There are several factors to consider when starting up a business. These factors include things like knowledge/expertise in chosen field, market demand for product/service, possible competition, fund/capital raising etc are things one need to settle before delving into entrepreneurship.
Among all these factors, fund raising tends to be the hardest part to accomplish. However, even though raising funds for a startup can be very challenging, it is not impossible. Taking the right steps in the right direction may be very rewarding. Here are few steps that have proven to be helpful to successful entrepreneurs.
- Investing in your idea: an entrepreneur should be willing to invest in his/her own idea. This could be from personal savings from a day job or sales of personal assets. This goes well to show how committed the entrepreneur is to the idea.
- Close Associates (Family and Friends): This is an effective way to raise funds, although it could be awkward sometimes. So entrepreneurs can pitch their ideas to close family and friends in a professional way. This might spur willingness in them to invest. They can become angel investors.
- Bank loans: with a good business plan, collateral and meeting other bank conditions, startups can obtain loans from banks to fund ‘ideas’. Many successful entrepreneurs got funding through banks. Microfinance banks offer more friendly interest rates than commercial banks but can provide small loans.
- Cooperative society: this involves a group of people with like minds, similar vision, who put resources together to help each other financially. Members contribute some amount of money every month and provide help to certain members. A startup entrepreneur can join a local cooperative, abide by the rules and regulations and then get funding. This is a very common way of raising fund.
- Grants: grants are provided by government/organizations to fund small businesses. To qualify for a grant however, the entrepreneur needs to have a unique business plan and prepared to go through a rigorous screening process.
- Venture capitalist: securing funding from group of investors who look out for ideas with potentials. They get ownership stake in company when fully in business. So a good venture capitalists include groups of wealthy investors, investment banks and other financial institutions.
A successful entrepreneur Aliko Dangote once said “To build a successful business, you must start small and dream big. In the journey of entrepreneurship, tenacity and purpose is supreme”. In the light of those wise words, entrepreneurs should be very resourceful with the funds available to them. No matter the source of the fund or no matter how little.