While the internet appears to make funding your business without outside help look easy, you still need to put in some hard work. It is a tough world out there. Thousands of businesses are starting up every year and they all need funding of some sort.
On average 61 new companies started every day in 2017 in Ireland. That works out at 22,354 new companies registered, which exceeds the previous record in 1998 of 21,145 start-ups registered. So, how do you fund your own business without outside help? There are a few ways but you will need to decide whether you are willing to give away company shares or not. Or, whether the money is a loan. From asking for help from friends and family to crowdfunding, there are ways to raise the money you need to get your business off the ground.
Seek funds from people you know
Though you may not want to seek funds from the people you know, they can be a good source of funding. Whether for a new venture or to help you expand your business, this makes sense as they know you and your passion to succeed. But, this can be a tough as it is a delicate situation. There may be more pressure to succeed. Failure would mean letting down the people you care about and losing their money.
In this situation, it is a good idea to treat them as strangers when you need their help. Have your expected growth figures handy as well as your business plan. This will let them know you are serious. Make your pitch professional. Offer either a percentage share in the company or to pay back the money based on your company’s actual cash flow. Give them a choice.
Crowdfunding is an option
Crowdfunding is an option for the right business. It can be a stepping stone to securing other forms of investment if successful. This is a great way to raise small amounts of capital or a loan. Keep in mind that failure rates are high as donations may not reach the target amount. If this happens, the company (crowd funding platform)returns the money to those who pledge to support you.
There are four different types of crowdfunding models:
- asking for donations to support you
- rewards based support or pre-payment for goods or services
- peer-to-peer or loan-based pledges
- equity investment for part of the company.
Crowdfunding takes up a lot of time. You need to prepare your campaign, manage and promote it online. You need to release a lot of information about your product or idea. So, your competitors will soon know what you are doing. Make sure you protect your intellectual property or someone could steal your idea.
Using crowdfunding to raise money is also a good way to test market demand for your idea. If people pledge money, then you know you could be onto a good thing. It is also a great marketing strategy.
What is more, if your campaign is a success it could attract the interest of bigger investors.
Angel investors are those who provide seed or start-up capital in return for a part of your business. And, they will want to play an active part in the business, offering their skills for you to learn from. They offer valuable management experience and knowledge in the industry when you are starting out. This can help you reach your business goals.
An angel investor is more interested in teaching you the skills you need for the future. After all, it is to their advantage to mentor you. They want you to succeed. When you achieve success, you both reap the rewards. This is how Uber and Facebook originally started up. But, on the other hand, if you fail then angel investors do not usually need to be repaid.
You need to make a decision on whether it is worth exchanging a chunk of your business and future earnings for what an angel investor offers. When, what an angel investor offers, is not worth what you need to give in return – then walk away.
These are just three options from many, but you will not need to sell your soul to achieve success. Consider what is important to you and what you can make work for your business.