THE FOUR BEST WAYS TO RAISE CAPITAL FOR SMALL BUSINESSES

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First published on MatthewGorelik.co

Starting a business from the ground up can be difficult, to say the least. Website costs, advertisement fees, legal fees and even rent are just a few of the myriad of potential starting costs involved with building a start-up from scratch. Regardless of what kind of enterprise you are looking to start, without a decent amount of capital to draw from, fundraising will be one of the first major steps in getting your company off the ground. Raising the necessary capital to get your small business up and running is essential. Luckily; however, with today’s technology, there are a few more options at the prospective business owner’s disposal than ever before. Additionally, the tried and true methods are always solid options, especially if one is not particularly experienced in using the Internet. With that, here are four good options to raise capital for a small business in the 21st Century.

Personal Savings

Perhaps among the most common and certainly most obvious, a reasonable amount of one’s own savings is always a great source of startup capital. Investors, while they are backing a company, they are also investing in the person who they feel they can trust and, frankly, whom they respect. Devoting one’s personal finances to his or her business venture is always something that will catch the eyes of potential investors because it clearly demonstrates one’s commitment.

Loan

Loans from banks or other investment firms are great sources of capital for your small business. Depending on your credit profile and the collateral you can offer, small-business loans can sometimes offer great deals and incentives. When attempting to earn an investment of a decent amount from any source, it is imperative that you either practice and perfect your sales pitch (selling yourself, your brand and your idea) or find someone who is good at this and can do it for you.

Crowdfunding

Most people have heard of Kickstarter, but there are many other reputable platforms for Crowdfunding that you should look into. Take a look at this list.

Cryptocurrency

Many entities, ranging from startup companies to small-scale inventors, are starting to issue new cryptocurrency tokens that are tied to a specific product or venture. Investors can simply buy a certain amount of these tokens and watch their value increase or decrease accordingly. This way, investors can see their return on investment immediately and in real-time.

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WHAT IT WILL TAKE TO ATTRACT ANGEL INVESTORS

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First published on MatthewGorelik.co

Angel investors usually invest in innovative entrepreneurs and promising small startup companies. Although early investors in a startup company tend to be close friends and family members, professional and everyday investors are often willing to invest seed capital in promising companies that are likely to attract additional investment. Angel investors are a good source of one-time capital infusions to help launch or maintain the financial stability of a fledgling company.

Seed Capital

Angel investors typically take a long-term approach to investing by providing favorable interest rates on capital loans. This allows aspiring entrepreneurs to focus on the development of a product or service. Unlike traditional lenders and venture capitalists, angel investors focus on the future prospects of a startup company rather than existing income and assets. Angel investors focus on helping entrepreneurs succeed in exchange for an ownership stake, convertible debt or company equity. An angel investor may be identified by any of the following terms:

  • Informal investors
  • Angel funders
  • Private investors
  • Seed investors
  • Business angels

The angel investing concept actually began on Broadway. Wealthy patrons of the arts invested in promising theatrical productions. Now affluent angel investors employ a variety of financial vehicles to pool capital and inject money into innovative companies, including investment networks and online crowdfunding platforms. Angel investors are required to meet the Securities and Exchange Commission’s accreditation standards. SEC standards require a minimum annual income of $200,000 and a minimum net worth of $1 million to become an angel investor.

Angel Investing

Angel investing has accelerated in recent years. Widely publicized success stories such as Facebook, WhatsApp and Uber have propelled angel investing to unimagined heights.

Outsized Returns

Although angel investors may be hoping for outsized returns, most experienced angels are searching for entrepreneurial passion, dedication, concept quality, market opportunity, potential growth and personal integrity. Angel investors typically invest between $25,000 and $100,000. A clearly defined business plan and initial signs of success are important aspects of attracting angel investment capital. Intellectual property rights and the development of innovative technologies are especially attractive.

Angels are looking for a reasonable company valuation, favorable terms and the prospect of raising additional capital.

From the standpoint of an aspiring entrepreneur, raising capital is time-consuming and demanding. Angel investors are seeking answers to fundamental financial questions. The amount of capital to be raised, detailed financial projections and the anticipated monthly financial burn rate are only the beginning of what will be necessary to attract angel investors and the crucial seed capital that aspiring startup companies require.