Most Entrepreneurs go to the wrong places first, in their quest to seek funds, for their businesses.
I have found myself coaching early-stage entrepreneurs on a couple of times.
What usually strikes my interest is the most frequent questions from the founders of these startup companies, “how can I best access the capital I need to get my first customers?”
The thing is that most start-up entrepreneurs need money, but where to start searching for it, might just be a rather daunting task.
Entrepreneurs, already, in the business journey may have more than one possible means of getting funded, but for an early-stage one, multiple options are not that available, when you intend raising seed fund.
Before considering other alternatives, you can explore, let’s consider some options you shouldn’t put on the table when sourcing for capital.
Venture Capitalists
Venture Capitalists are usually high-class funded investors, who catch interest in funding entrepreneurs, with a proven track record and demonstrating the potentials, of raking in very good numbers.
You should, therefore, be ready to pursue a Venture Capitalist source of funding, only, if you have had first-hand experience, of the qualities mentioned above and you have the potentials of a million-dollar market.
Venture Capitalists, seek companies, with potentials for explosive growth, so, your emerging start-up, might not be the venture they are likely to fund.
Private Equity
just in case you are not aware, Private Equity organisations, do not fancy funding early-stage businesses.
They, usually, prefer to pitch their tent, with companies having turn-around opportunities, especially, in the fintech sector.
Companies that have deep-rooted management teams and not your early-stage start-up that is, probably, yet to find a footstool.
Banks
If you are afraid of taking risks, the last place you would place your hope, for funding is the banks.
As a usual requirement, the bank will often demand collateral and your hard assets, to access loans from them.
Unless you have assets, like landed property, you are not guaranteed a loan, to raise your fund from the banks. Another thing is that banks, usually, do not pick an interest, in ventures, just starting out.
What you, therefore, need, are alternative sources of funding, to raise your capital, or, obtain seed funding, when you cannot look the way of Venture Capitalists, Private Equity, or, Banks.
Below are some of the alternative sources of funds that you can decide to first explore, before venturing into others:
Family And Friends
A lot of start-up entrepreneurs do overlook the path of their family and friends when seeking funds.
Before you go out there, to demonstrate the viability of your business to potential investors and platforms, in your quest to source capital, you need to, first, test your products and services, with your family and friends.
No matter what the case maybe, you have them to trust and they may just be the first set of people to lend a helping hand, by funding your start-up business.
Due to close relationship existing between you and your family members and friends, you might just be lucky to, easily, convince them to invest in your venture.
You may, however, have, to give up some equity to them.
This approach is a better alternative, to the three platforms that have been discussed above.
Most start-up entrepreneurs, often, find this pathway, too, a risky route to take, in the quest for a fund for running their businesses.
Risky, in the sense of failing their family and friends, thus, losing the factor of being trustworthy.
As much as this appears to be an obvious truth, it is also a risk, worth taking, if you want to have the benefit of a cheap source of funding.
Also read, should you accept a business loan from a family member
Angel Investor
In the absence of reliable family and friends that can guarantee your funding requirement, another alternative that, you can try out is, the Angel Investor Network.
They are, often, high-level executives or entrepreneurs, seeking opportunities, to invest in start-up companies, with good potentials.
Working with an angel investor guarantees that you got your hands, on diverse experiences and a large network, at your disposal.
Angel investors offer start-up entrepreneurs the opportunity to pitch their start-up ideas.
If your presentation is appealing to them, you might just have guaranteed yourself an investment offering.
Also read some local angel investors, operating in Africa.
All points of discussion, so, far centres on, leveraging your personal connection first, for capital funding, before exploring other options.
