Startup Business Funding

startup business funding

Startup business funding would possibly be your biggest concern if you think you have a brilliant business idea which could be converted into a lucrative venture. Most startup entrepreneurs feel that they are completely justified in expecting millions of pounds to flow in the form of startup business funding for supporting their self proclaimed idea. However, the truth is, no matter how novel or lucrative your idea may seem to you, the investors who provide startup business funding, need to be convinced big time. They would never invest in your venture, unless completely convinced about the commercial viability of your idea and your business acumen as well.

Hence, startup business funding has a lot to do with communicating your ideas across well and representing them in positive light. You need to package your ideas in such a way so that it automatically attracts startup business funding. In order to pitch your idea, you also need to determine your target segment correctly. Startup business funding can be successfully garnered only if you can understand your own business well and determine the specific needs so that you can target the right kind of investors.

At the outset, you must determine whether your startup business funding requirement is for long term or short term. How soon would you be able to pay back your loan or pay the amount due for return on investment? If you have a strong business plan in mind, then you will have ready answers for all these questions. Then, it will be easy to target investors with common goals. Some of them who provide startup business funding would be looking at short term gains while others would probably favour long term investments with profitable results. If you know who to approach, the process would seem easier.

The next most logical query would be, exactly for what purpose would you be utilizing the startup business funding? Would you be using it for operating expenses or for acquiring assets like machinery and office space? Some investors would probably not prefer their reserves to be converted to capital assets, while others may favour it immensely. If you have your plans clearly chalked out, gathering the required startup business funding would be easier. You will be able to provide venture capitalists with the opportunities they are looking at, specifically. A focused approach should actually help a great deal.

You must also have a requirement schedule chalked out, before approaching any financer for startup business funding. Since it is a business startup, the trends could be quite different from established businesses. You must inform your prospective investors if you need all the money at once or in instalments. The duration between 2 instalments and the exact amounts required for each, should also be chalked out in advance. Thorough planning will not only impress your investors but will also do away with any misconceptions or misunderstandings which could stem later. Last but not the least; you must also let your investors know if you are willing to solely assume responsibility of the risks, in case your idea crashes. Alternatively, you could also look at sharing your risks. Either ways, your investor must be informed.

The process of seeking startup business funding should therefore be approached with a great deal of transparency. Since investors who would provide startup business funding would be locking their reserves for a considerable period of time, they would want to participate and validate the business processes of your startup. They would also try to assume control and play a major role in decision making processes and other essential aspects. Most of these investors are normally experienced people and allowing them to become a part of your day to day operations, is not a very bad idea. However, you should always put a check on the extent to which you would allow them to take charge.

Startup entrepreneurs should always keep in mind that a majority of financers who provide startup business funding, look at a commitment of 2-3 years to a maximum. All they want is to maximize their ROI on the startup business funding amount, and withdraw their funds, exiting from the venture. Such short term investment goals might prove detrimental for the future of your startup, unless you have already planned for it in the past. If the startup business funding is provided with a long term perspective, by the investor; there is no harm in making him a part of the key business processes. He would then work towards the long term benefits of the venture, instead of milking it, in between. However, it is best to keep the key controls in your own hands so that you do not face any problems in future.

Broadly there are two types of startup business funding options you might try for startup business funding. The more popular one is “debt financing”, which is also quite simple. In debt financing, you borrow a certain amount of money and promise to pay it back within a stipulated time period. You must repay your business startup loans, irrespective of whether your venture is successful or otherwise. Therefore, you need to be very sure of the success of your idea, before considering debt financing as a startup business funding option. Inability to pay up on time makes you a defaulter and legal action might also be taken against you. Such cases will tarnish your image as a borrower and you might not be allowed to borrow money legally, in future.

The other option is to seek “equity financing”. In this one, the investors acquire part of your shares in lieu of funds and they also assume some or most of the risks involved in the business. So, if the business flops, they lose their money and vice versa.

Startup business funding, could prove to be tricky thing to handle. You need to strike the right cord with your probable investors at the outset, and establish a strong trust worthy relationship with them. All aspects should be spelt out clearly, preventing misunderstandings. Take the right path and you are sure to encounter success.