and suggestions – you don’t have to do what they say, but you may benefit from their experience.
