The following is a 3rd party contribution
In most business startups financing is usually a concern. Entrepreneurs are faced with a hard time trying to bring to life what they have envisioned for their startup. It can be disheartening when you compare all the beauty and greatness dreamed of and the limitations in access to funding.
However, just because funds are scarce doesn’t mean taking money from any source. Some sources of capital are incompatible with your business model and can wreak havoc to the startup.
There are institutions and individuals with zeal to see entrepreneurs transform ideas into success stories. In this article, we will point out some of the best sources of finance for an events business.
Family and friends
Apart from serving as a source of low-cost capital, they will also provide the required social proof for outside investors. When pitching this group, make sure you communicate the idea clearly enough to make them believe in you.
Even when they can’t provide large sums of money, they offer a valuable ingredient in startup funding. Most professional investors will be keen to see if the people closest to you believe in the proposed business. If they do, that could mean money flowing in towards your course.
Join startup incubators and accelerators
Startups are vulnerable and most of them die off shortly after they’ve been started. Incubators serve as a nurturing ground for young businesses by providing tools, training and invaluable mentorship.
Accelerators are specifically meant to help the young business to master the success curve. Although these terms are normally used interchangeably, each of them has distinct roles and is equally important. Because these are usually associated with universities, big companies, and CBOs, getting funded becomes relatively easy. Although not directly, funds are likely to come from an investor you meet on the same platform.
Normally, they will put in anywhere between $10,000 and $100,000. Because they can be very sensitive to valuation, learn to distinguish between active from occasional angels. The funding can be subdivided into rounds and for long term funding with realistic loans sometime invested as debt bonds or most of the times shared in total capital of startup, depending on how the angel investor works.
A good practice is confirming how frequent they invest and you can do this on AngelList. Frequent angels are easier to pitch while occasional ones can be difficult and may end up wasting your time. As a rule of thumb, only discuss business with infrequent investors if they approach you or if they are industry experts with good introductions.
Micro Venture Capitalists
They can either be individuals or firms with a pool of money to invest. After two to three meetings, the decision to invest or not will be made. Normally, they will be looking for equity but they can also be contented with debt. Although they like ownership, they don’t demand as much as the typical VC and you should be ready to part with around 8%-10% of the company.
To decide whether a micro-VC is suitable to your business, study their portfolios and understand each partner. Because partners will have varied experiences, it will be wise to target specific partners on different funds.
Today, they have become one of the best ways to secure capital on AngelList. Typically, these are influential angels with an investment range of several hundred thousand dollars to millions. To get sufficient funding for your business, you need to find an influential angel with a significant syndicate.
The moment they are interested in your idea, they will invest a sizable amount in the business and the syndicate will follow suit.
Although it may take a longer time to save the required capital, you will not deal with equity issues. Also, there is no administrative control to give up and no worries about lead roles.
The SBA loans
Despite the entry qualifications being high, they have very cheap loans that are perfect for a startup. However, not all packages are limiting and the microloan program only requires entrepreneurs to sign up for a technical support program.
With the microloan program offering businesses up to $35,000, it’s a good point to start at. Also, the technical support program is very instrumental in developing business skills. With annual rates in the range of 7% – 9%, they are among the friendliest loans with guaranteed satisfaction for consumers.
Find a strategic partner or customer and strike a deal that will get you an advance
If the idea is unique and promising, it will be easy to find people and businesses that believe in the potential. If approached well, they can give you an advance in exchange for royalty payments for services.
All the sources of funds presented above require serious work on the entrepreneur’s part. As always, commitment and determination play an important role in starting a successful business. It would be a big mistake to expect free money to fund a business since funding decisions build on compromise.