When you start a business, you need money right? Depends on your business idea, some people need more than others. If you can fund it yourself then great. If not, have you decided how you will fund it?
Some funding ideas
This is a popular option for start-ups especially if you are only interested in getting that all-important seed investment.
There are a lot of crowdfunding options to choose from. The way it works is: you create a campaign and include how much funding you need and how much equity you are giving out. Say you are looking for £150,000 in exchange for 30% equity. Investors tend to invest anything between £100 and £50,000 therefore if you are raising £150,000 you might end up with hundreds or thousands of investors. It might also take some time to raise that kind of money and having so many shareholders could look unattractive later.
2. Business Loan
You can choose to go to the bank and ask for a business loan However as start-ups are notoriously risky, the bank might ask for a personal guarantee. Which means if the company cannot repay the loan, you are personally liable.
3. Angel investors
Generally, angel investors are wealthy individuals investing in early stage companies either individually or as a group. They encouraged to invest because of the government schemes in place providing tax benefits (read my article on Venture Capital Investment Schemes – especially SEIS and EIS). The investment levels tend to be anything between £5,000 to £100,000 but you might also get a wealth of experience and industry connections. If they invest as a group, they will appoint one of them to sit on your board or if they invest individually they will ask for a sit on the board to protect their investment.
There are a lot of ways to find angel investors, through LinkedIn for example or angel networks (they might charge you a % introduction fee based on the how much you raised).
4. Peer to peer loans
Online platform matching lenders with borrowers. It’s a win-win situation as both parties are getting better rates than a bank. The interest rate and whether the loan is secured or not will depend on your particular situation.
5. Investment funds
It’s another option you should consider. Basically, investors put their money into a fund and invest it that way. They still benefit from the SEIS, EIS schemes without the hassle to find companies to invest in.
It generally takes quite a bit of time from the first meeting to completion (three months, maybe more), they also charge a % of the amount raised and they will appoint a director on the board.
6. Friends and family
If you believe in yourself and what you are doing, why wouldn’t your family and friends? But only if they can afford it! It’s like gambling, don’t gamble more than you can afford to lose! At least not with your parents’ money!
7. Founders cash
Like I said before, if you believe in yourself and have the money, invest in yourself! At the end of the day if you are not willing to risk your own money, why would investors? Also, if you need further investment down the line, investors love hearing you’ve been risking your own money!
I hope you find the article helpful. My final advice, think carefully before you choose what’s best for you! Also, don’t give out too much equity from day one as you might need further investment down the line and you don’t want to lose control of your own company and work for someone else! The equity left for you should be enough to motivate you! At the same time, a smaller piece of a big pie is better than a big piece of a small pie!
Investment is a complicated matter and I would advise you to contact a professional.
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