Ok, so today I’m going to discuss how you can go about getting start-up capital for your website project. Most website projects don’t need start-up capital but if you are looking to build the next Facebook, or maybe start an e-commerce retail website and need extra cash for marketing, then you might want to pitch for start-up capital.
I myself have raised 6 rounds of capital from 5 different investors in the past. Four of these were from Angel investors and 2 from corporate businesses.
Angel investors are typically individuals looking to invest in your business, in return for a percentage of ownership in your business. Those people on Dragons Den are Business Angels. They give a certain amount of money to you the entrepreneur and in return you give them a share in your business. They want a share because they hope that as your company grows, they will be able to sell their shares for a high price and make many times their initial investment.
So, say like they give you £100K to build your website and for marketing and in 3 years time your company is valued at £6million. If they traded £100K for a 50% stake in your business, then they are going to make a lot more money selling their shares in 3 years time than their initial investment.
Corporate investors are typically large organisations who decide to invest in entrepreneurs, again in order to take a stake in the entrepreneurs business. However, corporate investors rarely invest in tiny projects, unless they see some strategic purpose for investing that their own internal departments cannot service.
What we will be concentrating on here, is investment from Business Angel investors.
So, in order to obtain start-up capital you need to do the following
1. Prepare a Business Plan
You need to write a business plan that includes all the following :-
a. A statement of purpose that explains what your website is about and its unique selling point relative to competitors
b. A statement explaining why you are the best person or team that can develop this business
c. A spreadsheet that projects, sales revenue, costs and profit over a 1-2 year period
d. Exit Strategy for your Investor (in other words, what are they going to get in return for their investment)
2. Prepare a prototype or presentation
You have 5 minutes to get your point across, so you need to communicate your message to investors during your pitch in the most effective way possible.
3. Identify potential sources of investment
You need to spend time trying to identify the most relevant sources of funding.
You need to consider very carefully what kind of investor you want on board and even better if the investor has contacts in your market to help sell your idea further
Now, there are of course other considerations than those above, but what i outlined should get you some way down the road to start-up capital.
Here are a number of potential places you can find Business Angels.
1. Conferences / Exhibitions
2. Social Media Business Sites : Linkedin
3. Crowdsourcing websites
4. Friends / Family / Local Business People
5. Chamber of Commerce
7. Dragons Den / Entreprenuerial Competitions
Other sources of funding include
Venture Capital funding (usually only 2 or 3 round of start-up funding)
Government Business Grants
Social Enterprise / Charity funding
I hope that gives a little more insight, but contact us for further information in our forum at www.youngwebbuilder.com/forum.