When you start a new company, one of the hardest things is figuring out a way to finance it. Even if you have the best idea in the world, you will not be able to bring it to life unless you have some capital to get it started with. In many cases, it is also better to get even more funds than you actually need so that you can achieve an economy of scale with your production processes.
If you plan on starting a small company, then you may be able to use your own funds. Some entrepreneurs ask their friends or families to float them a loan to get started with. Banks are also more willing to offer small loans to businesses because they are risking less. If the entrepreneur and their family do not have enough capital available, they may be able to turn to their bank.
The problem begins when you want more capital than you, your family or your friends have available. Larger loans can be trickier to obtain, but you can always find options if you have a strong business idea. By using these alternative methods, you can get the financing your business needs. You can also turn to investment companies to find alternative funding sources. At James River Capital, executives like Paul Saunders have years of experience in helping companies find seed money. Through their expertise, they can help you get started in your chosen industry.
Consider Local Loans
One of the first things you can do is look for local options. Many entrepreneurs forget that their chamber of commerce is a resource for funding options. Your local chamber wants businesses to do well because it brings in revenue and jobs for the town. As a result, they keep track of local funding possibilities.
In many cases, the chamber of commerce will tell you to go to the local business development center at the community college or university in your area. This center will help you meet potential investors and other entrepreneurs in your town. They may also help you organize your financial information so that you are ready to apply for potential loans. In some cases, they will even help you apply for loans in your area.
The business development center exists with the goal of developing local businesses, and your chamber of commerce focuses on the same goal. They want businesses like yours to become successful because it helps the local economy. Because of this, they are generally quite helpful to business owners who need help.
Get the Help of an Angel Investor
Another option you can try is angel investing. Right now, the real returns in the stock market are for investors who invest money before the company’s initial public offering. This is one of the reasons why many institutional investors are buying shares of private companies before they ever go public. An angel investor operates around the same premise. They want to invest in promising businesses because it earns them a healthy return. Often, an angel investor will give a company $10,000 or more toward bringing their business idea to life.
Thirty years ago, entrepreneurs struggled to link up with angel investors. Now, it takes just an internet search to find them. Angel Capital Association has a nationwide network of 330 groups that invest in businesses. They offer direct loans that help new companies get started. Often, these groups will host events so that entrepreneurs can network with each other and with potential investors.
The quickest way to find angel investors is to go online. Sometimes, entrepreneurs are hesitant about taking money from an online source. If you are worried about where your money is coming from, you can also check out your local area for angel groups.
In recent years, crowdfunding has become an extremely popular way to get a business idea started. The name shows exactly what this funding technique is. A crowd of people funds your business idea if they like it. There are crowdfunding sites like Kickstarter that can help you reach out to large groups of people to get your idea going.
Kickstarter is a platform that helps you flesh out your idea and fund your project. It also serves as a useful way to do some market research. You can quickly tell if your idea is commercially viable based on how people respond to it on Kickstarter. If no one funds your project, you may need to consider refining it or moving on to a different idea.
When you use Kickstarter, you can set financial goals for your project. At each goal level, you can give an incentive to encourage people to fund your campaign. For example, a game designer may let you choose the name of a character if you fund a certain amount of the project. If you fund a different amount, you may get an advance copy of the video game.
You do not have to create incentives in your campaign, but they are effective for encouraging people to make pledges. Other than adding incentives, you will also need to do a lot of marketing to get financing on this platform. Many campaign creators are heavily involved with social media because of the exposure it gives them.
Venture Capital Is Ideal for Large Projects
James River Capital works with entrepreneurs to find venture capital for their project. Through venture capitalists, businesses are able to fund their next project idea.
Venture capital is a technique that is generally reserved for people who need $1 million or more in funding. Because the entrepreneur wants such a large amount, they have to be completely prepared before they talk to a venture capitalist. In general, a venture capitalist will expect a detailed business plan before they even consider committing their funds to a particular venture.
If you can convince a venture capitalist to fund your project, it is worth the effort. One of the biggest benefits of venture capital is that you can get a larger amount of funding. The venture capitalist wants to take their client’s money and place it in a business that will reap a high return in a short amount of time. In general, the venture capitalist is hoping to make 3 to 10 times their initial investment in just five to seven years.
To find a venture capitalist, start networking. Someone in your current contact list may know of a venture capitalist who is looking for a new investment option. If you are unable to find someone you know, you can also check out the National Venture Capital Association. This option may be less effective than getting funds from someone on your contact list, but it is still a useful option.
While finding funding sources can be a challenge, it is possible. Entrepreneurs should remember that they will always need a more detailed business plan if they plan on asking for a larger investment amount. Whether someone turns to an angel investor or a venture capitalist, the investment source will always want you to give them a plan that reassures them about the safety of their money.
If one funding source does not work out, try another one. Building a business is rarely a straightforward progression. There may be twists and turns along the way, but your dedication will eventually lead to success.
About James River Capital
Under the leadership of Paul Saunders, James River Capital has achieved a number of awards as an investment firm. Their investment philosophy includes the belief that funding business ventures is an effective way to achieve a higher return and a diversified portfolio. They believe that alternative investment exposure helps investors earn a better return and also provides a source of capital for new companies.