Money makes the world go round. Sure, the saying is a bit cliché at this point, but it’s also quite true. Even if you’re not a particularly materialistic person, even if you dream of saving the world, money is all but necessary.
And if you happen to have business ambitions, funding will almost always be a concern. Unless you happen to be extremely wealthy already, you’ll need to find funding to support your ventures. Fortunately, there are a wide variety of funding opportunities available. While every option may not be available to you, you should explore them all.
While preparing yourself to find out how to fund your business and become an entrepreneur, you should also take a look over these priceless advices from 50 entrepreneurs have shared to wannabe entrepreneurs.
Investments from Family & Friends
Many entrepreneurs first turn to their family and friends. To be clear, entrepreneurs shouldn’t be asking for gifts but instead investments or loans. You could sell a stake of your company for example. Or you can pay back a loan with interest.
However, there are downsides to family & friend funding. If your business fails, your family and friends could lose their investment/loan. Obviously, this could strain personal relationships. This could be a mistake you could make as an entrepreneur but you could avoid it and many others by finding out what are the most common mistakes made during the first year as an entrepreneur.
Don’t want to take a loan from your personal network? That’s understandable. Another option is to approach a bank. Many banks provide commercial loans. However, they often loan only to businesses with a proven track record.
You should also check with your government as they may have special programs. In the United States, for example, the Small Business Administration (SBA) will guarantee portions of private bank loans. This makes the banks more likely to lend as risks are lowered.
We all want a guardian angel. Many entrepreneurs take this concept a bit more literally, however, turning to “angel investors.” No angel investor is the same. However, most are wealthy. Many were previously entrepreneurs.
Angel investors will usually invest money in exchange for a stake in your startup. Usually, angel investors invest very early on in a company’s lifecycle. Given how high the risks are (many startups fail), they may ask for a large chunk of equity, between say 10 to 25 percent.
Venture Capital Firms
Similar to angel investors, venture capital firms often invest in startups. Usually, VC firms invest in startups that have already developed a product and are bringing it into the market. They will provide the funding necessary to scale and market said product in exchange for equity.
Some VC companies are hands on and will nurture a startup as it grows. Others are more aloof and act like banks. If you decide to approach venture capital firms, make sure you do your homework.
Crowdfunding through websites has emerged as a very popular strategy for raising funds. With crowdfunding, you usually sell future products through a web platform in exchange for money now. The products are often sold at a discount. Crowdfunding works best with products that have a viral potential.
Let’s say you want to publish a great new board game. The board game community is tight-knit and while the market isn’t the biggest in the world, word can spread quickly. So you set up a crowdfunding proposal, explain your game and offer to sell first edition copies for $49.99. However, those who crowdfund you can buy the game for just $29.99.
Find New Partners
Finally, if you’re struggling to find financing, you should ask yourself if your team is big enough. Maybe you can bring in a new partner who can help you grow your business. This partner might contribute funding. Or s/he might work on a sweat equity basis, foregoing wages but taking a stake in the company.
As your company grows, all of the above funding options will become more realistic. Venture capital firms and angel investors, for example, often prefer to invest in teams rather than lone entrepreneurs. Banks, likewise, will be more likely to lend to a company that is producing revenues.
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