Let’s consider that you’ve just drawn up a great business plan for your startup, and you’re ready to start. How do you navigate what type of funding you should be looking for at what stage of your company?
In this article, I’ll talk about the 4 general methods to achieve funding and 3 alternative methods you can use to raise the funds you need to properly invest in your business.
- Personal Savings and Small Business Loans
This is the most obvious and most personal way to begin with your startup and is a solid way to show your future investors that you are personally invested in your business. It could be money that you’ve saved up from previous work experience or it could be funds that you’ve raised through a small business loan. Either way, this is the basis of your early operations and the funding you will need to rely on until the valuation of your company develops.
- Friends and family
This is another obvious area to look into as your friends and family are most likely going to be more lenient than outside investors. The key thing to remember here is that friends and family are probably going to be willing to invest into your business based on the concept alone and the knowledge that you are a hard worker. This will not work with outside investors that will be purely looking at your business as a business investment where they will need to see sales figures and will be largely driven by the financial side of things. In these situations, you will most likely be giving up small amounts of equity (5%) for small investments (2000 CHF – 20 000 CHF).
- Angel Investment
Your business is slowly taking off and can be valued around 20 000 CHF by now. It’s time to enter into serious investing now. The idea of Angel investors is that they will most likely be looking at investing anywhere from 20 000 CHF to 100 000 CHF in exchange for some equity in your company and may be looking at integrating the startup itself. The main difficulty in dealing with these Angel Investors is large to find them. Here at Do It Better Coworking, as part of our new program, we are looking at providing a package that will enable young startups to become acquainted with a number of Angel Investor clubs within Switzerland in order to reach the investment they need in these critical moments.
- Series A
Your business has now reached a valuation of around 1 million CHF and it’s time to move to real serious business. The process of investment in this phase is that startups will organize large campaigns for funding called Series, the most critical being the first one (Series A). At this stage, rounds of investment are looking to raise anywhere from 500 000 CHF to multiple millions of CHF which is usually organized by venture capitalists. After a few other Series of funding, assuming the continuing success of your business. The next stage would be to launch an IPO or to look at being acquired by a large corporation.
It’s quite nice of thinking about the great IPO in a few years, but let’s focus on the critical stage in which startups really need the funding in order to build their company from nothing, the stage between the friends & family and the investment by angel investors.Luckily there are a few alternative methods to get beyond this hurdle. Here at the 3 alternative ways to raise funds.
This new trend can allow you to go from zero capital to what you need to get your production going. The principle is simple, crowd funders will look at purchasing your product at a discount in order to give you the necessary funds to begin production. In this type of investment, there is no exchange of equity and your crowd funders are purely interested in the novelty of the product. So much so that they are willing to pay for it in advance. This is a method that has been effective fro a number of companies such as: Filippo Loreti, Fidget Cube, and Pebble. If you have a product that’s trendy and can be marketed best through social media. This could be your best bet.
Having some trouble getting people interested in your startup? How about making them come to you instead? In Switzerland, there are a number of different contests for startups by a number of prestigious organization: from Venture Kick to contests organized by the Swiss Startup Factory, there are plenty of choices to get noticed. Here at Do It Better Coworking, we will soon be launching a new package that will guide startups in the application process for these contests and they will be matched with contests in which we believe they have the highest chance to qualify for. By winning any one of these contests you will receive more than enough exposure to key investors and experts in the field that will be able to help you push your company further than it has ever been.
Is your startup in the field of high-tech or medical technology ? If so and you require a bit of money to launch the business, you may qualify for a grant from the Swiss government. Here at Do It Better Coworking, in our new package, we will be looking to help facilitate the process of applying for these grants through a partnership with the key governmental organisations.
I hope this article has taught you something you didn’t know before. If you are a start-up looking for a great package to develop your business : follow us on Facebook to stay up to date with all of the info as soon as we launch our new program !