Startup Investments: Top 3 Funding Criteria’s To Help Raise Capital For Your Firm

Startup Investments

If you are wondering from where to start raising funds for your business or firm, let us assure you that you are not the only one looking for certain ways. Money is the fuel to run any business. But it turns out that not all of us are able to afford such huge sums to start a new business. It is a common question of all the young entrepreneurs and new business starters – From where can we get money? Who will invest in my company? Then comes some traditional and modern ways to help us raise funds. These are a few ways which may come handy if you are a startup too.

Bootstrapping

Bootstrapping or self-funding is one of the traditional and independent ways of racking up your own money. You can invest your savings for the beginning and later you’ll manage to fill that space. Bootstrapping is perfect if you are starting up a small business. If you are unable to organize the fund with your savings, look for some help from your friends and family. This way it stays intimate and you can deal with basic formalities in a friendly way. And even if something goes wrong you won’t have to worry so much and can talk through them. Further, investors will be really impressed by your investment strategy and they will believe in your company. This way you can attract various investors. This is also so far the safest investment you will find for your business. However, to invest money from your savings you have to save money first. If one can save enough resources to completely utilize that for starting a business, there is a great chance of running the business smoothly. So, if you are planning to start a small business; plan accordingly and save money.

Startup Investments

Special Purpose Vehicle (SPV)

One of the most popular ways of raising money in this modern era is Special Purpose Vehicle(SPV) or Special Purpose Entity(SPE). This is a subdivision of the Parent or Original company to distinguish and divide the financial crisis. It is mostly for large business companies. In this, the Main Company shares and keeps some finances with the subordinate company. The subordinate company deals with its own finances and runs its different business. It is built by the Main company so that whenever there is a financial risk for the Father company, the Son extends their finances to cope up Father’s loss. Currently there are few small business companies who want to be SPV of certain large companies. So if you are thinking of carrying on this process, you can convince a reputed small business company and both of you can help each other grow.

A particular Boss Company can make small companies their SPV and can use their help when there is a bankruptcy. The relation of both the companies stand on Liability, commitment and trust. It is not necessary that the financials of SPV will appear on Parent Company’s balance sheets and vice versa. It is also not important that the SPV will have only one parent company. It is open to as many investors as it can.

Advantages of SPV –

  • SPV companies might help you deal with other properties and you can use them for multiple dealings.
  • You are the owner of a specific resource.

Disadvantages of SPV –

  • There are not many SPV’s available in the market.
  • The idea of SPV can backstab you if they ditch at the end moment.

Cap Table

A Capitalization Table or Cap Table is a kind of spreadsheet or table which shows a company’s equity capitalization. This is suitable for both small startups and large companies. It includes all the details like company’s capital, shares, share holders, warrants, profits etc. This is basically created to attract investors and keep up with company’s dealings. Reviewing the ownerships and shareholders, the investors plan on investing in companies.

Advantages of Cap Table –

  • Attract investors.
  • Keep records of everything.

Disadvantages of Cap Table –

  • Shows transparency so might not work always.
  • Needs to be updated even with slightest changes.

How can you create a Cap Table?

Cap Table is necessary for every company to keep records of financials and it plays a major role in attracting investors. Few ways of creating the chart are: –

  • Start from scratch i.e., using MS EXCELto create it. However it gets difficult to manage with time and updates of the finances. 
  • You can look for free available Cap Table templates online. But it does not really satisfy the needs as you won’t be sure whether you will get the perfect template for your company and you to understand. 
  • The easiest way is to use a cap table software to maintain your company’s finances. Various cap table sites are available and they take complete responsibility of updating the sheet from time to time.

A company can create the Cap Table according to the information it wants to share. There can be different sheets as well for investors and employees. However, the authenticity is maintained in both the criteria.

These were the top three ways to help raise for your firm. However there are more ways such as – Launching a crowdfunding campaign, Applying for loan, Angel Visitors, get investments from venture capitalists, applying for small business credit cards and so on. When there is a will, there is a way; so if you want to start something of your own, you will definitely figure out one of the ways.

 

Conclusion

The whole process of raising funds and starting a new venture may take time and things might not turn out as you planned it would. But do not lose hope and keep on trying. Building up something of your own intakes a lot of courage, hardwork and dedication. There are uncountable risks in this process but business stands on risks and one day or the other you have to face that. 

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