How to raise capital for a startup

How to raise capital

6 Easy Ways to Raise Capital For Your Startup

If you want to know how to raise capital for your business, you’re not alone. We are here to describe the same to help you out.

Whether you’re an entrepreneur, a startup, or an established business owner, knowing how to raise capital can often mean the difference between success and failure. 

While money doesn’t grow on trees, there are a number of ways you can seek funding for your business—some more traditional than others.

In this article, we’ll explore several capital raising strategies and provide advice on preparing for a capital raise.

We have listed six ways here so you can raise the money for your business.

1. Bootstrap your business/ Fund it yourself

It might not sound ideal, but investing from your personal savings is probably the easiest way to raise capital for your business. Of course, funding the business yourself carries some risk.

However, the fact that you have enough confidence in your business to invest in it can make investors or lenders more likely to commit funding to it too.

Perhaps you think funding the business yourself carries lots of risk—and it does. But it’s important to consider your potential. Provided that your business isn’t operating in an industry that requires lots of startup capital, like manufacturing or transportation, you can potentially fund your own venture—and it may be more feasible than you think.

Investing some of your own money will usually make investors and lenders more willing to partner with you down the line.

2. Launch a crowdfunding campaign

Crowdfunding is the most recent capital raising strategy to make it onto the scene. Thanks to the internet, startups like Elevation Lab (makers of the iPhone dock) and Oculus (later acquired by Facebook) have become household names.

There are many crowdfunding success stories out there. And with the right product and pitch, you can be one of them.

Crowdfunding gives you the opportunity to connect with like-minded people who you wouldn’t normally be able to engage. You can gauge interest in your product and understand what’s resonating with people and what’s not. This shows you how to improve your product and your pitch. Most importantly, crowdfunding can help you raise money to fund your business.

So, how do you launch a successful crowdfunding campaign to raise capital for your business? We are here to help you. Please schedule an appointment with us and we will help you in the journey.

3. Apply for a loan/ Business loan

Small business loans are still a major stepping stone on the road to success for many entrepreneurs launching a new business. However, loan approval is not guaranteed. You will need to meet specific requirements, like having an excellent credit score and being in business for a certain period of time. 

Even as technology creates new ways of raising capital, traditional financing products remain the primary way small businesses fund their operations.

If you have outstanding invoices, you could opt for invoice financing to get that money faster. Or, if you need cash for machinery, tech devices, office furniture, or something similar, consider equipment financing.

Before applying for a small business loan, you might be asked to show a profit and loss statement, balance sheets, tax returns and bank statements. In some cases your personal information may be checked as well.

4. Raise capital by asking friends and family

Raising capital through friends and family is a viable option for many. That could be a loan or equity in your company. If the money is a loan, agree to a repayment plan and use a P2P lending website to document everything and manage the loan.

5. Find an angel investor

Angel investors are wealthy, accredited individuals that usually fund businesses alone but sometimes join other angel investors to do so.

By definition, angel investors are accredited individuals with a net worth exceeding $1 million or annual income of more than $200,000. They typically operate alone, but may team up with other angel investors and form a fund.

Angel investors can be a good source of capital for your business. First, you must have a solid business plan put together and a great pitch ready. You have to capture their attention with enthusiasm and promising data points about your company’s current situation and future potential.

You may be wondering how you find angel investors. This might seem difficult, but many resources exist. And we can also help you to connect with Angel Investors. Please schedule an appointment and we will help you in the journey.

6. Get investment from venture capitalists

Venture capitalists tend to invest in more mature companies than angel investors, and operate out of a firm, rather than working alone. Compared with angel investors, venture capital firms invest in a lower ratio of businesses that apply for funding – but when they do, they generally invest more money. 

Venture capitalists (VCs) typically want to invest in slightly more mature companies than angel investors and sometimes want to have more of a say in managing the day-to-day operations.

Since VCs have a responsibility to achieve certain returns for the firm or fund, they want scalable and cash-flow positive companies with proven and scalable products and businesses.

If your company satisfies certain requirements, you could apply for an investment with a VC firm. It’s not the easiest thing to accomplish, but plenty of small businesses have done it successfully. Please schedule an appointment and we will help you in the journey.