Connect with us

Funding

I would like to find a venture capitalist to fund my start-up idea, but have been warned this might not be the best avenue for me to take. Is that true?

VC funding can be a great way to launch and grow a business, provided you find the right investor, and your idea has merit.

Entrepreneur

Published

on

However, venture capitalists do not simply give you a big payout and walk away.

By its very nature VC funding is high risk – they are taking a chance on you, and they will protect their investment. This means they will set very clear deliverables with you, they will expect certain goals to be met, and they will have an equity stake in the business.

Be prepared to involve your VC funder in all big business decisions. You will have experienced mentors to assist and advise you, which can be a great benefit, but if you do not like working with others, the relationship will sour.

You will also need to meet their goals, or have a very good reason if a specific marker was not reached. Remember, if the business does not deliver, the VC firm will be able to sell the business to recoup its costs as well.

When you accept VC funding you accept all the responsibilities that come with that funding. It’s a great way to grow a business, but it’s not without its own strings.

Entrepreneur Magazine is South Africa's top read business publication with the highest readership per month according to AMPS. The title has won seven major publishing excellence awards since it's launch in 2006. Entrepreneur Magazine is the "how-to" handbook for growing companies. Find us on Google+ here.

Advertisement
Comments

Funding

What do I need to do in order to get a successful crowd funding campaign?

Advice on getting the gold you need for your crowd funding campaign.

Ambassador Tal Edgars

Published

on

I recently read through crowd funding and though this might be of benefit to me. What do I need to do in order to get a successful crowd funding campaign?

70 percent of most crowd funding campaigns never reach their funding laid out plan. If you only reach a portion of your desired pledge amount all donated funds are then returned to investors once your campaign date is up. Do your homework and make your campaign count.

To get the best out of your campaign, I would strongly advise you do the following:

  1. Lay out your plan way in advance
  2. Keep a proper and well-articulated business plan
  3. Create a compelling story.
  4. Use the social media and start a social media campaign
  5. Frequently promote your fundraiser, connect and interact
  6. Dish out rewards and incentives
  7. To go viral, go for educative, informative and entertaining videos
  8. Be more than unique and creative as more exposure will translate to more potential pledges
  9. Choose the right crowd funding site for you.
  10. Know and understand your end target audience

 

 

Continue Reading

Funding

Where can I turn when banks are not helping?

Getting bank finance for my restaurant is almost impossible.

David Lewis

Published

on

Getting bank finance for my restaurant is almost impossible.  How else can I access the funding that I need?

Most small businesses will experience a cash flow challenge at some point during the next 12 months and raising capital from traditional banks is becoming a real challenge. Conservative lending policies and onerous application processes mean that finance applications can take up to twelve weeks or longer.

Banks require significant securities, which many business owners are unable to meet. In short, banks are making it very tough for small businesses.

The business cash advance

For businesses that accept credit or debit cards as a form of payment for their goods and services (termed merchants), the business cash advance is now available as alternative source of funding.

In simple terms, a business cash advance offers the merchant an upfront advance to buy a discounted amount of future business turnover.  For example, you may be advanced R80,000 for R100,000 of future turnover, so the fees can be easily calculated as R20,000.

The payback is an agreed percentage of your turnover, paid daily until the full amount is paid across.  Payback increases and drops with your business turnover and the smaller daily payments are often easier than monthly fixed instalments.

Quicker turn-around and more accessible

Comparing it to a bank loan, the business cash advance is more accessible, operates over a shorter term and requires no personal security.  It is also much faster, typically available within two weeks.

The advance amount is based on historical credit and debit card sales and pay overs are daily.   The costs are fully transparent and there are no penalties for late payments or extended payback.    However, accessibility, flexibility and convenience come at higher cost than traditional bank lending products.

As with any financial product, it is important that the benefits gained from using the money are more than the costs, so it is important to have a good purpose for the funding and carefully consider the available options.

Over the last three years, the business cash advance has becoming more main-stream and this funding is used by business with a relatively high card turnover, such as restaurants, retailers, beauty salons, supermarkets, convenience stores etc.

What to use the advance for

The advance is typically used for a business opportunity, such as expansion, new stock, new equipment, marketing etc.  Alternatively, it also offers through a difficult trading period or to cover an unexpected expense such as equipment failure when the money is needed quickly.

Small businesses are a vital part of the South African economy, contributing over 65% of South Africa’s employment and over 50% of GDP – accessing funding is imperative for these businesses to survive and grow.

Continue Reading

Funding

Am I stupid to turn down a VC investor?

Bootstrapping your business initially will pay dividends down the line.

Michelle Goodman

Published

on

I’ve started my own business two years ago and I’ve recently been approached by venture capitalist investors. While I could really use the funding, I’m reluctant to give away a large portion of my business at this early stage. What should I do? 

While it’s exciting to be approached by investors at any stage in your business, in the early years it might be better for the business to keep it small, keep your overheads low and bootstrap your venture as much as you can. This not only allows you to build a viable business and product offering at your own speed, it means you can to do without creating a huge amount of debt.

By building a sound and profitable business model from the outset, you will attract more attractive funding offers down the line.

Read the full article here.

Continue Reading

Trending

FREE E-BOOK: How to Build an Entrepreneurial Mindset

Sign up now for Entrepreneur's Daily Newsletters to Download​​