Business Funding for Dummies by Helene Panzarino

Author:Helene Panzarino
Language: eng
Format: epub
ISBN: 9781119111603
Publisher: Wiley
Published: 2016-01-07T00:00:00+00:00

Starting Well by Preparing Well

Before you start talking to anyone about funding your early-stage business, you need to consider several points:

What stage your business is in. Are you in the pre-revenue stage? Are you gathering early revenue, but don’t yet show a profit? Is your business still just an idea?

How much money you need. Know what you need it for and what you’re offering in return.

What type of funding you need and want. Do you want equity from a crowdfunding platform, or an early-stage investment fund or an individual business angel investor? Would you like your family members to lend you money or to sell them a share in your business?

Who is a likely funder. Get a good list together based on research, advisor input and talking to people to narrow down a target list of likely funders for your business and your stage. Find out what funders are active in the areas you need and in your social and business networks. You want to make sure you exhaust every connection, link and introduction so that you feel you’ve done all you can to achieve your goal.

Who may be able to invest in future rounds, if that’s applicable to your business. Although it may seem early days, you should always have one eye on your future funding needs and consider what impact earlier funding rounds may have on later rounds. For example, equity crowdfunding your chocolate bar business can be a great way to get money and new customers in, but if you plan to raise larger amounts of equity to build a chocolate factory later on, your future investors may not be happy with hundreds of crowdfunded investors already on board. Research the funding journey of companies similar to yours and see what paths they chose.

Who is happy to have other investors or funders on board at the same time. Some investors only want other sophisticated investors in the game, some don’t want your business to carry any debt while they’re providing funds and others have different restrictions.

Where your business is based. Some early-stage funders prefer to invest or were created to invest in certain geographical areas of the UK. If you have active investors, they may also prefer to invest in businesses on their own doorstep so they can keep a closer eye on and a more active hand in them.

Your sector or industry and who is investing in this area. You’re looking to see who’s interested in what your business does, and who can bring some extra value. Investors sometimes have a very narrow focus, choosing to specialise in one business area, and aren’t interested in a mixed portfolio; others want diversity in the type of business they invest in, but stick with only one stage, like an SEIS (Seed Enterprise Investment Scheme) fund.

You need to find out who’s doing what, what their criteria and application processes are and if they actually have money to invest. Otherwise, you’ll waste a lot of time and wind up feeling very frustrated and very behind in your planning.

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