What you need to know about raising startup funds

Money

Raising startup funds for a new business can be challenging enough, but don’t compound the difficulty by not having a clear understanding of exactly what you want and need for your endeavor. This means asking yourself the hard questions that you will definitely need answers to before a check is written.

Rather than dive into the process floundering, it’s helpful to at least know what some of these questions you need answers for are, if for nothing else than to get you thinking about your responses.

7 Questions that need answers for startup funding

How much capital do you need? – Having a clear idea about how much you need obviously simplifies the task considerably. Examine what your costs are going to be, and understand that it always costs more!

What will it cost you? – What are you willing to give for this money? Is it going to be shares of your company, and how much is that? 10%? 25%? This is something you need a firm grasp on, and at least initially not be swayed from.

When does it get repaid? – What is the time frame for this initial investment? Do you have ample time to pay the capital investment back, using either a fixed repayment plan, when you sell the company, or more flexible options.

What’s your business growth strategy? – You and your investors will be very interested in what your plan for growth is. Not only is the plan of importance, but also the time frame for growth.

What are you willing to risk? – Are you willing to put up equity (other than sweat equity) in your startup? This can sometimes make things easier for others to see their way clear to invest.

How much input do investors get? – It should be made clear at the very beginning exactly how much guidance or “help” you want from investors. Much better to avoid these kinds of problems right from the get-go.

Who buys and uses your product or service? – Who is the ideal customer, and how do you intend to market to them? Having a firm grip on your eventual buyers calms many investment fears!

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