The biggest challenge start up Entrepreneurs encounter when starting a Business is raising Capital. But must it be so? Here are some ways to raise Capital for your Business.
1. Self – Financing – the easiest and most common way to start up a Business is to get into a saving plan and start your Business off your savings. Set a target amount and give yourself a duration and monthly saving amount and you can have enough to start a business in one year!
2. Friends/Family or Crowd funding- Another way to get capital to raise your business is to request for the money from your friends and family and offer them a stake in the business or on online crowd funding platforms. Identify 10 or so people who you feel may be willing to give to your business, prepare a good business plan and share it with them. If it is crowd funding, find an appropriate online crowd funding platform and put your business pitch out there!
3. Loans – You can get a number of different loans to start a business. This can either be from a Bank, Microfinance Institution or Sacco. What you need to ensure is that you have a good credit score. You can also use the high value items you have to get a loan under the Movable Property Security Act. You must be careful in choosing a bank/financier, you must consider interest rates, loan recovery methods, option for payment extensions and the overall integrity of the institution.
4. Angel Investors – an Angel Investor is mostly a high net worth individual with surplus income that they want to invest in your business. The easiest way to get Angel Investors is through attending global entrepreneurship workshops and conferences, ready to impress with your business plan (in less than 5 minutes) and you can get huge funding for your project. At this stage it is important to seek the services of a Lawyer in preparing your Investor Funding Agreement. It determines the kind of stake an Investor will have in your business and the role they will play in managing the Business or defining the Brand. In such situations, it is important to safeguard both your short-term and long term interests.
5. Venture Capitalists (VCs) – Venture Capitalists work almost the same way as Angel Investors (please read our previous post to understand) , the difference is that VCs come in when the Business has already matured and Angel Investors come in at early stages.
6. Incubation Hubs – These work a lot like Angel Investors and VCs but generally have more depth and offer you mentorship opportunities as well. There are a number of Start Up hubs in Kenya such as Ihub, Growthhub and the Chandaria Business and Innovation Centre. These Hubs offer opportunities to young budding Entrepreneurs to receive mentorship and the resources to found their Start Ups.
CAUTION – Every method of funding carries with it pros and cons, it is important to walk with a Financial Expert to guide you on which model will work best for your Start Up.
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