Business insights for Business Startup
It costs money to start a business. How you fund your business is one of the first — and most important — financial decisions most business owners will make. Choosing how to fund your business could affect how you structure and run your business.
If you are starting or running a business, nothing sounds better than “Free Money”.
Unlike loans, grants do not have to be paid back. You can Search a variety of grants here.
capital invested in a project in which there is a substantial element of risk, typically a new or expanding business.
Another means of funding to utilize is venture capital. The availability of venture funding is among the primary stimuli for the development of new companies and technologies. You may be able to get investors to give you funding for business startup in the form of venture capital investments. Venture capital is typically offered in exchange for a share of the company or an active role in the company.
Venture capital differs from traditional financing in several important ways. Venture capital typically:
- Focuses on high-growth companies
- Rather than debt (this is not a loan), Invests capital in return for equity
- Takes higher risks in exchange for potential higher returns
- Has a longer investment horizon than traditional financing
Bare minimum, most all venture capitalists will, at the very least want a seat on the board of directors. So be prepared to give up some portion of either control or ownership of the company in exchange for this type of funding.
- Find an investor
Individual investors or venture capital firms. Be advised to do enough background research to know if the investor is reputable and has experience working with startup companies.
- Pitch your business plan
The investor will assess your business plan to make sure it meets their investing criteria. Most investment funds will concentrate on an industry, degree of business development, or geographic area.
- Due diligence review
The investors will look at your company’s financial statements, products and services, corporate governance documents, management team, and market.
If they want to invest, the next step is to agree on a term sheet that describes the terms and conditions for the fund to make an investment.
Once you agree on a term sheet, you can get the investment!