Step By Step: Funding to Turn Your Idea Into a Business – Part 4
You’ve done the research, you’ve tested and analyzed, and your financial projections are looking great, both from the top down and the bottom up. Now that you know how much you need to start your company it’s time to figure out where that money is going to come from.
Before you go heading to the Shark Tank, go over all of your options for funding. Start with your closest sources of income, like friends and family. Many entrepreneurs have had their mom or dad as their original investor. But, you need to be smart about it. Even if you get your startup capital from your family, you still need to treat them like any other investor and make sure they get their money back, and then some.
Overview of your choices for funding your startup
You can also look inward and finance your business yourself. Take out a loan, use your credit cards, and dive into your savings, if you’re been wise enough to have savings. Depending on how much you need, your safest bet may be to invest in yourself. And, future investors are more likely to take you seriously if you have your own money invested in your company. If you’re not willing to finance your product at least in part, how can you expect to convince someone else to put up the funds?
If you can’t come up with all the money you need by yourself, your family and other smaller private equity loans you, can start looking at your other options for getting capital like crowdfunding, angel investors and venture capitalists.
In the next few weeks, we’ll be looking more closely at the pros and cons of each type of funding. Not all types of funding are beneficial to every startup. The type of funding you choose will affect the way your company functions, so don’t be tempted to go for the investors with the deepest pockets. Investors come with expectations. The more money they put up to fund your business, the more they are going to want in return. Don’t bite off more than you can chew and don’t write checks your business won’t be able to cash.
Next: Choosing the right investor for your business