Starting a new business is always a daunting task, but it can be made a little bit easier if you have the right resources. Here at the David Vs Goliath podcast, we explore the different ways that you can raise money for your new business. We discuss everything from crowdfunding to venture capital and provide tips on how to make the most of each option. To learn about different ways of raising money for business, read on!
How Do You Go About Raising Money for Business?
1. Crowdfunding
Crowdfunding allows people to pool their resources together to support a common cause. This type of fundraising can be done through online platforms, such as Kickstarter or Indiegogo, or through social media networks, such as Facebook or Twitter. There are several benefits to crowdfunding.
First, crowdfunding is a very effective way to raise money quickly. In many cases, businesses have been able to raise the entire amount they need in just a few weeks. Second, crowdfunding helps businesses build a network of supporters early on. These supporters can help promote the business and even provide feedback about the product or service.
2. Pre-Sale
Pre-sale allows customers to buy a product before it is released, which helps to generate interest and create a buzz around the upcoming release.
Leading brands that do pre-sales include Microsoft and automotive companies like Tesla. These brands use pre-sales to generate excitement around their products and to ensure that they have enough stock to meet customer demand. Pre-sales can also be used to gauge customer interest in a product and to determine how much inventory needs to be produced.
3. Angel Investors
An angel investor is an individual who provides financial backing for small startups or entrepreneurs. Angel investors are typically high-net-worth individuals who have a personal interest in the success of a company. These investors provide not only financial capital, but also often have networks of other potential investors. In addition, these individuals can help you navigate the early stages of starting a company.
Some top angel investors today include Marc Andreessen, Roger Ehrenberg, and Keith Rabois. Andreessen is a co-founder of Andreessen Horowitz and has invested in companies such as Foursquare, Facebook, and Pinterest. Ehrenberg is the founder of IA Ventures and has invested in companies such as Instabet, Simplebet, and Miami Marlins. Rabois is a partner at Founders Fund and has invested in companies such as LinkedIn, Square, and PayPal.
4. Venture Capital
So what is venture capital? It is money provided to a startup or small business in exchange for an ownership stake in the company. In other words, it is funding that comes with strings attached. This means that the investor usually gets a say in how the company is run and a share of any profits. The Sharks on Shark Tank are examples of venture capitalists – they invest money in new businesses in exchange for a percentage of the company’s ownership.
There are a few key reasons why a startup might want to seek venture capital:
To Get off the Ground
A lot of startups need a lot of money to get up and running, and venture capitalists are often willing to provide that kind of funding.
To Speed Up Growth
If a startup is seeing fast growth, it might need more money than it can raise on its own in order to keep up. Venture capitalists can help with that.
To Gain Access to Resources
A good venture capitalist will have a lot of connections and resources that a startup can tap into, like access to office space, mentorship, and networking opportunities.
To Avoid Debt
A lot of young businesses take on debt in order to get started, but this can be risky and lead to financial instability down the road. Venture capital can help sidestep that issue.
5. Strategic Partners
Strategic partners are entities that a business can team up with to achieve specific goals. These partnerships can be helpful in raising money for a business, gaining access to new markets, and developing new products or services. However, it’s crucial to note that strategic partnerships involve risks for both parties involved. For example, if the partnership goes sour, it can be difficult for either party to extricate themselves from the arrangement.
Additionally, disagreements about strategy or financials can cause problems for the relationship. It is therefore important to have a clear understanding of what each party hopes to gain from the partnership and to set forth expectations in writing.
6. Credit Cards
Though not the best way to raise money for your business, credit cards offer a quick gateway to getting your business off the ground. For example, if your cash flow is low but you’re confident that things will open up soon to repay your debt, then using a credit card for your initial expenses may be a wise decision.
With a credit card, you can purchase what you need for your business without having to wait for a check to clear or worry about taking out a loan. However, using credit cards can also be risky. If you’re not able to repay your debt in a timely manner, you could end up with high interest rates and late fees.
7. Personal Assets
Most people have some sort of personal assets that they can use to finance their business. These assets may include savings, stocks, bonds, or real estate. There are a few ways to liquidate your assets when it comes to raising money for business. You can sell off investments, such as stocks or bonds. You can also sell property or other valuable possessions. If you have any equity in your home, you can also use that to finance your business.
In addition, you can tap into your personal savings. Often, it’s wise to have a rainy day fund saved up for just such an occasion. If you don’t have any savings, you can also look into getting a personal loan from a bank or credit union.
8. Sharing Risk With Your Employees
There are several ways to share risk with employees, such as reducing their annual market salary to offer equity incentives in return. Equity incentives can be in the form of stock options, restricted stock units, or phantom stock. These incentives give employees a financial stake in the company’s success and make them more likely to work hard to help it grow.
9. Small Business Administration (SBA)
The Small Business Administration (SBA) is a government agency that provides support to small businesses in the United States. This includes offering grants and programs to help businesses raise money. Note that SBA loans ranging from $500 to $50,000 are the easiest to qualify for. These loans have a longer repayment term, which makes it easier for businesses to manage their expenses.
10. Purchase Order Financing
Purchase order financing is a way for businesses to get the money they need to pay for the supplies and materials they need to operate. It’s not the most viable option for raising money for business, but it can be a great way to smooth out cash flow.
With purchase order financing, a business can get a loan based on the value of the orders they have already placed with suppliers. This can be a helpful way to get started if you’re waiting for payments from customers.
Learn More About Business Growth Today!
If you’re an existing or aspiring entrepreneur who is looking for creative ways to raise money for business, the above 10 strategies have worked well for other businesses and can work for you. Be sure to sign up for our David Vs Goliath podcast so that you can get the latest tips straight from the source. And if you have any business-related questions, don’t hesitate to reach out to us. We’re here to help!
