Most startups need to get their first funding from friends and family and borrow money to start a company. Many also keep their jobs or work part-time. The advantage of raising money from friends and family is that they are easy to find. You already know them and they trust you. However, there are disadvantages if you mix together your business and personal life since this can cause problems. In addition to them not being as well connected as Angel or Venture Capital firms it is unlikely that they are experienced investors.
Entrepreneurs need a lot of time to create something worthwhile to market. On top of that, they must factor in the large costs for marketing a new product which at this time is around $1 Million. It is very hard to generate enthusiasm for an app or product in an extremely crowded market place. An Entrepreneur can’t just spend their own money, they must also go out and raise money or external capital for their new startup.
Raising capital is not easy. The global financial crisis has changed investment strategies worldwide but there is still continuing investment available. On the whole investors are more cautious and demanding, often seeking startups with a low risk profile or something that has had proven success.
The most successful startups over the last few years clearly show that investment in innovation is not predictable. Well established companies such as Apple, Microsoft and Google had less intensive competition than today’s startups. Today an entrepreneur must have a compelling breakthrough product to obtain the investors’ money since they often look for startups that disrupt an entire existing industry and potentially have a very large billion dollar plus market.
When seeking Startup Investment you must also be prepared for numerous disappointments before you finally succeed. The word “no” is to be expected by entrepreneurs seeking initial Angel Funding or later Venture Capital for their startups. Rejection is normal when seeking Angel Investment.
Many Angel Investors have limited experience with the product and can place unrealistic or high expectations on startup businesses, therefore good presentation skills are essential. Failing to fulfill obligations to one investor can cause the rejection of others and if an investor does not continue to back a startup in future investment rounds this can cause others to ask ‘why not’ . This is known as Signaling. Therefore it is preferable to approach investors who have realistic expectations and experience of your type of product.
Where can you get help to raise capital?
Try online resources including startup directories and forums where other entrepreneurs share their success stories. Look for Angel Investors via Angel Investment Groups or Angel Funds, there are many events & conferences dedicated to this process. One such investor is Rosemont Group who develops and invests in innovative and disruptive companies, they are a seed based investment company who specialise in tech and internet based products. Anything from eCommerce to digital content and advertising is within the scope of the company’s interests. According to Freddie Achom their Founder & CEO “We have a clear vision to be part of globalisation by creating and developing brands, concepts and solutions that will one day become recognisable.” So, if you are already working on your startup and need Venture Capital reach out to them or a similar investment company today.