Many people think that the hardest part of starting a new company is coming up with the idea and business structure. However, the actual hardest part can be getting the financing to get your company off of the ground.
There are many different routes you can take to get the money you need. Some may be chosen as a last resort, but sometimes you have to suck it up and do it for the sake of your company.
Expert Juan Carlos Bertini has experience in finance helping companies grow through funding, and can help your startup as well with these tips.
Venture Capitals
This is the money that you can receive that is given to startup companies. It’s a high risk and high reward fund for investors so it may be difficult to get the funding you need.
Basically what happens is a group of very well-off investors from various walks of life pool their money together to fund small businesses they believe in. From there, they will give that to the startup company in exchange for equity in the company and possibly some of the revenue.
It’s usually within the first five years that they expect serious returns on their investments. This means that they are hoping for the startup company to be acquired by a much larger firm or gain the ability to sell stocks.
Although it’s a bit harder to find money from Venture Capitals (think of the show Shark Tank) this is the best way to get a large amount of funding.
Crowdfunding
The power of the internet has created the growing phenomenon of crowdfunding. Websites such as Kickstarter allow you to pitch your business to the site’s viewers in hopes of having them give your company money for funding.
It’s not always a large amount as many people will give as little as $5, but you don’t owe them interest back. However, it is more appealing when you can give a reward for their investment in different stages.
This can be anything from a t-shirt from your company all the way up to equity depending on the value of their donation. Many companies, books, movies and much more have been launched using this method.
People You Know
This may be the last thing you want to do, but it may be absolutely necessary if you can’t find funding in other places. Perhaps you have grandparents that are sitting on more money in retirement than they know what to do with. It’s a lot easier for them to invest in you than an accountant that they don’t know.
Loved ones are always there to help, so don’t be afraid to ask if you really need to.
Find a Partner
Think of this as something similar to a Venture Capital except you only have to deal with splitting your profits with one other person. Obviously, this person will have to have quite a bit of money and you will need to sacrifice a significant amount of equity.
Some are wary of partnerships as things can go a little sour after working together for so long, but it may be worth the investment.
Personal Savings
If you have any life insurance policies, home equity or life savings, it may be time to cash those out. There can be a lot of money in those accounts and if your company pans out, you can put the money back in there to set yourself up for retirement.
However, it’s a very high risk so you have to make sure that you really believe in what you are doing.
There are a lot of other methods in which to get money, these are just a few. There are loans and grants available from banks and the government that can help you get started. Explore all of your options before making a decision as it could be the biggest one of your life.
Article contributed by Jenna Smith
