Now that you have a billion-dollar idea that you have used to open a company with, what is the next thing you need? Well, the next step is to create a website, build/rent office space, hire a professional team, and obviously have some free-flowing cash that would help you pay the rent and the salaries easily at least. All this just means that you require capital. Regardless of the kind of business, every startup needs some amount of cash to actually get off the ground during the initial days.
Today I’m introducing you, Mr. Tomas Milar a serial entrepreneur and investor. As a founder of 10 companies, Tomas is often asked by many entrepreneurs for tips on how to finding the right kind of funding. And there is good news for everyone; there are many places from where you can get funding depending on the amount you want and the funding plan you are comfortable with. Keep on reading to know where to search for the capital that you need for your business, and also understand which is the right one for you.
A Little About The Journey of Tomas Milar
A serial entrepreneur who focuses on the growth of various companies, Tomas Milar started his career in 2006 as a young entrepreneur. He has traveled the world creating and developing international partnerships and business projects. The very first business that Tomas started was Startupr that has now become an international company with 6 branches around the globe. He also acquired IncParadise — a business incorporation service providers in the USA and last year he started another company Eqvista headquartered in Las Vegas, Nevada — which is a sophisticated equity management software to track and manage all company share activities.
Tomas Milar
Being a startup business professional, Tomas Milar’s companies have guided and helped over 15,000 entrepreneurs over the years and still hopes to do better. And with the aim of assisting the startups to succeed, he has shared some of the top funding tips that can help you with your startup idea.
Check them out below:
Try Bootstrapping
The very first step to start your own business is by using the method of bootstrapping. This means that you would need to gather all your personal funds together and use it as the initial fund to create your company. And this usually includes your credit cards, savings account and also any home equity lines you own. One of the best approaches to funding your company is to use the money that you already have rather than loaning it from outside.
As a matter of fact, a few entrepreneurs still bootstrap their business until the company begins to generate profits. The reason as to why this method is the best one is because you would not be weighed down for a long time due to various monthly payments and extensive loans. Moreover, you would be able to avoid running into any snags that you might have entered if you take up a loan or raise capital from the outside.
But in case you are a person who wants to scale your business faster than normal, it is better to get funding from an outside source. Tomas also suggests that you should also think about the situations when the funds go out. What would you do then? Also, what happens when you decide that you need more money for running the startup? Well, bootstrapping would not help in these cases and there are some places where you can start from as explained in the next parts.
Ask Your Family & Friends
Even though it might seem like a daunting task to ask your family or friends for help with a loan for your business, it is a great step to consult with your closest people before heading out to look for external funding. Moreover, it would not hurt you to ask them for it. While your uncle does not have the fund or is not able to help you out completely with capital to run your dream business, he might give you a little to start off with the right foot.
One thing that you need to keep in mind is that before you ask your family and friends for money, you need to create a perfect business plan. Everyone would want to see a proof of what they are giving the money for. With the business plan, you would be able to explain everything about your idea, what you are selling, how you planning to earn from it and how much money you need to from them to give your company a kick start.
Moreover, Tomas suggests that it is better to be clear with the person you are getting the funding from. Let them know if it is a loan, Investment or just a gift. That is, if you would give them back the money, they would get a share from the investment or you would not be giving anything back at all.
Explore Alternative Funding Sources
For those who need more money and cannot survive in running a business with just bootstrapping or asking your closest people for help, there are many other alternative funding sources that you can opt for. Let us say that you are looking for an amount that is about $5000 or lesser, you can raise the capital from a few micro-loan organizations who offer funding to the startups.
Other than this, you can take help from the various crowdfunding sites that are becoming highly popular. A few top sites that are used by many entrepreneurs are IndieGoGo and Kickstarter, as per Tomas. These platforms offer a chance to raise money from various small supporters across the web from around the world.
All you have to do here is set a campaign and give a name to it. You would also have to set a target amount that you are looking for to use for your company. Other than this, you would have to create advantages that the donors would be able to enjoy after they have donated a certain amount. With this setup, you would be able to raise the targeted amount of money within a particular time.
In IndieGoGo, you would be able to keep the amount of money you raise within the time even if it is less than the target for a fee. Moreover, on Kickstarter, you can only keep the money when you have got the amount as per the target set. As per Tomas, it is better to go with IndieGoGo. You can also check out the most suitable one from many others online and select the one you are most comfortable with.
Look to Angels or VCs
Some companies do not usually need more capital as they begin to earn profits, but there are some companies that need capital as they grow. A tech startup is one such company that would always need capital as it grows, like Facebook. This is because you would need more money to rent/buy more office space, hire new specialists, and branch out. The crowdfunding and bootstrapping would not help you grow. In this situation, you would have to connect with outside investors.
To begin with, you can meet up with angel investors. Normally, these people are businessmen who want to make the best from what they have earned. Hence, it is used to invest in other companies in exchange of the company’s shares. Moreover, the angels invest only in the companies that have a promised future, which is all based on the business plan and idea of the company. The investment that angels offer ranges from $10000 to a million dollars.
To get in connection with an angel, you can search in your network or ask business professionals to let you know about anyone they know. Moreover, you can also check to find out the events in which many angels come together. These kinds of events mostly exist so that the startup companies can pitch their idea to the angels and if any angel like it, the company might get the investment. Another place to look at is the AngelList, which is a website that would help you connect with investors easily.
In case you are looking for a loan that is more than a million dollars, then you need to connect with a venture capitalist (VC). These are usually wealthy men or huge companies who offer investments ranging from a million dollars above. Moreover, these investors offer the investment only to companies whose idea is strong. And, you would have to offer them with a part of the company shares (ownership) in exchange for the investment. So, keep this in mind when choosing the investor you are about to approach.
What’s next?
From the tips above, you can choose the one that suits you the best and that would work for you. Remember that you should not just head over to take up a huge loan when your need is just for a few thousand dollars. It can end up being an issue for you since you would spend a lot of time repaying it or lose most of your company shares on a deal that you just wasted. Also, for the investments you get, you would obviously compensate them by offering your company shares to the investors. And to keep a track of them you would need a cap table.
Once you have started your business and have also obtained the investment for your company, you would need a way of managing all the shares you have given out for the investment or for the partnership you have. All the management can be done by using a cap table.
A cap table is a sophisticated table that holds all the information of the ownership stakes of the company (who owns what amount of shares), and the legal documents that are related to the company shares.
Even though many use the Excel spreadsheet for keeping the shares, it usually becomes tough to manage it when the company grows due to the increase in the number of details and legal documents needed accordingly. Hence, it is better to use a cap table software for this. Eqvista is a FREE software available for entrepreneurs to use and manage all the shares of their company. It also assists in staying compliant to any of the laws related to the company shares.
Bottom Line
Getting the funding for your company can be the most difficult task, but it is the most rewarding one as well. As soon as you have got the funds in your hands, ensure that you make the right use of it and help your business grow. This is the only way you would be able to reach success.