Obtain funds for starting a business is not easy. But, if you are creative neophyte , do not go broke either! New funding modes await you . To assess your chances , solicit appropriate parties and inflate your financial resources. “Funding for a new business is a challenge for all entrepreneurs. Where assome young companies with high growth potential can start with somehundred dollars , others cost a fortune to run. It is important to explore alloptions available to you, and to consider raising funds from various sources toto bring the total amount you need ” affirm Roger Pierce, partner atBizLaunch , a company dedicated to the training of entrepreneurs .
Ways To Get Startup Money For A Business : Why and how to raise funds ?
You need money to start a new business with major investments or expand your business ? You may consider a non-bank external financing from investors as part of a fundraiser.
What is fundraising ?
Fundraising for projects with high development potential 3-5 years.
These projects require :
– Research and development to develop a product ;
– The time to develop commercially ;
– Substantial investments and income shifted in time .
The principle of fundraising
Depending on the growth phase of your business and its needs, funding via a fundraiser will take different forms:
– Seed capital to finance the start of your business and its needs first;
– Development capital to finance the development of the company and accelerate its growth.
Whatever the purpose of the fundraiser, the principle is that investors realize an equity capital of your company. Thus, to raise funds, you issue shares in your company and sell to investors. These shares will be allocated to the share capital of your company and will finance its development needs.
These investors are business angels, venture capitalists or seed funds, which invest in innovative start-ups or start-ups with high growth potential. The goal for them is the realization of capital gains in the short term (five years for example).
Business angels usually occur on amounts between 50 000 and 500 000, and venture capitalists on higher amounts.
Following the lifting of funds, investors become shareholders of your company. As such, they participate in general meetings and have rights under the statutes of your company or the shareholders’ agreement, especially in the distribution of company profits. This sharing is often up to the percentage of capital held.
The benefits of fundraising
With a fundraiser, there is no concept of repayment of the capital borrowed or related interest. Investors are remunerated on the capital gains realized on the resale of their holdings. Fundraising does not require an input of personal guarantees from you.
The company has no debts to its investors and fundraising reinforces the capital of the company. In terms of balance sheet, accounting and perception of the company, the impact of raising funds is very positive.
The contribution of business angels is based primarily on project criteria, personality of the creator, team, enterprise value, rather than ratios and projections. Trust is one of the strong elements of the relationship between the business angel and you.
In addition to contributing to the financing of your business, the investor can bring you other essential elements in the development of your business: a network, an address book, support, skills, know-how, in the board management and organization. However, its role is not to intervene in the daily operation of your business.
Looking for investors
Convince investors to participate in financing of the project can not be improvised. A preparation is required to present its project and seduce. This presentation is formalized by:
– The executive summary, that is to say, a summary of the dossier in a page;
– The business plan, a detailed project with tables of financial statements.
Several formats can be combined (PowerPoint, video, elevator pitch).
You must tempt one follows you in your idea! Avoid common pitfalls to enhance the appeal of your project, as clearly increase the sales volumes and turnover.
Your personality is an important part of the relationship, stay yourself, humble, and witness the mastery of your project and your vision. Show interest in your project in terms of concept, market, competitive positioning and know the highlight, by answering this key question: how will you make money?
Most startups I meet rarely needed funds to start a working prototype of their product. Especially in the field of web and mobile ! If today you have the idea , but you would expect to find money from business angels to put you to work, as you say that it is damn ! An investor is not there to pay salaries founders reluctant to lose their “comfort” financial and take the slightest risk. Since it is rare to see one before paying 2 years for a contractor , the majority of them start their startup in parallel with their employment or with a small enough capital to meet the expenses of everyday life . You can also create your product or service and make it known without needing a lot of money (or even very little! ) Provided you go about it intelligently.
5 tips to complete your project
Find the right partners.
This is the first point and the most important. It is even the first challenge facing the business leader. Besides the fact that the success of your startup depends on your ability to assemble the perfect team, complementary partners with the skills to develop the project immediately avoid having to hire or outsource a part of it. Salaries generally being the largest expenditure item, so you can run your prototype by limiting costs. Build your community. Do not wait! From the outset start your blog, your Facebook page, Twitter and talk about your project. Give regular news on the progress of it. Build a community feel involved in your adventure. This is your best “sales force” your “quality manager” sincere but also your “eyes” on the ground. Offer to sincerity and she will help you.
Call on Lovemoney and crowfunding .
If your project still requires a bit of money, Lovemoney is a frequently used option of raising money from relatives ( family, friends, colleagues … ) who believe in your business . There are also associations such as the Association Love Money . As for the Crowdfunding (” crowd funding “), it allows the project to be funded by a significant number of individuals injecting small amounts of money. The online platforms such as Kickstarter, Wiseed or Anaxago greatly facilitate this process , and each year , thousands of projects around the world are born with this financing . Enlist your community and you ‘ll be surprised at the help it can bring you to finance your project.
Launch a working prototype . This is where the help of a committed community is invaluable. At this stage , the goal is to make him test your prototype, to be listening and analyzing feedback to validate your idea and make the necessary changes.
Do not spend money in the pub. The time when it was developing its product in secret before starting to blow marketing and advertising budget is complete. I see it with startups that I coach. The return on investment is becoming weaker even zero .
Today, develop its brand does not require huge funds but to mobilize all its neurons and a mastery of social media
Use your community to evangelize your offer and continue to be sincerely listening .
To conquer the world
With a working prototype validated by an ever-growing community , you now have enough assets to raise funds from investors as needed to accelerate your growth.
In the eyes of angels , you prove that you are capable , you and your associates, perfectly complete the project while demonstrating also that your solution addresses a real problem.
The business angel , more than a financial partnerPassionate about the entrepreneurial adventure that invest part of their personal assets in companies being launched ? These are business angels. Your company is young and your new project ? Business angels can perhaps provide the necessary funding for its implementation . Indeed, a business angel is an individual who invests part of his personal wealth in an innovative company . His participation intervenes – in contrast to investment funds – early in the company’s history . Specifically, business angels are involved in the company’s capital . In return, they receive remuneration based on the added value of the shares they resell , after a collaboration that lasts between five and seven years Operation seduction . How to find one or more business angels ? First , check with France Angels ( the association has over 4000 investors) , or from your chamber of commerce and industry. They direct you to contact the networks , depending on the activity of your business.
Tips and expertise
In addition to its funding, the business angel therefore supports the entrepreneur by providing him advice and sharing expertise . It can , for example, play a matchmaking role to facilitate linking with partners , suppliers or potential customers. Similarly, it can enjoy the Contractor of its network of investors and enable them to find alternative financing. A free course support. Caroline Derycke – Daumal , independent wealth management advisor , has helped two promoters to complete their financing plan, with its own core competencies . The business angel may also give its opinion in certain meetings within the business financed , share a personal experience to unlock a situation or even intervene in the negotiation of a contract.
However , the leaders , to their investors , obligation : to quarterly reporting to reflect the evolution of the company.
The association often proves beneficial. But places are expensive and severe selection: about 6,000 cases submitted each year , only 3% are funded. So to make the difference , do not count your hours when preparing your file.
The fund, a tremendous growth acceleratorThese professional investors bring you capital in exchange for equity . But that’s not all. With their guidance , they also help the company to grow faster
Here are some commonly used options to raise the money tostarting a business :
The personal assets
Use your personal savings, pension funds, RRSPs, mortgage credit,
life insurance. Demonstrate your commitment to your new small business by investing
personal money.
Money close
Money from relatives (friends or family), is one of the sources of funding that we have the
more recourse, just after the banks. Money associates or relatives is
often the easiest to get. Avoid unpleasant moments in your family in the future
clearly setting out in writing the terms of the loan or investment agreement.
Angel investors
These are wealthy individuals who invest directly in small firms owned
by others. These people can inject up to $ 100,000 in capital in companies
emerging. There are some disadvantages to add such partners:
“Equity financing means giving up a share of ownership of your new
business. Try to keep the majority of shares and make sure to clearly define the
role of each investor. The ideal is a silent partner who puts money but does not want to
intervene in the daily management of the company, “says Roger Pierce.
Venture capitalists
This is one of the most common sources of funding but also one of the least
understood. However , investment by venture capitalists often exceeds one million dollars
funds. These usually come from the pooling of private capital or
public sponsorship . Venture capitalists rarely involved in the daily management
your business, however, they expect to have a say in decisions
important. To learn more about the Canadian Venture Capital Association
investment , visit www.cvca.ca
Banks and credit unions
These institutions remain the main sources of financing for many small
businesses. Perform a loan from a bank or credit union
involves a credit check and reviewing your business plan. We
will also want to see that you are willing to put personal money.
Most people borrow from a bank or a credit union, which means they
must prove that they are a good risk. You can do this in several ways: by having
a substantial amount of money in savings, by demonstrating your level of expertise is
high enough to make your business the best chance of success, demonstrating that
you are a good credit risk (due to the number and size of loans obtained and
reimbursed in the past), and possessing property can be pledged as collateral (as
a house) with which the bank can reasonably ensure the repayment of
amount it lends you.
You can also obtain financing from the Business Development Bank of Canada
(BDC). For more details, visit www.bdc.ca
Suppliers and customers
Ask your suppliers the opportunity to delay payments of 45, 60 or even 90 days.
This will allow you to have more cash . Make sure to keep your current suppliers
of what is happening . Your customers can also help by setting your bills sooner. in
Furthermore, factoring companies or financial intermediaries can buy your receivables to release funds .
Leasing
Leasing is becoming more popular when it is possible for a company to use a
well – a device , machine, for example – without having to raise the funds to buy it.
A sale and leaseback transaction provides a firm funds from a property assigned to a
third while allowing it to continue its use. There are ” asset-based lenders ” ( the
individuals or financial institutions) specialized in this type of financing.
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