The crisis launched by the coronavirus pandemic has become a serious challenge for small businesses. Many of them have lost profits, while others have been forced to seek funding to increase manufacturing capacity due to increased demand. Traditional solutions no longer work under these new circumstances, and businessmen must seek new sources of financing. Read on to learn about the most effective available options.
Business angels. Investments for startups
Business angels are usually former company managers or owners who have successfully sold their businesses. They invest funds into promising startups at an early stage of development to get high profits. Business angels are well informed about their industry, and they seek out startups that are highly likely to bring them a high income in the future.
Investments from business angels. Pros and cons
Business angels invest their personal funds, so they flexibly approach the valuation process
The company must be very promising to attract the attention of a business angel. This is especially difficult to achieve during a crisis
Unlike investment funds, business angels don’t have specified investment plans, so they are less strict in relation to the timeline for receiving profits
The amount available to the business angel may be insufficient to develop the company
Thanks to the connections and authority of a business angel, your company can get additional support
You can find your own business angel even if you’re not personally acquainted. Start looking through business angel groups and syndicates on LinkedIn, and check out official sites for business angel associations.
Venture capital. Investments for developing companies
Venture capital is a type of direct investment for fast-growing companies and startups. Companies that develop quickly can get these venture fund investments for a share of their company.
Venture capital. Pros and cons
Venture funds can provide a large volume of financing
Venture capital is only available to profitable and fast-growing companies
Venture funds can provide quality management talent. This is usually obtained for additional payment
Raising investments through venture funds requires no less than three months
You can get in touch with a venture fund directly, for instance, through an official site. The official site of each fund usually includes contact information and recommendations on company information to submit.
Crowdfunding. Investments at any stage
Crowdfunding is the process of raising voluntary donations from a wide audience through online platforms. Donations can be minimal. Rewards for investments offered by different companies vary considerably: this could be a product from the founding company or a share in the company.
Crowdfunding. Pros and cons
Public funding might attract attention from potential clients and promote the company brand
You need to provide a large volume of company information to potential donors, and this information will also be available to your competitors
Unlike investors, donors don’t always seek out profits, they might simply like your company’s products
Donors are often unable to help your company with business development
With crowdfunding, you can raise additional funding to complement the funds obtained from business angels or venture funds
To raise investments with crowdfunding, start by finding the right platform. During your research, make sure to consider:
- the volume of investments you’d like to raise;
- the rewards you’re willing to offer to investors;
- the popularity of the platform among your potential customers.
After selecting your platform, make sure to read the terms and conditions for posting crowdfunding projects and commissions charged by the platform. The next step is to launch your campaign. Some platforms assign a designated employee who can help you follow the requirements of the platform when launching your project.
Advice that will help you successfully complete your crowdfunding campaign:
- Indicate your target funding amount. People are less willing to donate their funds to companies that don’t indicate their goals, why they need this specified amount, and how they plan to spend it.
- Promote your campaign. Make sure to share your campaign on your company page on social media, organize a series of articles in media publications.
- Propose an enticing reward for investors. If your investors are clients, then adopt a creative approach to your rewards, make it memorable.
Business incubators. Investments and help
Business incubators are complex infrastructures geared towards helping companies with high growth potential. Startups can particularly benefit from business incubators at the hypothesis testing stage, before building up their business processes.
Pros and cons of business incubators
The opportunity to undergo education and get a mentor at an early stage of developing your business
Relatively small size of investments compared to other sources
The opportunity to make useful connections
Not a source of financing for emergencies: business incubators usually set strict deadlines for applications and investments
Business incubators primarily serve as environments where you can get help and support for developing your business. It’s important to choose a group of entrepreneurs working in the same direction as you, and mentors who can help you solve your specific problems. To join a business incubator, access its official website and submit your application.
This crisis is the time to search for unconventional solutions and try new things. Those who are not afraid to do this have every opportunity to turn the situation in their favor, even in the current situation.