Best Way to Build Capital
From bootstrapping to crowdfunding, here's how to raise capital for your company.
Bootstrap your business:
Provided that your business isn’t operating in an industry that requires lots of startup capital, like manufacturing, or any machine, you can potentially fund your venture - and it may be more feasible than you think.
It’s important to consider your potential. Brent Gleeson, leadership and team-building coach specializing in organizational transformations, states, “If you believe in your vision and have an absolute refusal to accept failure as an option, you should feel comfortable investing your own money into the business.”
Investing some of your own money will usually make investors and lenders more willing to partner with you down the line.
Launch a crowdfunding campaign:
There are many crowdfunding success stories out there, and with the right product and pitch, you can be one of them. Fundraising in itself can be a full-time job. It can be an emotional roller coaster that drains all your time and energy. You may never know if your pitch will yield success 10 minutes from now, or ten years from now. The key to all of this is to remain humble, calm, and strong throughout the process. You are going to hear a lot of people say “NO.” Do not fight them. Accept their input, learn from them, and move along; handle this all with grace.
Get investment from venture capitalists:
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 & cash-flow positive companies with proven, and scalable products & businesses.
Raise capital by asking friends and family:
Raising capital through friends and family is a viable option for many. According to the Global Entrepreneurship Monitor, 5% of US adults have invested in a company started by someone they know.
Venture capitalists, like angel investors, exchange startup capital for equity. Venture Capitalists focus on later-stage funding, usually exceeding an amount of $2 million in the capital. Venture capitalists do not pay out of pocket, but rather invest other people’s money in the form of private equity, pensions, etc. Because of this, they frequently take on high-risk, high-reward companies, like young technology startups, in hopes of them being sold or reaching an IPO. They also take on much more equity in the company along with influencing important business decisions. Venture Capital deals with big money, so ask yourself, can my business make $100 million?
If you want to grow fast, you probably need outside sources of capital. If you bootstrap and remain without external funding for too long, you may be unable to take advantage of market opportunities.
While the surplus of lending options may make it easier than ever to get started, responsible business owners should ask themselves how much financial assistance they need.