Startup and SME funding uncovered

If you’re on a shoestring budget, scaling up may seem difficult. To obtain funding, you need to understand the process and how you can secure yourself. So, let’s get down to business and uncover the secret of successful fundraising.

Be strategic and picky

You wouldn’t marry the first person that you see at the street, right? Just like with marriage, in business you need to implement the same principles. Not everyone is suitable for you, you need to have clarity on your purpose, your value proposition and what type of funding is the best option for you. You need to have the right funder to achieve result, so take your time.

Borrowing is one that comes often to the mind but with it can come with a high cost if something goes wrong. You are required to provide some collateral like your house as guarantee if anything goes wrong and you can’t pay back.They also take interest and some lenders may take part of the revenue you make through your project. This is common in construction and property development.

Seeking investors is a good option but you usually have to give percentage of the shares of the company in return. Investors also may push their nose to your business especially if you’re a startup. Some investors however are just happy to get ROI.

Joint venture. Join forces with an established company is a way to scale up as well. However, you need strong relationship to make it success. The company can provide you with financing but they’ll also have their say on the business and also take part of the revenue. 

M&A aka merger and acquisition. A company buys your business and either the two of you become one and you seize to exist or you both exist but the buyer owns majority of your company. A common way especially in IT to scale up but you need plenty of due diligence and a proper exit plan not to mention careful read of the small print and ensuring your intellectual property is protected. 

Venture capital often comes in form of private equity that is pooled from a group of investors. Commonly provided as early stage and pre-seed funding for businesses that have potential for fast growth. When you receive VC, you enter into limited partnership with the investors. The so-called unicorns are often funded through VC.

Grants are provided often for charities, NGOs, not for profit organisations, startups and SMEs. Some for profit organisations also seek grants to keep operating and scale up. Grants are provided by foundations and governments.

What do I need to do to get funding?

There are 5 steps in the funding process.

  1. Define your purpose, values, mission, vision and value proposition.
  2. Ensure you have all the documents needed to apply for funding of your choice. Latest financials, tax certificate that your company exists and pays tax, business plan, pitch deck, fresh case studies, track record of your team on relevant projects, current budget.
  3. Define who is your ideal investor, partner, lender, donor. Determine what type of funding is the best option for you. There may be regulations that restrict you if you’re a charity or NGO.
  4. Craft your business plan and pitch deck. If you seek donations or grants, craft your grant application. Always write all the material looking from the reader’s perspective to make it impactful.
  5. Craft your outreach. Email, online applications, social media. Find the decisionmakers and approach them. Be polite, provide value, be relevant and avoid unnecessary jargon. Include a call-to-action, for example requesting a virtual or physical meeting to discuss the subject. Once you get positive response you move into interview/meeting phase and then lock the deal.

You may need to approach multiple organisations to get result because not everyone sees the value and opportunity.

If you’d like more advice, get in touch with us today.

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