Getting Startup Capital

Asking funds from family members is easy yet tricky. Easy as if you have a family that is rich and they trust you. Any family member will invest in your business. Tricky in the aspect that there are high chances that your business will fail and you can lose all your funds invested by the investors.

This can sour your relationships with your family members for life. This can be very excruciating as you would be caught between handling your business and investors who are family members.

Instead of asking your family to invest in your startup, you can take a loan from them. This has some advantages. First, you safeguard your stake at the company and keep control of the company. Second, the interest rate that you pay for the loan can be lower than the market rate.

Third, in hard times when you cannot repay your capital, you can ask for some time from your family and friends. It is much easier to ask time from them than a bank. You also do not have a fixed loan schedule to get worried about. If you take a loan from financial institutions, you have a fixed repayment schedule. if not adhered to that schedule, it can have drastic consequences on your business and you.

All said and done, be careful to ask your family and friends for funding. There is a reason many people say that do not involve your friends and family in business matters.

Protecting capital

Growth vs profit, cash burn, customer acquisition or conservative growth, this is the major conundrum in the minds of the startup founders. This is a question that has to be answered a case to case. If your idea is scalable, you can afford to lose money to gain customers for future growth, your investors are patient and are ready to back you and give more capital if needed, just go ahead with the idea.

If your investors are not that supporting, they do not agree with your vision to gain customers for present cash burn; it is prudent to do what the investors say or give them an option to exit if you have a bigger investor.

It is also not advisable to go on a spending spree with profit not even in sight. We have companies like Uber who keep raising capital, have no gone public, but still, are nowhere near profitable. Remember, any investor invests in your idea because they think there is a scope to get healthy returns on their investment regularly or a big exit.

Have a business plan

Having a business plan ready, which is necessary to pitch your idea to your prospective investors. A working proof of the concept of your idea on a small case is the icing on the cake. A working business model gives more confidence to investors than just one is in theory.

The business plan should not be a copy of any other popular startup which is already working in your target industry. For example, if you will give your idea which is eerily similar to Flipkart or Amazon, or it is in their working domain, how likely are you to get funding?

A business plan should be comprehensive, covering how you will set up shop, what manpower you would require, and if you need any business partnerships. You should project revenue projections with ample research.

Bring industry experts to guide you. Industry experts give you advice with years of experience. Who knows, if you have an excellent idea but it cannot be just implemented? It is better in that situation not to implement your idea.