If you are like me (when I was starting out in business and hustle) you definitely have the very serious challenge of how to raise money to start that business you have been thinking of.
Raising money is very hard; almost nobody wants to give you their money. How then does a young, struggling person get funds to start a new business or invest in a promising business?
This article will look at ways and methods I and a few of my colleagues have applied over the past few years to raise money for our various business ventures. Warning! The ideas here are not your usual run of the mill advice; it requires bold action and faith to raise funds.
1. Donation List (Family & Friends)
If you need N100,000 to start a business what do you think is the easiest way to get it fromyour family and friends.
Definitely not by asking one or two persons to cough out N50,000 each. To raise this amount from them you have to come up with a way that makes it easy for them to dash you little sums each and in the end you get what you want or something close to it.
Make a list of all friends and family members you know who can afford to dash you a small amount (eg N5,000 and start going after them one by one. If your persuading skills are good you would soon have your capital.
Business Plan and idea competitions could help you start your business if you win. Most times a substantial cash prize plus support comes with such competitions. Find as many as you can around and enter.
This may sound weird but hold on. If the money you have is too little and you are an adept follower of any sports maybe football you can make small bets on any of the numerous sports betting websites to see if you can win and build your capital incrementally.
Of all our tips this is probably the craziest and riskiest so thread with caution. You must be very knowledgeable, do plenty of research and find a reputable bet company that pays winners without stories.
However don’t take our words for it. You could lose all the little money you have. Best to divide it and use only a very small portion. Good thing is you can start small and don’t be greedy
4. Fire Sale
Sell anything you don’t need and you’ll be surprised how much you can raise. Many rich entrepreneurs today started and raised money for their first business by doing a fire sale – selling off anything that should be sold.
5. Apply for Grants
if you do not need too much money to start or invest in your business you may want to look at the option of applying for grants. First start searching and compiling a list of foundations, government and non-governmental organisations etc that give grants to young entrepreneurs. Be sure to check if your business falls within their area of focus. Organisations like the Tony Elumelu Foundation offer grants to small scale enterprises. You can do your research and start applying.
6. Barter Trade
Exchange materials, knowledge, skills and any other valuable things you have for money.
7. Seek Advice
Sometimes it is said that when you seek for money to invest in your business you get advice but when you seek advice you end up getting money. There is some truth in that. If you approach several successful or comfortable persons you can connect with and ask for advice on issues surrounding your business you never know what may impress them or strike the right chords and they start getting interested in investing. This usually happens when they see the value hidden and prospects in your business.
8. Royalty Financing
Royalty financing is a relatively new concept that offers an alternative to regular debt financing (loans and trade credit) and equity financing (venture capital and stock sales). In a royalty financing arrangement, a business receives a specific amount of money from an investor or group of investors in return for a certain percentage of all revenue.
So in short, you can offer an investor a certain percentage of revenues if they invest the amount you need to start your business. The danger is that the investor will get their agreed percentage of revenue you make no matter whether you make profit or not. If you are sure your idea will start generating sufficient revenue quickly enough you may explore this option. This is usually structured such that you pay a certain percentage of your revenues till an agreed amount you have to pay back to the investor is reached then you stop the royalties. Read up more on Royalty Financing here
9. Strategic Alliance
If you have an idea or a skill but lack money to start your own business you can think of any other business with the cashflow that you can go into alliance with. Your idea or skill must be very beneficial to the other organisation if they are to listen to your proposal.
This way you can find yourself using another organisation’s tools, equipment and resources to start your own company.
10. Sell Breakfast Cereal
When the founders of Airbnb ran out of money for building their then very young company they did something unique. With little cash they had left they bought cereals and put them in paper wraps branded Obama O’s and sold them for $40 each at the venue of the Democratic Convention. This was during Obama’s presidential nomination and campaign in 2008 so they rode on a very popular event going on around them. They sold 800 boxes to make over $30,000 in total. So suddenly they had enough money to last them for several months and they could go back to building their company.
A few lessons you can pick from this story above – timing is key (ride on the back of an event to sell something relevant), if you think hard enough you can come up with ways to raise that small initial capital you need.
Airbnb later went on to raise $112 million but that $30,000 probably saved the company.