If you need help to fund your business, there are some things you need
to do first, that can make your business more attractive to investors.
The followings are an easy way to improve your business image and make
it become good-looking in investors' eyes.
The most important thing, you should always talk to a qualified business
attorney. There are a lot of laws pertaining to how equity capital can
be raised from the public, and the laws change often. You need someone
who understands not only these laws, but also how to make sure that any
business contracts are written to protect you and your business,
especially the fine print.
1. Using your savings or credit cards. This is the most common way for
entrepreneurs to raise needed business capital. Before choosing this
method however, talk with your financial advisor. You want to look at
the long-term consequences of using your savings, life insurance or
credit cards, especially in the event that your business venture fails,
or does not bring in the projected return on investment (ROI). If you do
end up financing your project using credit cards, make sure that you
shop around first, and find the card that will offer you the best rate
and gives you the most "bang" for your buck.
2. Venture Capital and Angel Investors. Before even looking for venture
capital, look at your company from an outsider's point of view. Ask
yourself these questions: Does your company have a solid track record?
(Most venture capitalists don't invest in start up companies). Does your
company have the potential of becoming very large in the next five to
seven years? (People don't invest in your company out of the goodness of
their hearts. They're looking for a return on their investment -- the
larger the better.) Does your company own a good percentage of its
market, or does it stand to gain a large percentage in the next 12 to 18
months? (Contrary to popular belief, your company doesn't have to be
involved in high tech to attract venture capital). If you can answer yes
to the above questions, your next step is to find a venture capital
firm whose ideals and goals are in line with yours. Your next step
should be to look at your "circle of influence" and see if you know
someone who can give you a personal introd
3. Taking your company public. Although security laws in the U.S. have
made it easier for companies to go public, and offer stock as a way to
raise needed funds, this is still probably the most risky choice. It is
usually not a recommended option for very new or very small companies.
Because of the number of legal issues involved, consulting with a
knowledgeable attorney beforehand is vital. There is also a lot of
stress involved in running a public company, and a considerable loss of
autonomy and control. Before making this choice, be absolutely sure that
this is the wisest course of action for your business.
4. Potential or Current Employees. Surprisingly, one of the most common
ways (especially for new companies) to raise equity capital, is by
inviting your potential or current employees the opportunity to become
investors. With this method, not only do you get a really committed
workforce, but many equity employees are also willing to accept a
below-market wage in the beginning (especially if you do the same).
There are other benefits, but this choice is not without its pitfalls as
well. Again, before going this route, talk to your business attorney,
and put policies into place that plan for potential problems. For
example, what do you do if an employee's work becomes substandard? Or an
employee quits and goes into competition with you after learning all of
the company secrets? Putting a risk management plan into place and
considering all contingencies is your best bet for this option.
5. Getting money from relatives. Yes, it can seem like begging, and it's
a difficult thing to have to swallow your pride. Surprisingly, in a
recent survey, almost 30% of entrepreneurs said that they raised all or
part of the capital they needed through family members. If this is your
choice, make sure that you have your attorney draw up a regular business
contract. When approaching family members, talk to them about their
investment the same way you would any other outside investor. Tell them
about how much money they can make, not about how much you need their
help. And make sure that you keep to your end of the agreement.
It is mot crucial which source you decide to use. What important is that
you spend time on planning and following the advice of your personal.
With this strategy, you will increase the probability of raising the
money you need and making the relationship between you and your
investors a profitable one.
