Monday, February 25, 2013

How To Raise Money

Money makes the world go round, or so we are told. Moreover, if you want to make money, you have to spend money. All of this has truth, however the issue of initial funding is not black and white. In fact, many business can be started for little or no cash and grown to their optimal state. Now, there are those types of business which have an inevitable cost. Business that require equipment or specialized expertise, outside of the owner's knowledge, fall into this category. This being said, it is advisable that you start with where you are. If you have little resources, there are options, however proving your mantle, makes raising funds that much easier. And as the famous saying goes, 'money gets the experts and experts get the money', so do your best to develop a great track record and the money will find you. With no further ado, here are the best 8 ways to raise funds quickly:

How To Raise Money: 3 Essential First Steps

1. Idea: Putting together a great idea is a very deep proposal. Most often, people peal the first layer of the union and think they have a great idea. No sir, this is just the beginning. Your idea has to peal every layer of the union, you have to explore the depths of it and know it inside and out. You have to know where you will get your customers, how you will get your customers, how much it will cost, how long it will take, and why they will chose you, what is the revenue model and more! Stay very very far away from from assumptions like, 'we should be able to get 1% of the US population which means $x'. Investors hate hearing that.

2. Team: Put together a great team of professionals that can help you cary out your idea. Industry experience and a great track record go a very long way. It is in your favor to have at least one industry expert, one visionary, and someone who is good at marketing and accounting. Most of all, your team has to be noble, trustworthy, genuine and A+ quality.

3. Execution: This is the nitty gritty. Great ideas don't always make it, however greatly executed good ideas do. Your team should have the ability to execute to perfection and a plan of action in doing so. Think, business plan. Also, there are many local business resources such as the Chamber of Commerce, which can help you.

Where to Raise Money: 8 Funding Sources

1. Group: Put together all 'affordable loss monies' from team members. Other investors would like to see that you have skin in the game.

2. Inner Circle: Friends and family are clearly the best and easiest options. Every little bit counts and you can structure it in a way to protect them. Further, take as little as needed and do not take more than they can afford. Apply the same principal of affordable loss to others as well.

3. Outer Circle: This is distant acquaintances and business connections. Let them know what you are doing and ask them if you can practice your investment pitch. If they like it, they will invest. Worst case, you get both feedback and practice.

4. Local Business Community: By now, you have already met with other local business people via local events and business networks, such as the Chamber of Commerce. Network with the local business community, and stir up some interest and excitement. Make friends first, plan seeds, and when the time is right strike.

5. Incubators: There are different incubators for just about every industry. With some incubators, it is as easy as sharing your idea and getting a yea or nay. Often times, incubators will give you some money for a small share of your company, help you develop your product and pitch it infront of venture capitalists.

6. Angels: If your idea has substantial growth potential in a hot industry, Angels might find it very appealing. You can find local Angels online, via Law Firms, and through local events. An example of an idea that could get funded is mobile technology app oppose to a quick serve restaurant -far less likely. Angels generally invest their own funds, starting from the $250K -$1Million range, and expect to receive 5%-15% of your company or more. They are ideal for the start up phase.

7. Venture Capitalist: Venture Capitalist use other people's money and generally invest $1million plus in business for about a 15%-35%+ equity stake. Series A, the first round of funding,  is designed for business that show great potential and are past the start up phase.

8. Crowd Funding: This is one of the most popular options today. Via the internet, the crowd can fund you! Share your idea, business plan, etc on a crowd funding site which focuses on your industry and people all over the world can help 'donate' a little to help you get started. There are a few different models, the 'donation model', 'the equity model' and 'the rewards model'.

Related Links: 
How to Find and Line Up Investors
Links to Angles, Crowd-funding, & More
Business Fundamentals
Putting Together the Perfect Team


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