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The Art of Funding Your Startup

The Art of Funding Your Startup

Have you ever been stuck? Really stuck? For example, remember the time when you started out on a trip. You determined the direction to your destination. The trip is going well and then it happens. You enter a roundabout and just when you want to exit, you cannot. You are stuck! Really stuck! Round and round you go.

The spirit of adventure with its positive emotions is replaced with ever increasing frustration and desperation. The inability to move forward toward your destination stimulates within you immobilizing anxiety as noisy people; taxis and buses with persistent honking horns, wandering cows, determined street vendors and reckless motorbikes collectively impede your moving forward. Being stuck is not a good feeling.

Too often it is also the feeling of the beginning entrepreneur. It is experienced at an undetermined point, typically within the first year after you have solidified the idea for your business. You confirmed the niche for your product. You validated that people will buy your product. You clarified that the product will indeed enrich your community by meeting a societal need. You have also reaffirmed with excitement in your heart that your gifts, competencies, and temperament align with the essentials for being a business owner. It is then that the excitement comes to a screeching halt as your mind becomes saturated with these immobilizing realizations, “I am stuck. I need funding”.

Given the significance of funding to the success of your startup, we recommend familiarizing yourself with the following 7 funding options:

Option 1: Funding Your Startup Through Bootstrapping

The term bootstrap can feel foreign to the mind of the sub-Saharan Africa entrepreneur, yet its significance remains relevant. The term bootstrap emerges from the fact that everybody has to put on their own shoes. As it pertains to funding your startup, it is absolutely essential that you invest some of your own money in its success. This is essential because future investors will consider using their money to invest in you if and only if they see that you believe in the potential of your startup enough to invest your own funds. Be sure to include in your bootstrap strategy specifics on how future investors will not only get their money back, but get an attractive return on their investment. This is what investors call the “exit strategy”.

Option 2: Funding Your Startup Through Crowdfunding

Today’s 21st century technology through the global connectedness of the internet has introduced the social media platform as a resource to raise money for your startup. Crowdfunding means that you use social media to pitch your startup ideas to a community of investors or people willing to support your startup, and the need to which it will respond. Through social media, the entrepreneur shares the business model for the startup and its potential for growth. If the idea resonates with the crowdfunders on the platform, they will then make a pledge to support your business model publicly and donate funds respectively through the venue identified by the entrepreneur (e.g., wire transfer to your company’s bank account). Remember that for purposes of credibility and integrity, never request that these funds be deposited to your personal bank account.

Option 3: Funding Your Startup Through An Angel Investor

In accordance with the concept of a guardian angel, an Angel Investor is someone with a large amount of money who is interested, eager and willing to invest some of their money into new business ventures. An Angel Investor can be one or a cluster of individuals who critically evaluate business proposals in order to select the perfect candidate to invest in. With an Angel Investor, it is essential to clearly identify the exit strategy through which the investor will get an attractive return on the investment.

Option 4: Funding Your Startup Through A Venture Capitalist (VC)

Venture capital funds are managed by professionals who are ever seeking to identify investable companies with scalable growth using other people’s funds. These funds are usually from large institutions such as pension funds, financial firms, insurance companies, and university endowments. Generally, the venture capitalist wants to exit within 5-7 years.

Option 5: Funding Your Startup Through Accelerators Or Incubators

Support for your startup when obtained through an incubator typically provides workspace, seed funding, mentoring and training. Whereas a typical Accelerator program has a determined timeframe in which startup founders spend 3-6 months of an intensive bootcamp with expert mentors.

Option 6: Funding Your Startup Through Grants or Contests

Effective engagement in competitions or contests requires entrepreneurs to showcase or pitch their business concept against competitors vying for the same funding for their businesses. When seeking funds for your startup through grants or contests, it is essential to understand that, for consideration, competitors must create and submit a compelling business plan. Publicity from winning this type of competition can be invaluable in creating momentum and customers for your startup.

Option 7: Funding Your Startup Through Bank Loan

To be considered for a bank loan – once again, it is essential to create and present a credible business plan. Favorable consideration is based on informed profit forecast as conceived within a sustainable business model. When approved, these funds can provide essential money needed for cash flow, working capital and expansion of your startup. When considering the option of bank loan it is important that the entrepreneur understand the probable need for collateral through which the bank can have confidence that its loan is secure and that the funds needed to repay the loan are not at risk.

Call-to-Action

  1. Identify ways to bootstrap your startup (e.g., saving 10% of your income from your current job; working a second job and saving that money to fund your business and/or selling an asset. Remember, that it is only after you can give clear evidence that you have invested your personal funds in the launch of your startup – should you then, identify partners, family members and/or friends who share your vision and are willing to invest their money in your success.
  2. Scan and evaluate social media platforms to identify a crowdfunding audience for your business startup – then create and make the “pitch”.
  3. Designate time each week to identify a potential Angel Investor. Be aware that Angel Investors can be found locally through networking with business owners who are already profitable. In addition, internet resources such as the Angel Capital Association (ACA) are great places to start. Also, keep in mind that SIMBA Global Startups is an Angel Investor ready to provide funding support to the entrepreneur whose business startup aligns with its investment thesis. We invite you to apply at https://simbaglobalstartups.com/entrepreneurs/
  4. Create a VC target list for your company. Quarterly pursue this potential funding source.
  5. Conduct a search for a business incubator or accelerator in your area. Note: While some incubators are independently managed, they can also be sponsored by government entities, VC firms, large corporations, or associations of Angel Investors.
  6. Quarterly conduct an internet search for any business competitions through which funding and publicity for your startup can be secured – then enter the competition and prepare to win.
  7. Identify and meet annually with a credible bank lender in your community through which criteria for a potential loan are proactively reviewed and invaluable long-term business relationship is established.

NOTE: SIMBA Global Startups offers mentoring assistance for the design and implementation of the above Call-To-Action formulation to qualified entrepreneurs. Review our qualification criteria at https://simbaglobalstartups.com/entrepreneurs/

Mentoring Moment: York Zucchi

York Zucchi is the co-founder of the global SME Movement. SME is an acronym for small and medium size enterprises. York Zucchi is a Swiss born investor and entrepreneur in Africa since 2007. In addition to extensive service at Goldman Sachs, Zucchi has started numerous successful businesses (healthcare, IT, tourism, academia, etc.). He is passionate about entrepreneurship, Africa and coffee and believes that the right mixture of these 3 will make Africa the continent to be for the next 20 years.

When it comes to funding, York Zucchi gives the following advice, “Don’t seek funding. Seek clients. The former takes years. The latter pays the bills and eventually attracts the former. Investors want to know that clients want your solution. Ignore anyone that tells you otherwise”.

Just IMAGINE!

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