When running a young social enterprise that manifests itself as a business, there may be a time when you need to raise some money to continue your operations. Raising money, especially if you are located in a place like Silicon Valley, is a lot easier than somewhere like South Dakota. There are several key tips to keep in mind, and there are many tricks to the trade, but below are the most important bits of information.
Friends and Family: If you are just trying to get your idea off the ground, don't need a lot of money, and is something you would like to get your family involved with, this may be the easiest route to go. It is very important to note, though, that there is not much that is easier to break relationships in a family than borrowing money. While they are sometimes more forgiving than the bank, it is important that you treat money received from family and friends in a very professional and trustworthy manner.
Bank: For some organizations, the bank will be willing to loan money, but it is very hesitant to do so. This is especially true if there isn't some form of physical item that can secure the loan in case the business fails. By having a physical item such as a house or car, the bank can collect on the loan by seizing and selling the item.
Angel Investor: Angel investors are great for businesses that require about $1 million in capital or less. These individuals usually have business experience themselves, know other angel investors who have valuable skills, and a network of contacts who could help grow and/or develop your business.
Venture Capitalist: Venture Capitalists are for later stage organizations or for those who need large sums of money to get started. VC's usually don't get involved with startups until they need more than $1 million. Companies like Facebook fit this profile, for example.
Most of the information below for raising money have been learned from and apply to angels and venture capitals, but they can also be used for friends and family as well as banks. The best way to handle the latter two is to choose the elements that make sense and fit the audience.
While raising money is one of the harder things to do in an organization, it is also obviously one of the most important things to do. One final bit of advice to keep in mind is that your organization should be raising money when it doesn't need it. The reason being is that when your organization is looking good and being viewed as a success, investors want to have a part of that success. On the flip side, if you need money, investors will also know this is a good time to lend money on even better terms for themselves. Overall, do what fits with your organizations, and try to create as many synergies as possible to make raising money advantageous in many ways.
Rose, David. TED Talks. "10 Things to Know Before You Pitch a VC for Money." Page Online. April 2009.
© Copyright 2007-2020 Gumball Capital | All Rights Reserved Special thanks to www.maqdown.com for their generous support!