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How to Raise Capital for Your Startup

For many startup companies, this touchpoint necessitates a capital raise. But fundraising is not necessarily formulaic as investors vary, strategies differ, and how you secure funds might be unique to your circumstances. 

If you are new to this endeavour, don’t worry cause we got you covered. There are many ways to raise money for your startup. With that said, we built this guide to spotlight some methods you can utilize when raising capital. 

Let’s get started.

Different Ways to Raise Funds for Your New Business Venture

Get to Know Your Investors

Where your business lies in its growth cycle and what its specific capital needs have a significant impact on your target investor. This is because not all investors are the same. 

Primarily, here are the types of capital investors you should consider:

Banks Obtaining a loan from a bank allows you to fund your venture without sacrificing equity, even though they are usually not considered traditional capital investors. However, you must also demonstrate that your venture is viable and you will be able to repay the debt to qualify for a loan. 

On the other hand, you might as well consider outsourcing business avenues like outsourcing debt management. Finance to a trusted BPO company for more efficient outcomes and help you with your business loans.

Angel Investors – This variety of individuals might be entrepreneurs. They may be inclined to offer organizations with seed capital or even loan in exchange for debt or even equity. 

Family and Friends – In the earliest stages of smaller companies, family and friends are mostly the most logical place to source a fund. As these people already know and trust you, they care more about investing in you than the project itself.  

Crowdfunding – In this route, money is raised via the internet through different platforms, often in exchange for a “gift”. There is also no obligation of repayment or equity disbursements to entrepreneurs when they raise small amounts from many people in this type of funding. But, for more chances of success, it would be best to have a robust network of friends and family and essential marketing tactics. 

Venture capitalists – VCs are usually interested in sinking large amounts of money into the earlier stages of a company’s life cycle. They are also industry-specific. Thus, they invest in industries where they see massive potential for growth. 

Networking and Relationship Building Matters

It's important to build relationships with people from different backgrounds and cultures because it can open up new perspectives.

Investors are often sceptical of taking risks on people they do not know. They do not invest in businesses that have not yet demonstrated proof of concept. They also want to prevent taking years before they see a return on their investment. 

So to counteract this phenomenon, you must focus on building relationships by employing the assistance of individuals with an established presence in your industry. For instance, alumni networks, fraternity networks, and small business development centres are helpful for business relationships. It can help open doors for your business toward more prominent investors.

Sell Yourself

A business professor from Harvard stated that when receiving a business plan, he usually reads the resume section first. Without the right team, none of the other parts matter. It only means that investors are not always investing in a business but in people. So take time to pinpoint how you can effectively sell your team’s capabilities. 

Showcase Your Company’s Value

In other cases, investors would also want to discern whether you can build an engine that runs at scale. So you have to demonstrate the value of your goods or services. Then, outline an actionable strategy you will deploy to grow it for a successful capital injection. 

Reach Out To Many As Possible

Closing a deal with investors is also a numbers game. So even if the likelihood of receiving dozens of no’s from your pitch comes, the more people you connect to, the better your opportunities to find someone that perfectly matches your business ideals and vision.  

Although, in this number game, one must also consider being strategic. An article from CrunchBase recommended that for every 100 investors you contact, you will foster five genuine conversations. And that’s why you must not randomly cast tons of lines. Instead, you must target your list toward investors that actually work in your sector. 

Conclusion

Raising capital for a startup is the process of acquiring financial resources to start or continue the operation of a business.

Raising capital for a startup can be a tiring and painstaking process. You will inevitably face rejection and setbacks, especially if you don’t approach fundraising from a well-thought-of position. But have no fear! Integrating these helpful methods can help you seal the deal. 

At The Lead Enquiry, we provide high-quality financial consulting and outsource accounting services to help you make the best strategic decisions possible for your growing venture. Contact us today. 

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