Sourcing For Start-Up Funding
Funding is usually the core of modern startup failures. It is also the reason why several business minded individual do not take actions at all. I have always wondered, if someday finance personified, would have a voice to deny this allegations as being the #1 obstacle in people's career. it is so important, that holds the power to determine if a business will fail or succeed. Be careful though, it does not guarantee success either. Entrepreneurs and business start ups must be skilled in management of business finance. It is the only avenue that can determine which funding source is applicable. It is only when financial sources are identified that we plans to convince the applicable stakeholders for business funding. A good business plan can get you the funding you need
Sources of start up funding could be any or a combination of the following.
Friends and Family
Think carefully before taking money from family and friends. It can be awesome, stress free or could also come with its own cross for you to bear. Every situation is different. Friends and family members may not clearly understand the risk and how startups work. Take the time to educate them; if they get it and still want to be in, then you are all clear. There are cases when such funding come as gifts and without string only for expectation to change when business takes a positive turn.
Angels can be valuation sensitive. It is important to distinguish between active or professional and occasional angel investors. Before you meet an angel, understand what they are interested in. Don’t go after people randomly. It will be a waste of time.
They will commit to invest or will say no after two or three meetings. They may lead, and be comfortable with either debt or equity. Micro VC funds, will likely take longer and would not be too far off from a typical VC. These investors care about ownership, but to a lesser extent than a typical VC. They are not necessarily looking for percentage of your company depending on the size of their funds. Such fund could be used for basic business operation or Capital Investment. “Capital investment refers to funds invested in a firm or enterprise for the purpose of furthering its business objectives. Capital investment may also refer to a firm's acquisition of capital assets or fixed assets (assets being property) such as manufacturing plants and machinery that is expected to be productive over many years.
Why is this important?
If you are not getting the funding you need for your business, maybe the problem is not, whether sources are willing to support your start up, it is a problem of you not being to suitably position for external funding. Those who, you think should fund your start up not persons with excess money, who are out to do you, a big favor. This is a common misconception about potential investors. They are entrepreneurs and business minded persons like you. They want to do with their money, what you intend to do with your ideas. They need to be convinced. Your business plan will help in that regard.
Your startup idea might be amazing. How well can you package this idea? How well is the packaging able to convince your intended audience - potential investors or customers alike? You ability to get the needed funding will be a function, of how well you know your the sources and how prepared you are to convince them with your package.