In these days of ‘Unicorns’ and Facebook it seems as though the world should be lining up at your door to fund your next brilliant idea.
Of course it’s never quite as simple as that…
There never was a time when all you needed was a blinding idea and an unshakeable faith in you own ability - you need to:
a) demonstrate that a market for your idea exists beyond your imagination
b) show that your idea is capable of physical embodiment (i.e. it can be made)
c) have some idea of what you might want to do with the money
d) build a believable team around you so investors believe they’re not throwing their money away.
So once you’ve done that where to get the money from?
I recently read ‘Slide Rule’, the autobiography of Nevil Shute: engineer, pilot, author, inventor and founder of aero-company AirSpeed.
In it he describes how difficult it was (in 1930’s Britain) to raise finance from banks and other lenders and that entrepreneurs relied on individuals to back start-ups.
Nothing much has changed.
Angel investors are still the most likely to invest in a new, untested company, often being in reality parents and other relatives.
If things go really well then Venture Capitalists might be interested, if they can turn a huge profit quickly, usually at high risk.
Crowdfunding has been popular for a couple of years - Indigogo, Crowdcube, Kickstarter and many more give the ‘unsophisticated’ investor the chance to either pre-buy speculative products or take a tiny percentage in equity in return for a small amount of money - often needing hundreds to raise the required funds.
It can be an exciting and effective way of gaining investment - but still requires the founder to complete the work required and make a product!
For those keen to bolster their brand - TV has the perfect answer. Dragons Den in the UK, Shark Tank in the US and more across the world exist to make a spectacle of those prepared to appear on TV and pitch their product or company.
Although only 50% of companies offered funding actually complete on their deal, the publicity generated can be enough to drive the businesses forward. And even companies that don’t get funded can still be successful if the idea is sound and exciting.
There are many other ways of raising money for businesses - but never forget that the investors require that the company goes on and prospers - it’s the end of the beginning, not the beginning of the end…!