So you want to start your own business but are weighing up your financing options?
Taso Tounis, Association member and Principal of BudgetOne, says the good news is there are many different funding options available for start-up business owners who are seeking to raise capital.
Whether you’re looking to attract venture capitalists, angel investors or crowdfunding, you’ll need to pitch a compelling reason to convince others to invest in your start-up company.
In this post, we’ll outline a proven game plan to do just that.
The Essence of Private Equity or Funding
There are 3 key components that distinguish private equity from traditional financing:
1. Funds are dispersed directly from private investors and not through a financial institution.
2. Capital is usually exchanged for a percentage of ownership in the company (as opposed to an interest-based loan).
3. Criteria for “qualification” are not regulated and vary from investor to investor.
The type of investor you choose to target will vary depending on the scope of your project (i.e. the more money you require the more complex the vetting process)
An angel investor is an affluent individual who invests mostly in local business start-ups in exchange for convertible debt or ownership equity. While many angels belong to “angel groups” or “angel networks” many do not openly advertise the capital they have on offer.
Angels tend to fund smaller enterprises but investments can reach up into the low millions.
|Obtaining VC investment generally involves pitching to a firm that represents a number of private investors who fund a wide portfolio of start-ups under the firm’s umbrella.
Venture capitalist firms fund larger deals but tend to focus mostly on small companies with proven financials in search of massive growth.
This has become ever so popular thanks to the hit TV show, Shark Tank. Eliciting support/interest in your project from friends and family has never been easier.
Crowd-funding platforms such as GoFundMe, Indiegogo and Kickstarter allow your personal network to effortlessly invest in your start-up by lowering the minimum investment and allowing participation at all income levels.
Crowd-funded businesses often benefit from the fact that contributions are commonly paid back with products or services as opposed to equity, making it possible to raise capital without giving up ownership in your idea. Such a technique also has the potential of going viral.
If you’re dissatisfied with your current position, tired of working for somebody else and worried that traditional superannuation won’t suffice to cover the retirement of your dreams, call Taso on 0429 142 413 or email [email protected] to learn more about securing funding for your business venture or dream.