fundingSome ideas & companies can start up from nearly nothing, an idea, clever marketing, snowball effect etc.
However How should one go about funding a startup that requires a LARGE cash injection (circa £250k) just to setup and cover running costs until profitable? (for reference a large video/photo studio)
I see reference to “rounds” of funding, but what happens if you run out of cash before being either profitable or finding a second cash injection?
The first “round” in my case would have to be a corporate loan, but I find myself upping the amount needed every time I calculate it, pretty much JUST to cover its own repayments!! I have put the idea out there in investment/angel land and got no bites at all. I dont have any assets significant ENOUGH to fund this myself.
So enough rambling: How should one go about funding a big startup?
It is really hard (I could say nearly impossible) to get funding from Angel Investors/VCs for a conventional business. How much money would they get if you are really successfull? Millions? Hard to believe..
Investors would rather prefer to put that money -- £250k -- in tech/biotech other industries where they are used to see x10, x25, x50 Return on Investment - even if your idea is more predictable on making money than a new crazy app..
So what are your options then?
(I'm assuming you were really desperate when you mentioned taking a loan, because that is not a good idea at all..)
1. Stash Cash
Set money aside, separately from other savings, in amounts that you won’t miss on a daily basis. Your savings will only grow if you don’t draw on it for living expenses or other necessities.
When you’re ready to start your business, it could benefit you to keep your job at the outset, as keeping your salary while you’re starting up can take a lot of the pressure off of your first few months, or years, in business.
2. Keep Your Overhead Low
Keep things small at the start and grow organically. If you can get away with working at home, or not needing to rent a space or invest at the outset in new technology, you can keep your overhead low, therefore not needing to cover huge bills at the outset when you could be investing your profits into your business instead.
If you can keep your overall running expenses on the low end, this will help you be better able to reinvest your profits back into your company.
3. Crowdfunding
Crowdfunding is the process of raising money to fund what is typically a project or business venture through many donors using an online platform, such as Kickstarter, Indiegogo and Crowdfunder. The fundraising window is usually finite -- 90 days, for instance -- and the fees and rules vary across platforms.
Maybe Indiegogo would be a best fit for you.
Your best bet is to scale your idea down to a level you can afford. If you have no takers on your big idea, do it on a smaller scale and be successful. Then, it is more likely you will find investors to grow your business (note - not start). If you are not interested in scaling down, you might rewrite your business plan to directly focus on the interests of an investor. Additionally, if you can find a popular business person who believes in your idea, that person might help you market your project.
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