How to raise money for your startup?

Raising money is simple but not easy. This guide illustrates one way how to raise money for a startup, especially for first-time entrepreneurs.

Raising money is simple but not easy. This guide illustrates one way how to raise money for a startup, especially for first-time entrepreneurs. We have seen quite a few entrepreneurs go from nothing to a funded company. This infographic is a generalization of their experience. Let us know if you have any questions about it in the comments.

Few More Tips How To Raise Money

When it comes to funding, there is one thing that can increase your chance of getting funded astronomically – traction. Yet, founders often struggle to get traction and hope that investor money will help them get it. This problem can be solved if you start lean, test your product and and gather meaningful feedback from your customers.

Use that feedback to modify your product. After you get traction, you are certain to get interest from investors. How much traction? Compare yourself to your competitors at the moment they got funding and use that as a benchmark.

Preventing people from raising money successfully, the other myth is that you can raise money before you build anything. Even if you are not an engineer, you can build a prototype of your product. You can do it in WordPress, another content management system (CMS), you can learn to code the basics. If you do not go out of your way to build your own product, why should other people risk in joining you?



Finally, when you are going to raise money, have the investors feel good about what you are going to spend their money on – not marketing, not development, not business development, but scaling.

This post was written by Anna Vital and originally published in Funders And Founders.

Image credit: www.naeyc.org

How to start a startup without any money?

You’re excited to start a start-up. But there’s one logistical hurdle stopping you: You don’t have much money.

You’re excited to start a start-up. Maybe you have an idea, or you’re just fascinated with the idea of launching and growing your own enterprise. You’re willing to take some risks, like leaving your current job or going without personal revenue for a while. But there’s one logistical hurdle stopping you: You don’t have much money.

On the surface, this seems like a major problem, but a lack of personal capital shouldn’t stop you from pursuing your dreams. In fact, it’s entirely possible to start and grow a business with almost no personal financial investment whatsoever – if you know what you’re doing.

Why a business needs money?

First, let’s take a look at why a business needs money in the first place. There’s no uniform “startup” fee for building a business, so different businesses will have different needs. It’s important to first estimate how much you need before you start finding alternative methods to fund your company.

Consider the following uses:

Licenses and permits. Depending on your region, you may need special paperwork and registry to operate.

Supplies. Are you buying raw materials? Do you need computers and/or other devices?

Equipment. Do you need specialized machinery or software?

Office space. This is a huge expense, and you can’t neglect things like Internet and utilities costs.

Associations, subscriptions, memberships. What publications and affiliations will you subsribe to every month?

Operating expenses. Dig into the nooks and crannies here, and don’t forget about marketing.

Legal fees. Are you consulting a lawyer throughout your business-development process?

Employees and contractors. If you can’t do it alone, you’ll need people on your payroll.

With that said, you have two main paths of starting a business with less money: lowering your costs or increasing your available capital from outside sources. You have three options here:



Option one: Reduce your needs

Your first option is to change your business model to demand fewer needs as listed above. For example, if you were planning on starting a company of personal trainers, you could reduce your “employee” expenses by being the sole employee at the start. Unless you need office space, you can work from home. You can even do your homework to find cheaper sources of supplies, or cut out entire product lines that are too expensive to produce at the outset.

There are a few expenses that you won’t be able to avoid, however. Licensing and legal fees will set you back even if you cut back on everything else. According to the SBA, many microbusinesses get started on less than $3,000, and home-based franchises can be started for as little as $1,000.

Option two: Bootstrap

Your second option invokes the idea of a “warmup” period for your business. Instead of going straight into full-fledged business mode, you’ll start with just the basics. You might launch a blog and one niche service, reducing your scope, your audience and your profit, in order to get a head-start. If you can start as a self-employed individual, you’ll avoid some of the biggest initial costs (and enjoy a simpler tax situation, too).

Once you start realizing some revenue, you can invest in yourself, and build the business you imagined piece by piece, rather than all at once.

Option three: Outsource

Your third option is all about getting funding from outside sources. I’ve covered the world of startup funding in a number of different pieces, so I won’t get into much detail, but know there are dozens of potential ways to raise capital – even if you don’t have much yourself. Here are just a few potential sources for you:

Friends and family. Don’t rule out the possibility of getting help from friends and family, even if you have to piece the capital together from multiple sources.

Angel investors. Angel investors are wealthy individuals who back business ideas early in their generation. They typically invest in exchange for partial ownership of the company, which is a sacrifice worth considering.

Venture capitalists. Venture capitalists are like angel investors, but are typically partnerships or organizations and tend to scout businesses that are already in existence.

Crowdfunding. It’s popular for a reason: with a good idea and enough work, you can attract funding for anything.

Government grants and loans. The Small Business Administration (and a number of state and local government agencies) exist solely to help small businesses grow. Many offer loans and grants to help you get started.

Bank loans. You can always open a line of credit with the bank if your credit is in good standing.

With one or more of these three options, you should be able to reduce your personal financial investment to almost nothing. You may have to make some other sacrifices, such as starting small, accommodating partners or taking on debt, but if you believe in your business idea, none of these losses should stand in your way. Capital is a major hurdle to overcome, but make no mistake – it can be overcome.

This article was originally published in Entrepreneur.com
Image Credit: Benzinga.com



5 Things to know before starting a business with friends

Starting a business with your friends is incredibly rewarding, but it comes with its own unique challenges.

Starting a business with your friends is incredibly rewarding, but it comes with its own unique challenges.

You want co-founders who can push you, who can make you nervous — the sort of people whose intelligence and drive make you feel as though you’ve got to operate beyond your limits just so you aren’t playing catch-up. You also want them to know something you don’t. The right co-founders will have skills and expertise beyond the scope of what you know, which is what makes you a formidable team.

If you’re already friends with people like that, consider yourself lucky, but don’t think everything will be easy moving forward. Here are five lessons to know before starting a business with friends that should help you avoid some of the more obvious pitfalls:

1. Stay in your lane.

Define your roles, and do it early. When dealing with friends, taking a more collaborative approach toward everything feels natural. That may work to a point, but it’s better when everyone on the founding team can “own” a different portion of the business. Doing this right means understanding the strengths and weaknesses of the entire team, yourself included, and using that knowledge to clearly define everyone’s individual responsibilities. Once you’ve done that, don’t be shy about enforcing it. It’s OK to tell someone to back off of your work and to focus on their own.

2. Have the tough conversations early.

There can only be one CEO, one head of product, one head of sales, and so on. Once again, knowing your team’s strengths and weaknesses is key. What’s more, you can’t be afraid to have frank discussions about potentially touchy subjects like equity, salary, title, and job descriptions. The longer you put these off, the more challenging and uncomfortable they become.



3. Businesses are not democracies.

We’re taught as children to share and make compromises with our friends, and we’re also taught that democracy is the fairest form of government. News flash: a business isn’t a kindergarten classroom or a country, and fairness isn’t a priority for early-stage founders. “Benevolent dictator” is a much more accurate job description for you; when getting things off the ground, there isn’t time to run everything through a committee, and, frankly, some things just aren’t up for discussion. Take control and move the ball forward every single day. It’s safe and easy to put every little thing to a vote, but ultimately that’s a waste of time. You’ll get so bogged down in bureaucracy that your company will not accomplish anything.

4. New perspectives are crucial.

You probably have a lot in common with your friends. Similar backgrounds, personalities, and life experiences often make solid foundations for friendships, but can cause problems from a business standpoint. If you have a blind spot, chances are your good friends may share it, so make sure that your early hires are people who can give your business a shot of fresh ideas.

5. It pays to include everyone.

When starting a business with friends, your social life becomes a catalyst for innovation. A significant chunk of your idea sessions will end up taking place outside of the office, whether on the weekends, out at dinner, or at a local watering hole. This is a real asset to you and your team, but you need to be careful not to exclude newer team members who aren’t part of your longstanding circle — that’s just shooting yourself in the foot.

Here’s a sixth bonus lesson: Starting a business with your friends is worth it. Creating something from nothing and helping it grow is a fantastic experience, and it’s even better when you can do it alongside people you genuinely like. It isn’t always easy, and sometimes your strengths as friends can become your weaknesses as a business, but if you take that into consideration and plan intelligently you’ll be in a great position to succeed.

This article was originally published in Entrepreneur.com

Image Credit: www.yunicycle.com



10 Great ways to generate business ideas

You know it’s time to venture out on your own, but what to do? Find the business of your dreams with these ideas.

Great business ideas are all around you. Just open yourself to the possibilities, and you’re bound to find a winner. To start your search for that drop-dead idea that’s going to set the world on fire, start with the following sources. These can be the first steps in your search for the business of your dreams.

1. Start with family

Tapping family for great business ideas may not seem like an obvious first step. Sure, you’ll hit them up for cash once you’ve developed your idea, but what can your aging father or cousin contribute this early in the process? Plenty. Donald Trump certainly wasn’t bashful about learning the real estate business from his dad, Fred, who ran a thriving real estate development company, says Ries. Trump had the good sense to get some priceless training before going off to become one of the country’s foremost builders and real estate developers. “If his father hadn’t provided the foundation and training [he needed] to create a profitable business, Trump wouldn’t be where he is today,” Ries explains. “Unfortunately, many people insist on [creating a business] themselves without any help from their family. That’s foolish.”

2. Get a little help from your friends

Ries says you are severely limiting yourself if you rely solely on your own ideas–especially when your creative juices run dry. This is reason enough to listen to ideas others may have. If you have 15 or 20 friends, chances are a couple of them have some incredible business ideas.

If it weren’t for Steve Jobs’ good friend Steve Wozniak, there would be no Apple Computer today, Ries points out. “Jobs didn’t know anything about computers,” he says. “Wozniak, on the other hand, was the computer genius who developed the first Apple.” Jobs had an eye for great business ideas and saw the marketing potential for developing a new type of computer. The important lesson is to keep your antenna up at all times so you can retrieve good ideas when you stumble across them. Ries insists you can make more money recognizing someone else’s idea than creating one yourself.

3. Look at all the things that bug you

It may not sound profound, but this is fertile ground for great business ideas. How upset Kemmons Wilson was in the 1950s when a motel owner wanted to charge him an additional price for each of his five children. He was so ticked off, he launched Memphis, Tennessee-based Holiday Inn, today one of the world’s largest hotel chains.

If King C. Gillette hadn’t been fed up with the tedious process of sharpening his straight-edge razor, he wouldn’t have founded the massive disposable razor industry. When he took his idea for a portable razor with a blade that could be used several times to a research university for assistance, engineers questioned his sanity. Gillette followed his instincts and the rest is history.

4. Tap your interests

Thousands of clever people have taken up hobbies and turned them into a successful business. Tim and Nina Zagat, who launched the Zagat Surveys, a publishing empire that sells restaurant guides for many major U.S. and European cities, are great examples. In the early 1970s, the Zagats were high-priced corporate attorneys whose passion was dining out. For fun, they created a newsletter in which they asked their friends to rank popular restaurants in several categories. Each year, the newsletter encompassed more restaurants. Eventually it became such an expensive and time-consuming undertaking that the couple began charging money for it to allay their expenses. That was the meager beginning of the famed Zagat Survey, which is sold in bookstores worldwide.

When you’re doing something you love, it’s never considered work.



5. Travel

Traveling opens your eyes to a plethora of potential business ideas. Leopoldo Fernandez Pujals’ discovery of Domino’s Pizza on a trip to the United States from his native Spain. Pujals was so impressed with the fast-food operation, he went back to Spain and launched his own version, called TelePizza, in 1986. His company now registers $260 million in sales, and employs 13,000 people in eight countries.

6. Keep your eyes open

When you see something that piques your interest, ask yourself, What is it about this situation that’s special? The process of zeroing in on the idea often spawns important niche markets. “Blockbuster Video’s niche is renting videos, and Bulbs Unlimited’s niche is selling light bulbs”.

7. Examine old mousetraps-then build a better one

If a product doesn’t meet your own high standards, create a better one. That’s what put Ben & Jerry’s on the map. Ice cream fanatics Ben Cohen and Jerry Greenfield felt popular ice creams weren’t rich and tasty enough for their cultivated palates, so they created their own super-premium line of ice cream, which is a bestseller nationwide. Just think: If these ice cream gurus weren’t such picky eaters, there would be no Cherry Garcia, Chubby Hubby or Phish Food to enjoy.

8. Take it to the streets

There’s no better place to lock into up-and-coming trends than city streets. Street culture spawned punk, hip-hop, grunge and a number of other fads that rapidly evolved into multimillion-dollar businesses. Great ideas can often be found by just browsing happening inner-city neighborhoods in virtually any big city.

9. Sleep on it

Many people ignore their dreams, and some don’t remember them at all. But sometimes it pays to listen to those inner messages, no matter how strange or unintelligible they are. You never know, you might just find the germ of a great idea. The tough part is crawling out of bed in the dead of night to jot down those great ideas before they’re forgotten.

10. Check out the Net

Finally, Web surfing is a fun way to log on to potential business ideas. “Virtually every search engine has a ‘What’s New’ or ‘What’s Hot’ section, where it lists new trends, news tidbits and hot new Web sites. “Make it a point to check out various sites daily. It may trigger an idea or concept you never thought of.”

This article was originally published in Entrepreneur.com

Image credit: under30ceo.com