How to finance your startup?
The startup is defined as an innovative company whose growth is exponential. Many startups are faced with the problem of finding financing to make technological investments, at the time of its launch. In addition, the turnover is almost non-existent at start-up. From an external point of view, the financing of a startup is often associated with a risky gamble. Hence the problem of discovering how to finance, effectively, its startup.
What are the criteria and chances of getting funding?
Whatever the method of financing chosen, the selection criteria are identical.
Investors nevertheless want certain conditions to be respected:
- Have a profile in line with your objectives
- Have a personal contribution
- Present guarantees
- The project must be based on a documented market study
- Realistic financial plan
- Developing a business plan
In the face of these requirements, it is advisable to break down one’s project into different stages to obtain financing for the first stage with realistic return on investment objectives.
What are the solutions to consider to finance its startup?
The financing of a start-up, in the start-up phase, by his family is a solution to consider. You are thus obliged to submit your project and to argue with close people.
It is recommended that you focus on financing a repayable loan without interest. Opening too quickly its capital is discouraged when launching a startup, at the risk of regret.
From the moment your project is oriented to the general public, crowdfunding is presented as a solution to study. This mode of crowdfunding can result in equity participation, a donation or a loan. This method involves being able to convince and rally the most people around your project.
More and more crowdfunding platforms are appearing in Africa. The platform Waalam is nevertheless distinguished since it is based on a system of royalties.
Participation in a competition
To raise funds, it can be interesting to participate in competitions or to apply for an innovative call for projects. Many foundations such as those of Mo Ibrahima, in search of African entrepreneurs of tomorrow. The advantage of these opportunities? Benefit from a relatively high subsidy rate.
Heads of companies or executives, Business Angels invest their own funds. Their credo? Bet on promising startups. It is true that their contributions are lower than those offered by a venture capital fund.
Nevertheless, their intervention takes place from the creation of a startup. Business Angels are also able to benefit entrepreneurs from their relational network.
Open up your capital to a new partner
One of the solutions to consider is the gradual opening up of its capital to new partners. It may be one of your collaborators or one of your former colleagues whose skills are proven.
These are companies that take equity stakes in the startup on behalf of clients. It can be institutional organizations, individuals, etc. Investment funds are divided into two types: general investment funds and investment funds dedicated to one or more pre-defined business sectors.
In contrast to other types of financing, investment funds focus mainly on startups in the development phase. Very few investment funds agree to finance startups in pivotal phase. The particularity of investment funds? Have to raise funds for the startup themselves.
Financing a startup can be complicated to determine. Nevertheless, depending on these different solutions, you will certainly be able to adopt the one that best suits your objectives.