₦airaland Forum

Raising money for your new startup isn’t as
difficult as you may think.
However getting the right source of funding is
slightly more complex. Each source of capital has
its own unique advantages and disadvantages.
Here are 8 of the most reliable sources when it
comes to raising money for your startup .
8 Ways To Raise Capital For
Your Startup


1 – Crowd funding
While crowdfunding is still in its infancy as a
means of raising money for your startup its
popularity is rapidly increasing. Crowd funding
takes it name from the fact that your project is
funded by the public using their own personal
funds. To start with, you propose the idea that you
wish to see funded. People can then choose how
much or how little they want to give you. Most
crowdfunding sites currently use a reward base
model where people who invest in a new business
venture are given some form of reward such as the
product that is going to be produced. However
changes to US law will soon allow equity based
crowdfunding.
Some of the best crowdfunding websites for small
businesses include Kickstarter , Indiegogo, and
Fundable.
2 – Angel Investing
After entrepreneurs have made their fortune many
of them look to invest their funds back into startup
businesses. These are known as angel investors.
Some of the worlds largest businesses including
Google, Facebook, Skype and Twitter have received
angel investing.
The benefits of receiving angel investment go
beyond the purely financial. The advice and
connections that a good angel investor can offer
can be equally as valuable. Angel investors are
willing to take on the risk of a brand new
startup. There are a number of angel investing
networks which connect entrepreneurs and
investors. Some of the biggest networks include
Golden Seeds, Tech Coast Angels and Investors
Circle.
3 – Family and Friends
Your family and friends want to see you succeed
and may even want a stake in your potential
goldmine for themselves. However using family
and friends as a source of raising money can be
problematic. It can create a strain that can ruin
personal relationships. It is also worth
remembering that over 50% of small businesses
fail in their first five years often because of factors
completely outside of the control of the owners.
Make sure that you are not borrowing money that
they can’t afford to lose. Put any lending
agreement in writing with the terms clearly laid out
even if it is a “friendly” loan.
A number of successful businesses have started
out with a loan from friends and family, so don’t
shoot this idea down, just be mindful about the
pitfalls and burdens that may come about in
turbulent times. The risk is high but so is the
reward when you are able to grow not only your
own wealth but friends and families along the way.
4 – Credit Cards
Credit cards should be viewed as a temporary
measure between getting your business started
and obtaining other financing such as a bank loan.
Given the hefty 10 – 20% plus interest rates on
many credit cards they are generally not a good
source of loan term capital. That said credit cards
have been used by many entrepreneurs when their
was no other options available. In the mid 1990s
the founders of Google initially funded the company
using credit cards. While the founders maxed out
their credit cards they used the funds wisely,
purchasing second-hand computers instead of new
ones and open source software instead of off the
shelf.
5 – Bank Financing
One of the most common ways that people raise
capital for their small business is through a bank
loan. Your banker may request that you have your
loan guaranteed by the Small Business Association
before approval. The SBA is a government agency
who will guarantee up to 80% of the value of the
loan for applicants which meet their criteria.
Alternatively you may be able to offer some other
form of security such as your home to get your
loan approved.
6 – Second Mortgage
Second mortgages are also referred to as home
equity lines of credit. These loans tap into the
locked up equity you may have in your home. To
calculate how much you may be able to borrow for
a second mortgage take the value of your home
and deduct the value of any outstanding mortgage.
Be aware some lenders may only lend only up to
70 – 80% of the fair value of the home. One of the
biggest advantages of using a second mortgage is
that the interest rate tends to be lower than with
others form of financing. This is because the bank
knows it can always recover the value of the loan
by foreclosing on your property if you are not able
to meet your interest payments.
7 – Venture Capital
Venture capitalists aim to invest in early stage
businesses with high growth potential. Traditionally
venture capitalists received equity in the business
in exchange for funding it. However these days
they typically demand a mixture of equity and debt
financing.
The venture capital business is based on the idea
of a few big wins making up for a lot of poor
performers. In fact approximately 3 out of 4
businesses which receive venture capital fail.
Because of this venture capitalists look for
businesses which have a lot of growth potential. If
the market for your business is more modest you
may need to look elsewhere for funding.
8 – Business Partner
You might not have the money to get your
business started but maybe you know someone
who does. Of the Inc top 500 businesses, 28%
received seed funding from a co-founder.
When selecting a partner for your business you
need to make sure that their own goals for the
business are aligned with yours. As a business
partner they will have control over the direction of
the business. It is also a good idea to have a buy
out agreement in place in case of a breakdown in
the business relationship. This should stipulate
that the other partner must agree to a proposed
buyout within a set time frame or buyout the other
partner themselves.
Finally it is worthwhile looking at the lesson of
Facebook. CEO and founder Mark Zuckerberg had
seen how earlier dot com companies had been
willing to give away almost all of their equity to
venture capitalists in order to get funded. He
wasn’t going to make the same mistake and never
gave up equity lightly. His 28.1% stake is now
worth $14.9 billion. Be careful to negotiate your
own financing terms with equal tenacity even when
all you have is a vision for the future. The
difference may one day be worth millions.

One problem most young entrepreneur in Nigeria face today is How to raise capital for their new business, Am here to help out on the issue of raising capital for new business. let us pull up ideas on raising capital for new business! you are all welcome to contribute!

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