Raising Funds by Startups…

It takes more than just a great idea to run a successful business. Entrepreneurs and existing business owners need capital to pursue their vision.

But if you don't have the cash in your wallet, what do you do? Luckily, there are still options for funding new companies, but finding and securing the cash will take careful research, good negotiating skills, and, above all, dedicated commitment to launch your business. Few way out for raising funds by startups are provided below:

1. Family & Friends

2. Crowd Funding

3. Preferred Stock & Convertible Debt

4. Angel Investment

5. Venture Capital

1. Family & Friends- People like to invest not only in the idea but in the person involved in it. However using family and friends as a source of raising money can be risky. It can create a strain that can ruin personal relationships. It is also worth to note that over 70% of startups fail in their first three years often because of factors completely outside of the control of the owners. Make sure that you are borrowing money that they can afford to lose. Execute a written agreement with all terms, even if it is a “friendly” loan.

2. Crowd Funding- Crowd funding takes it name from the fact that your project is funded by the public using their own personal funds. To start with, you propose the idea that you wish to see funded. People can then choose how much or how little they want to give you.

3. Preferred Stock/Convertible Debt- Startups generally offer preferred shares or convertible debentures when they raise money. Common stock is typically given to founders and reserved for options. The reason to offer preferred shares or convertible debentures is that they often come with provisions like rights and dividend preference. They are also superior to the common stock. This will make the investment more attractive and assure the investor he or she will be paid out first.

4. Angel Investment- Angel Investment can go beyond the purely financial. The advice and connections that a good angel investor can offer can be equally as valuable. Angel investors are willing to take on the risk of a brand new startup.

5. Venture Capital- Venture capitalists aim to invest in early stage businesses with high growth potential. Traditionally venture capitalists received equity in the business in exchange for funding it. However these days they typically demand a mixture of equity and debt financing

There can be different other structures for raising funds by startup, however, a startup should look into the options which is best suited for your business.

To know the further details about Raising Funds by Startups and other aspects of startups, contact us at admin@equicorplegal.com or visit www.equicorplegal.com

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