Tackling The Challenges Of Raising Capital For Your Start-Up


A brilliant idea can be the start of a successful business, but it’s not the only thing you need. One of the main reasons that many start-ups fail is because they are under capitalized. Despite the popular stories of entrepreneurs launching a multi-million dollar concern in their bedroom with a nickel and a broken typewriter, it is almost impossible to start a successful business with no money. Unless you’re living off the goodwill of friends and family you’ll need to be earning enough to eat and pay rent, but you’ll also need money for research and development, production, marketing, office or workshop space and so on, depending on the nature of your business idea.

Your business plan is your best asset

A thorough business plan is essential to any successful business. It forces you to visualize exactly how your business will work, and to look critically at any weak spots or problems and how you hope to overcome them. A business plan is also the deciding factor when attracting investors, whether they are business angels, venture capitalists or your bank manager. As a start-up, the strength of your business plan is the deciding factor as to whether your business is a sound investment or not.

Have skin in the game 

Any investor will expect you to put a significant amount of your own money into your business. Doing this will also help you to retain more control. Your initial stake may come in the form of savings, redundancy money or personal credit card borrowing. Selling your assets- your TV, your car, your teenage comic book collection- can also be a good way of raising start-up capital.

Help for disadvantaged entrepreneurs 

David Kiger started Worldwide Express with a good idea and five thousand dollars, and eventually the company made $550m annually. Kiger now actively looks for ways to help other Americans achieve the same success. He’s particularly interested in helping socially and economically disadvantaged entrepreneurs: those who have a great idea and the guts, determination and initiative to follow it through, but for whatever reason don’t have access to capital or the right connections. David Kiger’s blog is full of advice and useful links and he aims to raise awareness of businesses in need of support, while encouraging investors to lend a helping hand.

Approaching friends and family 

For loans or investments, friends and family may well be your first ports of call. While these are often the people most prepared to help you out, turning a family relationship into a business relationship can be risky. If things don’t go as planned you could be alienated from the very people you need the most for emotional support. Ensure you have a legal contract that’s fully understood, offer favorable terms and don’t accept money they can’t afford to lose.

Early investors 

Investment in start-ups from angel investors or venture capital firms is rare; less than 1% of US start-ups are funded this way. Crowdfunding is a more realistic possibility for start-ups, with many individuals contributing small amounts in return for specified rewards or interest. An idea that grabs the imagination can raise a significant amount, and your initial funders may become your first customers and a marketing team spreading the word via social media.

Whether you fund your business through equity or debt, keep an eye on the bottom line and don’t surrender more control than you’re comfortable with. You may need to grow your business for months or years before it is big enough to attract major investors, but you should always remain flexible, creative and open to new options.

  1. 2 years ago