Elon Musk of Tesla and SpaceX is really good at raising lots of money from his customers.
Ways to raise money for a business?
You’re about to learn 10 interesting and highly effective options you can start exploring today.
Raising capital is probably the biggest obstacle many entrepreneurs face in starting or growing a business.
According to research by CB Insights, up to 40% of start-ups and young businesses fail because they run out of money.
As a result, fundraising — the ability to raise money for a business or project — is a very important survival skill for entrepreneurs.
Without fundraising skills, even the most brilliant and innovative ideas will die a sudden death.
In my experience working with entrepreneurs over the last decade, we have learned the best fundraising strategies that actually work and are guaranteed to help you raise money for a business — to start or grow your company.
In this article, I’m going to share some of those interesting strategies with you, and spark your mind with creative fundraising ideas.
Here they are…
1) Start with what you have
Sara Blakely bootstrapped Spanx and became the world’s youngest female billionaire.
At the beginning of your journey, it’s very likely nobody will believe in your business ideas as much as you do.
That’s why you will have to put your money where your mouth is and start with what you have.
For Sara Blakely, the founder of the famous women’s underwear brand Spanx, that’s exactly what she had to do.
After several attempts to raise money for her unique business idea of body-slimming pants, most people she approached either thought her business idea was stupid, or the products would never sell.
Without any possibility of outside help, she reached into her savings and used the entire $5,000 in her account to start Spanx in 1998.
Today, Spanx, the same business people thought would never work, is currently valued at over $1 billion. And Sara has never raised a single dollar from outside investors since she launched the business.
Sometimes, if your business idea is as brilliant as you say it is, you have to stand for yourself and make personal sacrifices.
Investing your own money in your business is often seen by banks and investors as a sign of confidence and a strong show of faith in the potential of the business.
After all, if you can’t invest some of your own money in your business, why should anybody invest theirs?
However, using your own money start a business can come with big risks.
And inside our fundraising program for entrepreneurs, you’ll learn exactly how to raise money for a business by avoiding and managing these risks so you don’t fall into financial ruin.
2) Convert your social capital into financial capital
China’s Jack Ma leveraged social capital to start Alibaba in 1999.
After you have exhausted your personal finances, it’s time to start converting some of your social capital into financial capital for your business.
Social capital is the value of the close relationships you have in your life.
It comes from family and relatives, close friends, current and former work colleagues, old classmates, neighbours, etc.
These are people who are socially and/or emotionally connected to you.
Because of this connection, they are more likely than total strangers to listen to your ideas. And they will often be your first set of true fans and supporters.
This is the exact strategy that Chinese billionaire, Jack Ma, used to kickstart Alibaba, the global e-Commerce giant.
In 1999, Jack Ma invited 18 of his friends to his small apartment in Hangzhou and pitched to them for two hours about his business idea and vision for the business. That day, he raised a total of $60,000 to finally start Alibaba.
When Alibaba became a public company in 2014, it was valued at $21.8 billion on the New York Stock Exchange and became the biggest US IPO in history — bigger than Google, Facebook, and Twitter combined.
But raising money from friends and family can be tricky. You don’t want to lose the trust and friendship of people who are really close to you.
That’s why you need to execute this strategy the right way.
In our fundraising program, you will learn how to raise money for a business by pitching your business in a way that compels people close to you to want to invest, and how to avoid the expensive mistakes people make when they take money from people in their social circle.
3) Find a partner who’s got the cash
Some people have the cash, but may not have the time, ideas, knowledge, or skills that are required to start or build a good business.
These people may have another full-time commitment (like a job), or may not have the risk appetite or entrepreneurial flair to actively build a business.
This creates an opportunity for a win-win partnership.
And that’s where you come in.
As the saying goes, two (or more) good heads are better than one.
It’s no surprise that some of the most successful companies in the world like Google, Microsoft, Apple, and co. have at least two co-founders.
This was the fundraising strategy that Jason Njoku followed to fund his business idea, Iroko TV, which has now become one of the biggest creators and distributors of African movies, series, and TV shows.
Jason met his business partner and co-founder, Sebastian Gotter, at the University of Manchester where they both studied.
In 2010, Sebastian, who is German, contributed $150,000 for a 50% stake in the business. While Jason, who is Nigerian and fully understands the local market, was responsible for executing the business plan.
Since then, Iroko TV has grown into an industry giant, raising over $40 million from international investors to date.
However, business partnerships can be a double-edged sword.
When they work, the synergy from a business partnership can be powerful. But when it’s not done right, a bad business partnership can lead to conflicts that could crash or crumble a good and healthy business.
Inside our program, you will learn how to properly structure a business partnership in a way that leads to a favourable win-win outcome for all parties involved.
4) Raise money from angel investors
In the early days of your business, it will be hard to raise money from formal sources of capital like banks and investment firms.
Most banks and investors typically don’t like to invest in ‘early-stage’ businesses because they’re perceived as high risk.
That’s where angel investors come in. These are individuals or groups who invest their personal funds in young businesses in the early stage of their journey.
Angel investors are often successful entrepreneurs, well-paid senior employees, or high net-worth individuals who are drawn to the opportunity of high returns that come with making high-risk investments.
One classic example of the impact of angel investors in a business is Facebook.
In 2004, when Facebook was still a tiny business and Mark Zuckerberg was an unknown name, Peter Thiel, an angel investor, led a $500,000 investment in the company for a 10.2% equity stake.
By 2011 when Facebook became a public company, that angel investment was worth $1 billion.
It’s because of opportunities like this that angel investors invest more than $24 billion annually in countries like the USA.
However, it’s always that easy to convince angel investors to give you money.
In our fundraising program for entrepreneurs, you’re going to learn how to raise money for a business by targeting angel investors, and how to pitch or propose your business in a way that positions you as the kind of investment opportunity they would love to invest in.
5) Pitch and win a business competition
In 2016, a small South African start-up business called “Giraffe” won $500,000 in investment at a pitching competition in Geneva, Switzerland.
This annual competition, known as the Seedstars World Summit, features entrepreneurs and businesses from across the world who pitch to an audience of investors, international media, and other stakeholders.
That year, Giraffe beat 54 other finalists – including 13 from Africa – to win the $500K grand prize.
At the time, Giraffe was still a small company with a simple online and phone-based platform that helps skilled people find jobs in South Africa.
Every year, there are dozens of competitions just like Seedstars that provide strategic opportunities for entrepreneurs and business owners to raise funding to support and grow their businesses.
Entering most of these competitions is free. You don’t have to pay anything.
All you need is an innovative or impactful business, and the ability to confidently and convincingly pitch your business on stage to investors.
Unfortunately, many entrepreneurs don’t know how to find these competitions or how to pitch their business in a way that increases their chances of raising funding.
That’s why we created our fundraising program for entrepreneurs.
Some of our students who completed the course have won thousands of dollars in prize money, gained international media attention, and have been featured on platforms like CNN and the BBC.
Inside our program, you will learn how to raise money for a business from competitions, and how to package and pitch your business before an audience in a way that positions you as an attractive investment opportunity.
6) Use your spare assets
An asset is any property or thing of value that you own.
High-value assets include houses, land, vehicles, jewelry, stocks, bonds, and other short/long-term investments.
Assets can be a good source of capital because you could convert them into cash to fund your business, or use them as collateral (security) for a bank loan.
Very often, taking the decision to convert an asset can be difficult, especially when we have emotional attachments to them. Some assets may be connected to strong memories, or speak to our taste for fashion and social class.
Whatever the case, you will be the person to decide if selling that inherited house or Rolex watch your grandfather gave you is a worthy sacrifice for realising your business dream.
I had a client once who had to make the painful decision to draw down his retirement funds and sell a few real estate properties to start a trucking and logistics business.
In his case, it turned out to be a good decision that helped his new business take off.
However, some people have regretted similar decisions. This often happens when you underestimate or ignore the critical risks that are often involved in the kind of business you want to start.
In our program, you will learn the 7 critical risks you need to consider before you make a serious decision like converting your precious assets into business capital.
7) Get advance funding from your customers
Elon Musk of Tesla and SpaceX is really good at raising lots of money from his customers.
This is one of the few creative ways of starting or running a business with zero capital.
Here’s how it works:
When you have customers who have an urgent or desperate need for your product or service, it’s very likely that they are often willing to pay for your product in advance.
This ‘upfront’ payment usually provides you with the capital you need to produce the product or service, get it delivered to the customer, and turn a nice profit.
In fact, this smart strategy for raising money is often used by some of the world’s most successful entrepreneurs and businesses.
Elon Musk, CEO of the electric car company Tesla, is a great example of a growing number of entrepreneurs, businesses, and organisations that are turning to their customers as a source of creative financing.
Between 2014 and 2018, Musk’s car company received up to $985 million in upfront payments and deposits from thousands of customers, for vehicles that were not even in production yet.
At a $1,000 average deposit, more than 450,000 customers waited for up to two years before their Model 3 electric cars were delivered.
Amazon is another famous company that uses upfront payments as a financing strategy.
Its popular subscription program, Amazon Prime, generates more than $11 billion in interest-free capital to support its business every single year.
That’s just mind-blowing!
However, while raising capital through upfront payments works for some people, it can backfire for certain kinds of businesses.
In our program, you will learn from a real-life example of one of our students who has effectively used advance payments from customers to raise money for a business (his solar energy solutions company).
8) Target government grants, subsidies, and low-interest loans
Many people don’t know this, but there are several government schemes, initiatives, and organisations that provide grants, subsidies, and low-interest loans for all kinds of businesses.
These funds are typically used by governments to stimulate and encourage entrepreneurship, investment, innovation, research, and economic growth in a particular industry or geographical area.
There are funding schemes for agribusinesses like the $60 million Anchor Borrower’s Programme in Nigeria that provides low-interest loans to farmers who cultivate certain crops.
There are also several Special Economic Zones (SEZs) across the world that provide incentives like waivers, tax holidays, grants and subsidies that could ultimately save you capital as you start and grow your company.
Entrepreneurs like Alyssa Furtado of Rate Hub have successfully used this strategy to raise over $1 million in government grants to support her business.
Sadly, many entrepreneurs lack the knowledge and skills required to target and benefit from business grants, subsidies, and low-interest loans.
In our program, you will learn how to identify, target and apply for government funding opportunities and improve your chances of raising the funds you need to start or grow your business.
9) Try Crowdfunding
Crowdfunding (also known as crowd financing) is a new and revolutionary way of raising startup capital for a business or project.
Let me show you how it works.
Imagine for a moment that you’re trying to raise $100,000 for your business.
There are two extreme ways you can achieve this funding target.
One way is to find a wealthy investor who can provide all the money; the entire $100,000.
Another option is to ask 100 ordinary people to contribute $1,000 each to fund your business; which gives a total of $100,000.
The concept of crowdfunding is built on the principle of democratizing the process of raising capital.
Rather than rely on the monopoly of a few wealthy investors, banks, or institutions that have deep pockets, crowdfunding allows entrepreneurs to raise the same amount of capital from smaller, individual contributions of a large group of ordinary people – the crowd.
By 2014, crowdfunding platforms around the world had helped artists, inventors, entrepreneurs, and activists to raise up to $16.7 billion in capital for all sorts of products, projects, businesses, and causes.
Tomato Jos was one of the early Africa-based businesses that successfully raised $55,000 on Kickstarter.
By early 2021, the start-up, which works with local farmers in Nigeria to grow high-quality tomatoes that are processed into tomato paste, had commissioned a $5 million processing facility in the country.
In my book, Jackpot, I explain the concept of crowdfunding in great detail. You will learn more about the
10) Yes, you should approach your bank!
Anna Phosa used bank loans to significantly boost her piggery business in South Africa.
Remember, banks make money by lending money.
In summary, if a bank doesn’t give out its money, it can’t make more money. Period.
But banks just don’t lend money to anyone.
Most banks are typically conservative and don’t want to lose their money. That’s why they only give money to people and businesses that meet their criteria.
Many entrepreneurs try to get loans from banks without success. In my experience, most just don’t understand how banking works and how to entice banks to give them capital.
There are several strategies you can use, and one of them is to get a credible backer first before you approach the banks.
This was the exact strategy used by Anna Phosa, the founder of Dreamland Piggery & Abbatoir in South Africa, to raise a $1.9 million loan from ABSA Bank to expand her business.
Based on a major contract with Pick ‘n Pay, a major supermarket chain, to supply 100 slaughtered pigs a week, Anna was able to get the loan and expand into a 350-hectare farm property.
In our fundraising program, you will learn how to develop loan proposals and applications to banks in a way that addresses most of the critical risks that typically hold back banks from releasing funds to entrepreneurs.
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Raise Up to $1 Million for Your Business
Are you looking to raise between $10,000 and $1 million (or more) for your business, project, or non-profit?
Have you been trying to raise money on your own without much success?
We can help you overcome this problem, so you can finally raise enough money to start, grow, or turn around that business.
Since 2015, members and alumni of our program have used creative strategies to raise over $5 million in grants, equity, and debt funding for different types of businesses and projects.
Are you ready to learn and apply the strategies we’re going to show you?
Get FREE access to our exclusive program and join other entrepreneurs who have successfully raised between $10,000 and $1 million for their businesses and projects.
Credit – Takenhttps: //www.smallstarter.com/business-funding/how-to-get-capital-to-start-your-small-business/