Here’s how you can raise money for your business for the first time without going bonkers.
Congratulations on your decision to start a business. You’re in great company here. Most of our readers are people who want to start or are currently running their own businesses.
One thing you would have noticed by now is that businesses don’t just happen. Even with a brilliant viable idea, you need to put several moving parts in place before that idea of yours can become a business.
And, you need money – loads of it actually, to turn your brilliant business idea from just ideas to reality.
Here’s the thing, you will need to build a modern, user-friendly website for your business. You will have to set up a team to successfully launch your startup. And, you will need a marketing budget no matter how small to create the first buzz for the business.
Unfortunately, all of these cost money; which right now you don’t have.
Regardless, of whether you sell physical products or services, you will need money to get the business off the ground.
Here’s where you are luck once again, most of our readers were once in this same position you are in right now before they went on to raise cash for their business.
So, how were they able to raise money for their business for the first time?
Bootstrap Your Startup
This is the most common suggestion that start-up investors and experts recommend. You need to ask yourself whether or not you need an investor.
According to research, more than 90 per cent of new businesses launched by following the bootstrapping method.
Bootstrapping – otherwise known as self-funding – means starting the business with your own money. And it is a good thing to have some skin in the game. This is because no investor will look at you twice if you have not invested anything into your own business.
Moreover, self-funding also ties you to the business. However, this may not be an excellent option if your business needs money right from the first day.
And this takes us to the next point.
Family and Friends
It is not always a pleasant experience asking family and friends for money. It can be a daunting prospect because not all of them will believe in your dream.
But you shouldn’t allow that to stop you from asking. It never hurts to ask. Just make sure your business plan is drawn up and ready.
Your business plan will help to explain what you intend to do, how you will make money, etc.
You may also need to specify whether you need an investment, a loan or a gift. Should they expect their money back? When should they expect their money? Etc.
Crowdfunding has helped many businesses to get off the ground. In 2013, crowdfunding sites raised an astonishing $5.1 billion. That is billion with a “B.”
Crowdfunding gave many side projects fighting chances, and those businesses went on to become multi-million-dollar companies.
For example, Oculus Virtual Reality was crowdfunded before being purchased by Facebook in 2014 for $2 billion. Bragi Wireless Headphones, and SkyBell Video Doorbell, just to name a few were a couple of other American companies that were crowdfunded.
Here’s how a crowdfunding campaign works: an entrepreneur with a business idea or existing business signs up on crowdfunding platforms like Kickstarter, Indiegogo, etc.
Next, a full description of the business will be posted on the platform. You will need to state the following:
- Your business goals
- The plans you have for making profit
- How much funding do you need?
- Why do you need such an amount for your start-up? Etc.
If users after reading through all the information you provided liked the idea, they will donate some money.
Another benefit of using crowdfunding as an option for raising funds for your business is that it can help in marketing your service or product.
It is also perfect for small businesses as it cuts out brokers, professional investors, etc. and puts the entire funding in the hands of the general public.
But then, if your start-up has an impressively successful campaign, you may end up attracting venture-capital investment later on!
Most angel investors are business professionals that are highly successful. They are individuals with high net worths and are always interested in investing in companies with potentials to become big.
You can make inquiries at the Lagos Angel Network which is an invite-only group for angels investors in Lagos. Also, think of asking for suggestions and or recommendations from your entrepreneur friends.
Most of the tech start-ups in the country today were funded with angel investors’ money.
Consider Taking Out a Bank Loans
To qualify for a traditional bank loan, you may have to prove that your start-up is making money already. And that a loan can help you to make much more.
In recent times, many of the major Nigerian banks are beginning to show interest in funding small businesses. Check out UBA’s TETF grants for entrepreneurs. Union Bank, Fidelity and GTB also have loans earmarked for SMEs
Of course, each bank will usually have their terms and conditions. A traditional bank loan may be what you need to get ahead with your start-up.
Final thoughts on how to raise money for your business for the first time
The hardest part of getting started with a business idea is the funding aspect. But following the suggestions above can get you started on your dream project.
So, follow and enjoy the process, no matter how long down the road it takes you. And if you don’t lose steam along the way, your startup may soon be ranked among multimillion-dollar companies within a few years!