Money is the life-blood of any business. Without enough money, no business can survive. Most of the startups fail because of a lack of funds. So, in this article, I am going to give you some tips on how you can raise money for your startup.
Before raising money for your startup, you must exercise these basic practices:
1. You must be the first investor:
Before asking someone else to invest in your business or give you a loan, you should make sure that you are the first investor in your business. You should invest your money, time, energy, knowledge, in fact, all that you have, in your business. The reasons why you should be the first investor are :-
- The investor whom you ask to invest in your start-up, will realize that you have invested almost everything you have in your startup and that means that you believe in your startup, and it will make him more confident in you.
- It will motivate you to work harder as you have put everything that you have got into your startup.
2. Know the difference between an angel investor and venture capitalists:
Angel investors invest in small startups. Often, angel investors are an entrepreneur’s family members, relatives or friends.
Venture capitalists provide funds to start up, small businesses, and companies that are believed to have long-term growth potential
Angel investors typically use their own money, on the other hand, venture capitalists take money from many other investors and invest that money in the right businesses.
3. Have complete knowledge about your business:
You should have full knowledge about your business before approaching any investor. Investors are more likely to trust entrepreneurs who know what they are doing and are confident about themselves and their startup. You can build this confidence by increasing the knowledge that you have of your startup and it’s market.
4. Approach the right kind of investor:
If the person you are approaching for funding your startup is not interested in your startup or is not an expert in your startup’s niche then it is highly probable that he/she will not invest in your business. Collect some basic information about the person whom you are going to approach for funds. Have some information about his previous investments and his/her interest. For example, if you have launched a website and you are approaching an investor who knows nothing about an online business then he/she can only provide you the money and not the expertise that an investor brings and hence he/she is not a good investor for your business.
Exercise these practices before going to an investor for funding your startup. Now, the next step is how to finance your startup.
There are two ways using which you can fund your startup:
- Equity share financing.
- Debt financing.
You can read here the advantages and disadvantages of both these ways of finance. You can choose the way which suits you and your business the best.
Here are some tips using which you can raise money for your startup:
Sacrifice the share of the company:
You can raise funds for your startup by sacrificing a percentage share of your company. You can bring in a new partner or a shareholder in your business for more money by sacrificing your company’s share. Maybe they will act as a working partner but, chances are that they will act as a sleeping partner, so choose your partners carefully.
You can do a part time job:
Doing a part time job for funding your business is a good idea if your business requires a small amount of capital. You can earn money and develop useful skills which are required for your startup. Also, it helps you build connections with new people. But, only choose this method, if you can spare some time after giving enough time to your startup.
You can take the help of your parents:
If your parents are supporting your startup, then you can ask your parents for money. If your parents do not agree with your startup plan, then you can read these tips on- ‘how to convince your parents for your startup?’. Taking money from your parents is a great idea because you do not have to sacrifice a share of your company for funds, neither do you have to pay an interest, nor do you have a deadline for refunding money.
You can invest money from your past savings:
If you have past savings, then you can invest that money in your startup. Most of the startups are initially funded from personal savings. It might be convenient for you to use your savings because:
- You do not have to convince your parents for money.
- You do not have to take any kind of loan from your friends.
- There is no need to sacrifice a share of your company.
You can take a loan from your friends.
If you have a wealthy and a co-operative friend then you can take a loan from him/her. You can get a loan from your friends at a low rate of interest than the bank. It will be useful for those who are unable to get a loan from the bank or could not bear the high rate of interest.
You can make money from IPO:
For making money from IPO, you do not need to be an expert in the share market. You just need to fill and submit an IPO form, and if your share application form is accepted then you get the allotment of shares. After the allotment of shares, you can sell your shares for a higher price. There is no risk involved, as only reputed companies can launch IPO in the market. You can open a Demat account with Angel brokers for Rs 87. After you go to the Angel Broker’s website through the link I provided you, you can enter your mobile number and in just a few hours a customer care attendant will call you and will clear all your doubts about IPO.
It might seem like a very difficult and risky way to fund your startup but believe me, it is not.
These are some very efficient ways through which you can raise money for your startup, but the main problem is that most of the startups fail not because of a lack of money but because of the lack of knowledge about money. So, I would advise you to increase your financial wisdom first, before funding your startup and to do so, I would encourage you to read ROBERT KIYOSAKI’s books. His books will educate you about money very effectively.
I would suggest you one of my all-time favorite books, “RICH DAD POOR DAD”.
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You can also watch an animated summary of this book: