by 10 Leaves
by 10 Leaves
Every startup needs money. You either put up your own savings, borrow money or raise money by selling part of your company.
Your own savings – this includes money you get from friends and family as well. You need to stretch every dollar to the limit here, since this is mostly money that you have saved for a rainy day.
Debt is hard to come by in the early stages, and usually carries a high level of interest. Equity funding is about taking money in exchange for shares in the company. There are many types of equity investors!
The SEED Stage is usually from friends and family, and below US$ 150k. You would also need to at least have a minimum viable product ready at this stage.
Early Stage investors include Angels and Venture Capitals. You would have paying customers by now, and looking at money for growth. Usually between US$ 10k and US$ 2 million.
Once you have high turnover and a big market potential, you would look for VC and PE funding (typically US$ 2 million to US$ 50 million).
When you take money from friends and family, it may be easier to come by, but you risk mixing business with family. Ensure that you be professional and have written Ts&Cs!
Angel Investors are typically HNIs, who also tend to take a personal interest in the business. They can be good mentors as well.
VCs and PEs invest on a professional basis, and are much more structured in negotiations. They may process hundreds of applications a month, approach them through a referral, to stand better chances.
Selection of an investor depends on the stage of funding (Angel, VC/PE), the type of investor and their preferences.
It is good to research on the investor prior to contacting them. Look out for where they are based and the industries that they currently invest in, so as to find a proper match. Remember, investors look for businesses that they can understand, and have access to as well.
Don’t be afraid to ask around!
This course helps you navigate the rocky road of preparing your own business plan – creating something that goes mere fluff, and actually makes sense. Taught by lecturers from Sloan School of Management, it comprises four sessions, with lecture notes and presentations. And, like the other resources on this page, it is ABSOLUTELY FREE!