4 Ways You Can Fund Your Next Business Venture
Whether you have an existing business or you’re finally making the plunge and attempting to start your first venture, money is always important.
Often, it seems silly, but money is what determines whether or not your great idea will take off or fail.
Do you know where you’ll gain access to funds?
4 Funding Options to Mull Over
There is no straightforward guide to funding a business venture. If there were a proven formula, everyone would follow it and be successful. But the good news is that you have options – and knowing what yours are can help you take a balanced approach.
- Private Equity Financing
One of the more common funding techniques involves private equity financing. Under this arrangement, you give investors a percentage of the business in return for access to a specific dollar amount of capital. The benefit of this arrangement is that you can generally gain access to a large amount of money. The obvious downside is that you lose a percentage of your business.
In private equity financing situations, you have to really understand the valuation of your business and think about how much you’ll be worth in the future. Will the capital an investor infuses into your company help you do something that you otherwise wouldn’t be able to accomplish?
- Online Lending
Due to convenience and variety, online lending has become a really attractive option over the last decade. There are a variety of options available, including crowdfunding and private investing. All you have to do is perform a quick Google search to see what’s out there.
Comparing business loan lenders is important before choosing one specific route. The credibility of the platform, as well as the rates and requirements, can vary drastically from platform to platform.
- Angels and VCs
You’ve probably seen the popular television show Shark Tank before. Well, in the show, the “sharks” are venture capitalists. In other words, they aren’t just investing money in the businesses in order to obtain equity; they also want a say in the company and what direction things go.
When you work with a venture capitalist (or angel investor), you’re giving up a little extra equity in return for their expertise. So, if you go this route, be sure to vet the investor to make sure they’re truly worth the rate they’re commanding.
- SBA Loans
The U.S. government obviously has a vested interested in the health and prosperity of the country’s small business sector. As such, they extend a variety of loan and grant options to small business owners who meet certain requirements.
If you’re a military veteran, have been impacted by a natural disaster, run a non-profit, or meet other special circumstances, your chances of receiving funding may increase. Be sure to check out your options and talk with an advisor to learn more.
Persistence Over Connections
Far too many entrepreneurs fail to obtain financing and funding because they look at the challenge through the wrong lens. They’ve been conditioned to feel that who they know is the leading factor in whether they have access to capital. It definitely helps to know the right people, but persistence trumps connections almost every time.
“You don’t need an MBA from a prestigious university, all the best industry contacts or a Fortune 1000 work history,” venture finance veteran Susan Schreter notes. “Successful fundraisers don’t have to live in one of the epicenters of entrepreneurial activity, such as San Francisco, Seattle, Boston or Austin, Texas. And entrepreneurs don’t have to represent any presumed stereotype of business ownership. Ambitious men and women of any race can raise money for their business even during the most stubborn of recessions.”
In the opinion of Shreter and others, the reason so many business owners complain about not getting funded has less to do with their credentials and knowledge and more with a lack of persistence.
Investor Pelli Wang acknowledges how difficult it is to get her attention. She meets dozens of founders and communicates with thousands of people over the course of a given year. She doesn’t always have time to follow up with every promising startup she encounters and admits that it’s the persistent entrepreneurs who tend to get her attention.
“However, there’s a fine line between being persistent and being pushy,” Wang says. “If you’ve reached out several times and are still getting the silent treatment, then take the hint and move onto the next investor.”
It’s not always easy to remain persistent when you’re constantly being denied over and over, but remember that there are more doors than one. There are lots of ways to fund your next venture and you only need one option to work out.
Currently, Larry writes for Entrepreneur, Social Media Week, CEOWORLD Magazine and the HuffingtonPost among others.