Starting a business is probably one of the most stressful activities one can take up. Some entrepreneurs, including many of the well known serial entrepreneurs, depend upon instinct to reach success while a vast majority conduct a detailed research and market analysis before heading out into, what for them are, uncharted territories.
Statistics show that the success rate of both is similar.
Whatever the approach, everyone needs funding for their enterprises.
To begin with you must have a very well structured project report. The project report must comprise of your background. Financers appreciate a little on your personal history and traits, and a detailed educational and professional background. Set out your objectives clearly and where you see your business going each year over the next five years. If it’s cutting edge technology or a new business idea be clear about the regulations, marketing plan, the clientele you shall be aiming towards, give detailed financial estimates, talk about the management structure even if you are initially going to be a two person’s operation, SWOT analysis which is nothing but the strengths, weaknesses, opportunities and threats and be clear about your target markets whether it is domestic, other countries or both. Do not be over optimistic in your report. Try to keep it real. Financers like this.
Armed with this neatly bound report, in several copies, make out a plan about who you are going to approach first.
If you are going to invest say 20 percent of your own money, your first visit must be to your bank. With the interest rates at historically low levels, especially in Europe and the U.S. the best deal you would probably get would be at the bank.
Your next or even the simultaneous option, is to visit the investment body organized by the government within your country.
If your project is unique and you expect unusually good returns on the investment, plan to visit venture capitalists. First where you live or in parallel send out copies to various investment and venture capitalists within your country or even world wide, depending upon your budget. Send hard copies through regular mail. Emails usually find their way into Spam or are deleted. Please follow up with a phone call and try speaking with someone responsible so that your project report receives the attention of the right person. Be prepared for disappointments as most of them might reject your proposal. In any case, it is the one person or organization that you have to convince, so be tenacious and resolute.
Business angels. Almost every country has an association of business angels. These are nothing but individuals and firms who have made good money and are themselves looking for good opportunities where they can invest their money. There’s nothing angelic about it. They want to make money too and are tough negotiators.
In the case of both venture capitalists and business angels, be sure not to mortgage your personal properties and offer the business itself, preferably a part of it and its assets, as collateral. The percentage of the collateral reduces in proportion with the pay back. Every business venture is a risk. You are taking that risk by investing yourself, your knowledge and some of your personal resources, so must your investor take that risk with his/her resources.
As far as possible, negotiate a deal offering a shareholding in your enterprise. This often works with the venture capital companies and the business angels. Here again your investors will try their best to squeeze out a deal that gives them the majority control. Be tough, negotiate and do your utmost to keep control.
While you’re trying all or some of the options already discussed above and if your requirement of funding does not run into very high numbers, try crowd funding. Apart from kickstarter.com which doesn’t allow residents of all countries to seek out money, there are often local crowd funding websites. All of these charge a small percentage of the total amount collected. The advantage being that you often do not have to pay back the money you receive. Though, you must invest the money you receive with honesty and integrity. This however is like a lottery and if the average person likes your project you may actually end up receiving more than you asked for. The requirement of funding being, not very high, this should be among your first options. After all, if you don’t buy a lottery, how are you going to win it, even if the odds are low?
Photos: Shutterstock
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