Got a great idea? Great. Ready to start flawlessly executing it? Great. Got the funding for it? Well, not really.
The above line sums up the one big challenge that lies ahead of every fledgling startup going through its initial incubation period. There are various methods of sourcing funds, of which we are going to discuss the two most popular methods in detail. Right before we get to that, there are a few basic details one needs to take care of before asking for funding.
Is Your Idea 100% Business Ready?
- Is your idea marketable and does it translate into a long-term future for your company? Remember, venture capitalists and incubators don’t want to invest in an idea that might be great, but has a limited or short-term future ahead of it. They’re in this business for the long run and huge profits, not temporary quick-fix solutions.
- So unless your idea results in giving them the results they wish to achieve, funding is not going to be easy.
- This is probably why software startups find it easier to get funding, as the industry is constantly changing; their goals and requirements keep upgrading with time and market dynamics.
Now for various methods of securing funding-
1. The Venture Capital Way
The most popular route most startups prefer to take is the Venture Capital Way. This involves submitting your idea and business proposal to a venture capitalist or a firm and requesting them for funding your idea-to-a-business proposal in return for a stake in your firm or terms and conditions laid down by them.
Imagine you walk into the office of a venture capital firm tomorrow, asking for funding and they turn you down. Now this might come as a huge shock to you, with your Grand Idea, but venture capital firms receive hundreds of requests for funding every day and most get turned down for some reason or the other. So how do we avoid the pitfalls in the way and move ahead?
What Do They Want from You?
- They want to see someone level headed, with a strong business plan and an adept team already in place. They need to be reassured, that you have clear vision going forward. The T&C’s that they impose are a direct reflection of their faith in your proposal.
- They need to know that your growth plan for the next three to five years has already been laid out with financial objectives in place.
- If possible, keep a pitch video and presentations ready to show them. Visual elements go a long way in convincing people as compared to details on paper.
- There will be certain questions and doubts about your proposal. Anticipate these queries in advance, by running it past somebody proficient. Come up with suitable replies well in advance.
For those of you unwilling to go down the VC way, crowd funding is a cheaper alternative.
2. The Crowd Funding Way
Crowd funding is an alternative method of garnering funds for your business. It involves pitching your idea on an online platform offering incentives to those to choose to invest in it. Over a certain deadline set by the platform or yourself, people invest money in your project according to the target set by you.
- There are dozens of crowd funding platforms springing up across the country every month or so, just take your pick from whichever one suits your cause or business.
- Crowd funding platforms charge a nominal fee of 5-10% of your total funds raised, excluding service tax charges (14%) as their charges.
- If you succeed in clearly getting your message across to the target audience, expect a larger number of people to invest in your project.
What Do They Want from You?
• The campaign requires pitch videos, your business proposal and extensive online campaigning across social media platforms to spread your message.
• Clearly explain how potential investors benefit from the proposal. Since it involves asking for funds from practically anyone with an Internet connection, give all the specifics in one document or spreadsheet.
• Avoid ambivalent details.
We hope the above methods guide you towards finding the right source of funding for starting your venture. Good luck!