1. Bootstrap your business

“if you believe in your vision and have an absolute refusal to accept failure as an option, you should feel comfortable investing your own money into the business.” - Brent Gleeson, a leadership and team building coach specializing in organizational transformations

What is it?

• The process of utilising personal savings for your business is known as bootstrapping or self-funding.
• Transforming your business to utilise cost-saving, productivity enhancing strategies, processes, technologies so that funds can be deployed elsewhere

Why Should You do it?

• Perhaps you think funding the business yourself carries lots of risk—and it does. But it’s important to consider the potential.
• When you invest money and resources in transforming your business, or investing in long-term growth, you are creating more opportunities for your company's future.
• Follow the industry trends (industry 4.0) and employ best practices such as digitisation, Business Process Outsourcing (BPOs) and Software as a Service (SaaS) to make your business more competitive.

Pros

• Cost-Savings can be used to release funds for business development
• Personal funds have no barriers or obstacles
• Investing some of your own money will usually make investors and lenders more willing to partner with you down the line.
• You aren't giving away your business, or jeopardising the ownership of your company. (No dilution of shares, compliance issues)

Cons

• Bootstrapping doesn't work for large businesses and industries that require huge capital, like manufacturing or transportation ;
• it only works for small-scale enterprises
• Paradigm shift in the way business is done - A change of thinking about business is required.

2. Loans & Financing

“Startups seeking money from banks need a good business plan, profitable projections and some of their own money in the game.” - Mike Kevitch, COO of All Business Loans

What is it?

• Getting loans and financial support from financial institutions who see potential in your business.
• Banking institutions provide financial backing on loans to individuals who approach them with a solid business plan. The business plan must be well structured to convey the modus operandi, profit forecast and estimated time of maturity.

Loans and Financing Options

• Traditional Business Banking: Getting funds from business loans, credit cards, and lines of credit.
• Micro-financing: Special financial institutions that specialise in providing capital to small-scale entrepreneurs. Those that lack access to conventional banking capital or loans, or unable to secure loans from the banks due to poor credit ratings.
• Working Capital Loan: This loan is designed to traverse one full cycle of revenue generation. Stocks and debtors usually have leverage on the limit.
• Funding: This process involves providing the business plan and concise information of the valuation, alongside the project report on which the loan was sanctioned.

Pros

• Large capital can be accessed through loans
• Capital provided can fast-track the process of income generation
• You aren’t giving away a piece of your business.

Cons

• Adding of debt to the company
• High risk of Collateral loss, since it is an important requirement for loan grants

3. Sell Shares in Your Company

What is it?

• Selling away a portion of your company by diluting or selling your shares/stocks as a means to raise capital.
• Issuing shares dilutes the holdings of existing shareholders and reduces their ownership in the company.

Pros

• Will not add more debt to a company's balance sheet,
• With shares/stock, an organization does not need to make obligatory interest payments to investors and instead can make discretionary dividend payments when it has extra cash.
• You may have onboard an additional person to help share the load and accountability of running the company as his/her profits depend directly on the success of the business

Cons

• You are diluting the ownership of your company, and adding more shareholders.

4. Crowdfunding

What is it?

• Getting funding on Crowdfunding platforms by pitching your business ideas or challenges to a community of investors or people willing to support their ideas or cause.

How Does it Work?

• Make a business pitch: Your business model and it's potential for growth.
• If the idea is bought by the crowd funders on the platform, they'll make a pledge to support his business model publicly and donate funds respectively.

Case Study

• Formlabs, (maker of affordable desktop 3D printers), raised $3 million on Kickstarter in 2013.
• This capital allowed the company to scale their operation and achieve their goal of manufacturing affordable 3D printers for the public.
• Eventually, the 3D printer maker caught the attention of venture capitalists.
• During a series A round, Formlabs closed $19 million in investments, giving them the chance to expand beyond their initial goals.

Pros

• Besides helping you raise money to fund your business, crowd-funding can also:
  • Give you the opportunity to connect with like-minded people who you wouldn’t normally be able to engage.
  • Gauge interest in your product and understand what’s resonating with people and what’s not.
  • Show you how to improve your business model, product and your pitch.
  • Creates public interest for your business, thus running some free marketing and providing finance for your business at the same time
  • Eliminates the intricacies involved in placing your business in the hands of an investor or a broker and wields that power directly to potential customers.
  • Has a potential to attract venture-capital investment as the business progresses.

Cons

• It is not easy to be successful at crowd-funding. The stiff competition inherent in crowdfunding platforms if someone or people are pitching the same business idea as yours.
• If your business pitch isn't as solid as your competition, then there is a probability that your business idea will be overlooked or rejected .

5. Find an Angel Investor

What is it?

• Angel investors are people with capital and are willing to invest it on good business ideas.
• Sometimes they can be friends and family, or come together in groups to scrutinize business proposals, in order to select the best candidate to invest in.

How Does it Work?

• First, you must have a solid business plan put together and a great pitch ready. You have to capture their attention with enthusiasm and promising data points about your company’s current situation and future potential.
• You must seek them out, either via your direct and secondary contacts, or look for angel investor associations and showcases around you. For example, the Angel Capital Association is a platform that seek out, meet, and arrange pitches to angels.

Pros

• Besides capital, Angel investors often understand the industry and can offer business advice.
• Angel investors can sometimes also help you to network, find customers
• Some Angel investors can help build credibility for your business by spreading positive opinions or if they themselves have clout in your industry.
• Angel investors are willing to take risks on business idea as they anticipate heavy return on investment from your startup

Cons

• Angel investors provide lower investment capital to business ideas compared to venture capitalists.

6. Get Funding from Venture Capitalists (VCs)

What is it?

• Venture capitalists are professionals or firms that manage funds to seek out companies with great prospects.
• They invest heavily in a solid business rather than an equity, and once there is an IPO or acquisition of the business they are partnered with, they then pull out to take the profit and seek other investments.
• VCs have a responsibility to achieve certain returns for the firm or fund, they want scalable and cash-flow positive companies with proven and scalable products and businesses.

How to Secure VC Funds

• If your company satisfies these requirements (Scalability with potential of higher returns), you can apply for an investment with a VC firm.
• Your pitch is crucial to obtaining funding.
• Example:
  • Sequoia, one of the most successful VC firms on the planet, stresses, “you need to convey the main reasons why an investor should love your business in the first 5 minutes.” Sequoia partners state you can do this in three simple steps, which are:
    • Explain what’s changed. Detail the innovation, industry shift, or problem that presents substantial opportunity for your company.
    • Explain what you do. In one sentence, show how your company can capitalize on this opportunity.
    • Explain the facts. Get to your company’s story and financials quickly. Lay out the opportunity with numbers. Discuss the team and their abilities and experience.

Pros

• Venture Capitalists can bring in tremendous amount of capital (sometimes hundreds of millions of dollars!) to support sometimes outrageous and big dreamy goals that you can never think you can reach.
• The mentorship and expertise venture capitalists bring can sustain a business or company effectively, and provide the connections to resources to make your ideas successful.
• VCs effectively monitor the progress of a company they have invested in, thus ensuring the sustainability and growth of their investment.
• To be funded by a venture capitalist also brings a certain amount of prestige and confidence-boost to your business. Media reports often include investments made by VCs.
• Companies with astronomical growth rates such as Uber have a pre-designed exit strategy that enables them to reap huge profits that they can, in turn, re-invest in the growth of their company.

Cons

• You tend to lose control of your business since you're giving up a large part of it to venture capital investors
• Venture Capitalists will remain loyal to your business till they have recovered their capital and profits, then they will exit once they have met their target, usually during a slim three to five-year timeframe.
• VCs typically want to invest in slightly more mature companies than angel investors and sometimes want to have more of a say in managing the day-to-day operations.
• Venture capital investors usually seek companies with excellent strategic planning, business models and operational setups . This could prove to be an obstacle for you because business startups don't usually have this level of capability.

7. Get Help From Business Incubators & Accelerators

What is it?

• Early stage businesses can consider Incubator and Accelerator programmes as a funding option.
• These programmes normally run for 4-8 months and require time commitment from the business owners.
• There usually is a sort of competitive program that culminates in a Demo Day, where the startups they mentor gather to all present their ideas to potential investors. .
• You will also be able to make good connections with mentors, investors and other fellow startups using this platform.
• Incubators and Accelerators are found in almost every major city, and their programs assist hundreds of startup businesses each year.

How do they Work?

• Incubators - Like a parent to to a child, who nurtures the business providing shelter tools and training and network to a business. They help/assist/nurture a business to walk over a long period of time.
• Accelerators - Similar to incubators, except they help businesses to run/take a giant leap in a short amount of time.

Examples

• Companies like Dropbox and Airbnb started with an accelerator

Pros

• Business owners receive mentorship from their investors
• To be selected by an competitive incubator or accelerator also brings a certain amount of prestige and confidence-boost to your business.
• Connections can be made with other startups and synergies can often result

Cons

• During the 4-8 month programme, if commitment is lacking, the startup might spiral in a downward direction

8. Find a Venture Builder as a Partner

What is it?

• A Venture Builder is a Startup that specialises in building businesses, either by offering it as a service or in lieu of professional fees, a shareholding in your business.
• They have a wide network of experience, expertise and resources to efficiently and effectively run and grow a business;
• Their internal teams of experts (engineers, advisors, business developers, sales managers, etc.) can pass on that knowledge or to actually run various aspects of your business for you.
• You get the expertise you need without raising funds.

Pros

• You are getting a partner who knows exactly what they are doing and will run directly the business system and process, or solve your business problem that you originally intended to raise funds for.
• Unlike outsourcing, they are shareholders rather than service providers: With the vested stake, it is their best interest that your business performs admirably.
• They run other mission critical aspects of the business operations other than product and service development, leaving you to focus on the business at hand while they handle the administrative and operational aspects of your business. It's like getting an entire department planted into your business.

Cons

• There might be a difference in organisational culture and fit. Your staff might be uncomfortable to have a super efficient and dedicated team suddenly working for you.
• You are in effect having an immediate gain in capability and business outcomes, instead of a slow organic change and growth. The sudden effect may be scary to most.
• You are opening your company to another shareholder, effectively diluting your shareholding.

9. Getting Government Grants and Other Kinds of Non-Financial Support

What is it?

• Governments often have special programmes that offer capital and non financial support to local businesses.
• These come in a wide variety of funding amounts and support like access to advisors, expertise, networking opportunities, manpower, toolkits etc.
• You are required to submit an application and a plan that can be accepted by the grant committee. Once your plan has been scrutinised and approved, you will be provided with the funds or expertise to help your business.

Pros

• Funding and support from the Government is usually substantial in size with very little caveats, thus providing you with additional capital and resources to support your plans.
• The process of applying for and the scrutiny that follows can actually help you to plan better and serve as a check for your plans.

Cons

• The process of scrutiny, approval and eventual release of funds may take a lot of time due to government bureaucracy.
• There might be an over-reliance of government funds to support your business, especially when there usually isn't any repercussions, hence less motivation if you are unsuccessful in your business plans.